Thermon(US:THR)2021-02-04 19:48PART I — FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements (Unaudited) This section presents Thermon Group Holdings, Inc.'s unaudited condensed consolidated financial statements and accompanying notes Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific dates | Metric | December 31, 2020 (Thousands) | March 31, 2020 (Thousands) | | :-------------------------------- | :----------------------------- | :-------------------------- | | Total Assets | $642,357 | $620,905 | | Total Liabilities | $262,775 | $274,466 | | Total Equity | $379,582 | $346,439 | | Cash and cash equivalents | $49,617 | $43,237 | | Accounts receivable, net | $76,612 | $92,478 | | Inventories, net | $74,153 | $60,273 | | Long-term debt | $162,906 | $169,053 | Condensed Consolidated Statements of Operations and Comprehensive Income This section details the company's financial performance over specific periods, including sales, gross profit, and net income | Metric (Thousands) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2019 | | :----------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Sales | $79,604 | $100,468 | $202,858 | $295,115 | | Gross profit | $36,960 | $43,480 | $90,010 | $126,054 | | Net income (loss) | $6,175 | $6,522 | $1,928 | $14,904 | | Basic EPS | $0.19 | $0.20 | $0.06 | $0.46 | | Diluted EPS | $0.18 | $0.20 | $0.06 | $0.45 | - Sales decreased by 21% for the three months and 31% for the nine months ended December 31, 2020, compared to the prior year periods12 - Net income decreased by 5% for the three months and 87% for the nine months ended December 31, 2020, compared to the prior year periods12 Condensed Consolidated Statements of Equity This section outlines changes in the company's equity, including retained earnings and comprehensive income, over specific periods | Metric (Thousands) | December 31, 2020 | March 31, 2020 | | :----------------- | :---------------- | :------------- | | Total Equity | $379,582 | $346,439 | | Retained Earnings | $184,487 | $182,559 | | Accumulated Other Comprehensive Loss | $(35,388) | $(63,894) | - Total equity increased by $33.1 million from March 31, 2020, to December 31, 2020, primarily driven by a significant foreign currency translation adjustment gain of $14.5 million in the three months ended December 31, 2020, and $29.2 million for the nine months1512 Condensed Consolidated Statements of Cash Flows This section details the company's cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (Thousands) | Nine Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2019 | | :----------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $15,479 | $52,355 | | Net cash used in investing activities | $(4,643) | $(6,088) | | Net cash used in financing activities | $(7,588) | $(40,923) | | Cash, cash equivalents and restricted cash at end of period | $52,311 | $39,688 | - Net cash provided by operating activities decreased by $36.9 million for the nine months ended December 31, 2020, primarily due to a decline in net income19 - Net cash used in financing activities decreased by $33.3 million, reflecting lower payments on long-term debt and revolving credit facility19 Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Basis of Presentation and Accounting Policy Information This note describes the basis of financial statement presentation and significant accounting policies adopted by the company - The Company provides highly engineered industrial process heating solutions, including heat tracing, Thermon Heating Solutions (THS), and Thermon Power Solutions (TPS) brands20 - The COVID-19 pandemic has adversely affected global demand for products and services, leading to an economic downturn22 | Canadian Emergency Wage Subsidy (Thousands) | Three Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2020 | | :------------------------------------------ | :------------------------------ | :----------------------------- | | Subsidies Received | $979 | $5,928 | Note 2. Fair Value Measurements This note details the fair value measurements of financial instruments, including long-term debt and derivative contracts - Long-term debt is measured at fair value using Level 2 inputs (market approach based on similar debt terms)33 | Cross Currency Swap (Thousands) | Three Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2020 | | :------------------------------ | :------------------------------ | :----------------------------- | | Unrealized Mark-to-Market Losses | $1,869 | $5,319 | | Notional Amount of Foreign Currency Forward Contracts (Thousands) | December 31, 2020 | March 31, 2020 | | :---------------------------------------------------------------- | :---------------- | :------------- | | Total Notional Amounts | $19,900 | $9,803 | Note 3. Leases This note provides information on the company's lease arrangements, including right-of-use assets and lease liabilities | Lease Metric | December 31, 2020 | March 31, 2020 | | :----------------------------- | :---------------- | :------------- | | Weighted average remaining lease term (Operating) | 6.1 years | 6.2 years | | Weighted average discount rate (Operating) | 4.81 % | 4.82 % | | Operating lease right-of-use assets (Thousands) | $13,527 | $16,637 | | Total lease liabilities (Thousands) | $16,975 | $19,124 | | Lease Expense (Thousands) | Nine Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2019 | | :------------------------ | :----------------------------- | :----------------------------- | | Operating lease expense | $3,455 | $2,627 | | Future Operating Lease Payments (Thousands) | Total | Less than 1 Year | | :---------------------------------------- | :---- | :--------------- | | Total lease payments | $19,056 | $4,375 | Note 4. Restructuring and other charges/(income) This note details restructuring initiatives, including workforce reductions and associated charges incurred by the company - The Company enacted restructuring initiatives, eliminating 66 positions (three months) and 262 positions (nine months) ended December 31, 202050 | Restructuring Charges (Thousands) | Three Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2020 | | :-------------------------------- | :------------------------------ | :----------------------------- | | Severance costs | $997 | $5,858 | | Lease impairment costs | - | $429 | | Lease abandonment charges | $144 | $191 | | Loss on sale of South Africa Business