UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 20172023
 
OR
 
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
 
Commission File Number:001-35159
 
 
THERMON GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware27-2228185
Delaware  27-2228185
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
100 Thermon Drive, San Marcos,7171 Southwest Parkway, Building 300, Suite 200, Austin, Texas 7866678735
(Address of principal executive offices) (zip code)
 
(512) 396-5801690-0600
(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareTHRNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x☒Yes o☐No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x☒Yes o☐ No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerx
☐
Accelerated filero☒
Non-accelerated filero(Do not check if a smaller reporting company)
☐
Smaller reporting companyo☐
Emerging growth companyo☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o☐Yes x☒ No


As of February 7, 2018,January 31, 2024, the registrant had 32,464,31533,714,736 shares of common stock, par value $0.001 per share, outstanding.
 




THERMON GROUP HOLDINGS, INC.
 
QUARTERLY REPORT
FOR THE QUARTER ENDED DECEMBER 31, 20172023
 
TABLE OF CONTENTS
Page
Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Thermon Group Holdings, Inc. and its Consolidated Subsidiaries
Condensed Consolidated Balance Sheets as of December 31, 2017 31, 2023 and March 31, 20172023
12
Condensed Consolidated Statements of Operations and Comprehensive Income (loss) for the three and nine months ended December 31, 20172023 and 20162022
23
Condensed Consolidated Statements of Equity for the three and nine months ended December 31, 2023 and 2022
4
Condensed Consolidated Statements of Cash Flows for the nine months ended December 31, 2017 31, 2023 and 20162022
36
Notes to Condensed Consolidated Financial Statements (Unaudited)
47
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
1720
Item 3. Quantitative and Qualitative Disclosures About Market Risk
31
Item 4. Controls and Procedures
32
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
3233
Item 1A. Risk Factors
3233
Item 2. Unregistered Sales of Equity Securities and Use,Use of Proceeds and Issuer Purchases of Equity Securities
3233
Item 3. Defaults Upon Senior Securities
3233
Item 4. Mine Safety Disclosures
3233
Item 5. Other Information
3233
Item 6. Exhibits
33
34
35
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
 

i



PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
1

Thermon Group Holdings, Inc.
Condensed Consolidated Balance Sheets
(Dollars in Thousands,thousands, except share and per share data)
 December 31, 2023March 31,
2023
(Unaudited)
Assets  
Current assets:  
Cash and cash equivalents$55,396 $35,635 
Accounts receivable, net of allowances of $1,913 and $2,682 as of December 31, 2023 and March 31, 2023, respectively120,624 97,627 
Inventories, net96,299 82,132 
Contract assets19,397 16,272 
Prepaid expenses and other current assets16,363 16,138 
Income tax receivable1,648 3,138 
Total current assets$309,727 $250,942 
Property, plant and equipment, net of depreciation and amortization of $72,193 and $67,450 as of December 31, 2023 and March 31, 2023, respectively67,932 63,288 
Goodwill268,538 219,612 
Intangible assets, net133,247 93,970 
Operating lease right-of-use assets14,482 13,570 
Deferred income taxes1,072 688 
Other non-current assets10,090 7,559 
Total assets$805,088 $649,629 
Liabilities  
Current liabilities:  
Accounts payable$26,611 $27,330 
Accrued liabilities40,392 39,364 
Current portion of long-term debt15,945 10,222 
Borrowings under revolving credit facility32,500 14,500 
Contract liabilities15,414 8,483 
Lease liabilities3,429 3,364 
Income taxes payable5,448 6,809 
Total current liabilities$139,739 $110,072 
Long-term debt, net163,954 87,710 
Deferred income taxes10,835 12,084 
Non-current lease liabilities13,368 12,479 
Other non-current liabilities9,767 8,296 
Total liabilities$337,663 $230,641 
Commitments and contingencies (Note 10)
 Equity
Common stock: $0.001 par value; 150,000,000 authorized; 33,711,599 and 33,508,076 shares issued and outstanding at December 31, 2023 and March 31, 2023, respectively$34 $33 
Preferred stock: $0.001 par value; 10,000,000 authorized; no shares issued and outstanding— — 
Additional paid in capital242,111 239,860 
Accumulated other comprehensive loss(53,421)(58,100)
Retained earnings278,701 237,195 
Total equity$467,425 $418,988 
Total liabilities and equity$805,088 $649,629 
 December 31,
2017		 March 31,
2017
 (Unaudited)  
Assets 
  
Current assets: 
  
Cash and cash equivalents$51,171
 $42,842
Investments1,031
 44,786
Accounts receivable, net of allowance for doubtful accounts of $1,029 and $518 as of December 31, 2017 and March 31, 2017, respectively85,456
 63,719
Inventories, net65,068
 34,020
Costs and estimated earnings in excess of billings on uncompleted contracts13,379
 4,973
Prepaid expenses and other current assets8,848
 5,806
Income tax receivable1,267
 2,028
Total current assets226,220
 198,174
Property, plant and equipment, net73,750
 43,266
Goodwill216,198
 122,521
Intangible assets, net159,436
 86,178
Deferred income taxes

2,901
 2,823
Other long term assets2,463
 1,118
Total assets$680,968
 $454,080
Liabilities 
  
Current liabilities: 
  
Accounts payable$23,323
 $15,683
Accrued liabilities19,658
 13,142
Current portion of long term debt1,875
 20,250
Billings in excess of costs and estimated earnings on uncompleted contracts4,878
 2,767
Income taxes payable3,231
 481
Total current liabilities52,965
 52,323
Long-term debt, net of current maturities and deferred debt issuance costs and debt discounts of $9,089 and $524 as of December 31, 2017 and March 31, 2017, respectively239,036
 60,226
Deferred income taxes41,639
 25,661
Other non-current liabilities11,434
 3,368
Total liabilities345,074
 141,578
 Equity   
Common stock: $.001 par value; 150,000,000 authorized; 32,459,933 and 32,365,553 shares issued and outstanding at December 31, 2017 and March 31, 2017, respectively32
 32
Preferred stock: $.001 par value; 10,000,000 authorized; no shares issued and outstanding—
 —
Additional paid in capital221,597
 219,284
Accumulated other comprehensive loss(33,878) (48,335)
Retained earnings142,752
 136,899
Total Thermon Group Holdings, Inc. shareholders' equity330,503
 307,880
Non-controlling interests5,391
 4,622
Total equity335,894
 312,502
Total liabilities and equity$680,968
 $454,080
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements


2

Thermon Group Holdings, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
(Dollars in Thousands,thousands, except share and per share data)
 
Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Nine Months Ended December 31, 2017 Nine Months Ended December 31, 2016
       
Three Months Ended December 31, 2023Three Months Ended December 31, 2023Three Months Ended December 31, 2022Nine Months Ended December 31, 2023Nine Months Ended December 31, 2022
Sales$92,660
 $64,340
 $206,027
 $196,548
Cost of sales50,446
 35,721
 109,039
 112,891
Gross profit42,214
 28,619
 96,988
 83,657
Operating expenses:       
Marketing, general and administrative and engineering27,251
 18,357
 67,089
 57,689
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses
Deferred compensation plan expense/(income)
Amortization of intangible assets4,753
 2,963
 10,714
 8,804
Restructuring and other charges
Income from operations10,210
 7,299
 19,185
 17,164
Other income/(expenses):       
Interest income161
 131
 553
 366
Interest expense(2,787) (862) (4,376) (2,671)
Loss on extinguishment of debt(376) —
 (376) —
Other expense(5,492) (6) (5,563) (156)
Interest expense, net
Interest expense, net
Interest expense, net
Other income/(expense)
Other income/(expense)
Other income/(expense)
Income before provision for income taxes1,716
 6,562
 9,423
 14,703
Income tax expense883
 1,245
 2,798
 3,068
Net income$833
 $5,317
 $6,625
 $11,635
Income attributable to non-controlling interests234
 (41) 769
 245
Net income available to Thermon Group Holdings, Inc.$599

$5,358

$5,856
 $11,390
Comprehensive income (loss):       
Net income available to Thermon Group Holdings, Inc.$599
 $5,358
 $5,856
 $11,390
Comprehensive income:
Comprehensive income:
Comprehensive income:
Net income
Net income
Net income
Foreign currency translation adjustment1,175
 (8,069) 14,457
 (8,929)
Derivative valuation, net of tax—
 495
 7
 655
Comprehensive income (loss)$1,774
 $(2,216)
$20,320
 $3,116
Net Income per common share:       
Other miscellaneous income
Comprehensive income
Net income per common share:
Basic
Basic
Basic$0.02
 $0.17
 $0.18
 $0.35
Diluted0.02
 0.16
 0.18
 0.35
Weighted-average shares used in computing net income per common share:       
Basic32,447,838
 32,330,392
 32,408,608
 32,280,539
Basic
Basic
Diluted32,914,372
 32,651,930
 32,762,542
 32,619,285
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

statements

3

Thermon Group Holdings, Inc.
Condensed Consolidated Statements of Cash FlowsEquity (Unaudited)
(Dollars in Thousands)thousands)
Common Stock OutstandingCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income/(Loss)Total
Balances at March 31, 202333,508,076 $33 $239,860 $237,195 $(58,100)$418,988 
Issuance of common stock as deferred compensation to employees73,345 — — — — — 
Issuance of common stock as deferred compensation to executive officers93,826 — — — — — 
Issuance of common stock as deferred compensation to directors5,718 — — — — — 
Stock compensation expense— — 1,238 — — 1,238 
Repurchase of employee stock units on vesting— — (1,685)— — (1,685)
Net income— — — 10,938 — 10,938 
Foreign currency translation adjustment— — — — 4,457 4,457 
Other— — — — 13 13 
Balances at June 30, 202333,680,965 $33 $239,413 $248,133 $(53,630)$433,949 
Issuance of common stock as deferred compensation to employees2,550 — — — — — 
Issuance of common stock as deferred compensation to directors7,197 — — — — — 
Stock compensation expense— — 1,450 — — 1,450 
Repurchase of employee stock units on vesting— — (30)— — (30)
Net income— — — 14,730 — 14,730 
Foreign currency translation adjustment— — — — (7,845)(7,845)
Other— 1 — — 51 52 
Balances at September 30, 202333,690,712 $34 $240,833 $262,863 $(61,424)$442,306 
Issuance of common stock as deferred compensation to employees14,839 — — — — — 
Issuance of common stock as deferred compensation to directors6,048 — — — — — 
Stock compensation expense— — 1,444 — — 1,444 
Repurchase of employee stock units on vesting— — (165)— — (165)
Net income— — — 15,837 — 15,837 
Foreign currency translation adjustment— — — — 8,072 8,072 
Other— — (1)1 (69)(69)
Balances at December 31, 202333,711,599 $34 $242,111 $278,701 $(53,421)$467,425 
4

 Nine Months Ended December 31, 2017 Nine Months Ended
December 31, 2016
Operating activities 
  
Net income$6,625
 $11,635
Adjustment to reconcile net income to net cash provided by operating activities: 
  
Depreciation and amortization16,488
 13,202
Amortization of deferred debt issuance costs433
 298
Amortization of inventory step-up362
 —
Loss on extinguishment of debt

376
 —
Stock compensation expense2,627
 2,658
Deferred income taxes(7,617) (2,794)
Long term foreign exchange derivative4,874
 —
Remeasurement (gain) on intercompany balances(2,671) (621)
Changes in operating assets and liabilities: 
  
Accounts receivable(4,848) (724)
Inventories(9,101) 1,177
Costs and estimated earnings in excess of billings on uncompleted contracts(6,842) 437
Other current and noncurrent assets(3,058) (52)
Accounts payable2,617
 (4,168)
Accrued liabilities and noncurrent liabilities8,769
 (6,161)
Income taxes payable and receivable2,154
 (2,432)
Net cash provided by operating activities11,188
 12,455
Investing activities 
  
Purchases of property, plant and equipment(6,182) (5,426)
Sale of rental equipment at net book value461
 312
Proceeds from sale of property, plant and equipment8
 811
Cash paid for acquisitions (net of cash acquired)(202,693) —
Purchases of investments(8,090) (36,972)
Proceeds from the sale of investments53,132
 —
Net cash provided by (used in) investing activities(163,364) (41,275)
Financing activities 
  
Proceeds from senior secured notes250,000
 —
Proceeds from revolving credit facility10,000
 —
Payments on long term debt and revolving credit facility(91,000) (10,125)
Issuance costs associated with revolving line of credit and long term debt(9,611) —
Proceeds from exercise of stock options239
 129
Repurchase of employee stock units on vesting(471) (571)
Lease financing(193) (156)
Net cash provided by (used in) financing activities158,964
 (10,723)
Effect of exchange rate changes on cash and cash equivalents1,541
 (3,005)
Change in cash and cash equivalents8,329
 (42,548)
Cash and cash equivalents at beginning of period42,842
 84,570
Cash and cash equivalents at end of period$51,171
 $42,022
Common Stock OutstandingCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive Income/(Loss)Total
Balances at March 31, 202233,364,722 $33 $234,549 $203,528 $(38,906)$399,204 
Issuance of common stock as deferred compensation to employees30,352 — — — — — 
Issuance of common stock as deferred compensation to executive officers64,294 — — — — — 
Issuance of common stock as deferred compensation to directors8,766 — — — — — 
Stock compensation expense— — 1,193 — — 1,193 
Repurchase of employee stock units on vesting— — (552)— — (552)
Net income— — — 6,556 — 6,556 
Foreign currency translation adjustment— — — — (5,152)(5,152)
Other— — — 1 2 3 
Balances at June 30, 202233,468,134 $33 $235,190 $210,085 $(44,056)$401,252 
Issuance of common stock as deferred compensation to employees5,544 — — — — — 
Issuance of common stock as deferred compensation to directors9,930 — — — — — 
Stock compensation expense— — 1,251 — — 1,251 
Repurchase of employee stock units on vesting— — (34)— — (34)
Net income— — — 10,984 — 10,984 
Foreign currency translation adjustment— — — — (17,811)(17,811)
Other— — — — 116 116 
Balances at September 30, 202233,483,608 $33 $236,407 $221,069 $(61,751)$395,758 
Issuance of common stock as deferred compensation to employees512 — — — — — 
Issuance of common stock as deferred compensation to directors11,167 — — — — — 
Stock compensation expense— — 1,994 — — 1,994 
Repurchase of employee stock units on vesting— — (2)— — (2)
Net income— — — 8,425 — 8,425 
Foreign currency translation adjustment— — — — 5,403 5,403 
Other— — — 1 (75)(74)
Balances at December 31, 202233,495,287 $33 $238,399 $229,495 $(56,423)$411,504 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

statements


5

Thermon Group Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
 Nine Months Ended December 31, 2023Nine Months Ended December 31, 2022
Operating activities  
Net income$41,505 $25,965 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization13,075 14,557 
Amortization of deferred debt issuance costs236 230 
Impairment of property, plant, and equipment— 367 
Stock compensation expense4,132 4,438 
Deferred income taxes(1,817)(4,186)
Reserve for uncertain tax positions, net— 36 
Remeasurement (gain)/loss on intercompany balances(836)134 
Changes in operating assets and liabilities:0
Accounts receivable(12,305)1,145 
Inventories(5,329)(18,047)
Contract assets and liabilities(3,343)4,447 
Other current and non-current assets(2,914)(695)
Accounts payable(1,793)(4,066)
Accrued liabilities and non-current liabilities(2,103)1,433 
Income taxes payable and receivable80 5,847 
Net cash provided by operating activities$28,588 $31,605 
Investing activities  
Purchases of property, plant and equipment(7,882)(5,173)
Sale of rental equipment75 163 
Cash paid for acquisitions, net of cash acquired(100,472)(35,299)
Net cash used in investing activities$(108,279)$(40,309)
Financing activities  
Proceeds from revolving credit facility18,000 34,500 
Payments on revolving credit facility— (10,000)
Proceeds from long-term debt100,000 — 
Payments on long-term debt(17,778)(17,121)
Issuance costs associated with revolving line of credit and long term debt(659)— 
Repurchase of employee stock units on vesting(1,880)(588)
Payments on finance leases(145)(62)
Net cash provided by financing activities$97,538 $6,729 
Less: Net change in cash balances classified as assets held-for-sale849 — 
Effect of exchange rate changes on cash, cash equivalents and restricted cash51 (754)
Change in cash, cash equivalents and restricted cash18,747 (2,729)
Cash, cash equivalents and restricted cash at beginning of period38,520 43,931 
Cash, cash equivalents and restricted cash at end of period$57,267 $41,202 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
6

Thermon Group Holdings, Inc.
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in Thousands, Except Sharethousands, except share and Per Share Data)per share data)
 
1. Basis of Presentation and Accounting Policy Information

Thermon Group Holdings, Inc. and its direct and indirect subsidiaries are referred to collectively as “we,” “our,” or the “Company” herein. We are a providerone of the largest providers of highly engineered industrial process heating solutions for process industries. Our core thermal solutions product - also referred to as heat tracing - provides an external heat source to pipes, vessels and instruments for the purposes of freeze protection, temperature and flow maintenance, environmental monitoring, and surface snow and ice melting. AsWe offer a manufacturer, we provide afull suite of products (heating units, electrode and gas-fired boilers, heating cables, industrial heating blankets and related products, temporary power solutions and tubing bundles and control systems) andbundles), services (design optimization, engineering,(engineering, installation and maintenance services) and software (design optimization and wireless and network control systems) required to deliver comprehensive solutions to some of the world's largest and most complex projects. On October 30, 2017 the Company consummated the acquisition of CCI Thermal Technologies Inc. ("CCI"). CCI is engaged in industrial process heating, focused on the development and production of advanced heating and filtration solutions for industrial and hazardous area applications. In addition to our thermal solution offerings, we offer temporary power products that are designed to provide a safe and efficient means of supplying temporary electrical power distribution and lighting at energy infrastructure facilities for new construction and during maintenance and turnaround projects at operating facilities.
The accompanying unauditedOur condensed consolidated financial statements are prepared in conformity with generally accepted accounting principles in the United States ("GAAP") and the requirements of the United States Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, the accompanying condensed consolidated financial statements do not include all disclosures required for full annual financial statements and should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2017.2023 ("fiscal 2023"). In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring items) considered necessary to present fairly our financial position at December 31, 20172023 and March 31, 2017,2023, and the results of our operations for the three and nine months ended December 31, 20172023 and 2016.2022.
Use of Estimates
Generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. While our management has based theirits assumptions and estimates on the facts and circumstances existing at December 31, 2017,2023, actual results could differ from those estimates and affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities and the corresponding revenues and expenses as of the date of the financial statements. The operating results for the three and nine months ended December 31, 20172023, are not necessarily indicative of the results that may be achieved for the fiscal year ending March 31, 2018. 2024.

Restricted Cash and Cash Equivalents
Reclassifications
Certain reclassifications have been made within these consolidated financial statements    The Company maintains restricted cash related to conform prior periods to current period classifications. On the consolidated balance sheet at March 31, 2017, we reduced the previously reported balancecertain letter of credit guarantees and performance bonds securing performance obligations. The following table provides a reconciliation of cash, cash equivalents, and restricted cash included in prepaid expenses and other current assets by $2,000 and increased income tax receivable byrestricted cash included in other non-current assets reported within the condensed consolidated balance sheets that sum to the total of the same amount. The income tax receivablesuch amounts relate to tax payments or accruals made currently, which have not beenshown in the statements of cash flows.
December 31, 2023March 31, 2023
Cash and cash equivalents$55,396 $35,635 
Restricted cash included in prepaid expenses and other current assets1,871 2,859 
Restricted cash included in other non-current assets— 26 
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows$57,267 $38,520 
    Amounts shown in restricted cash included in tax returns filed within their respective jurisdictions. The Company believesprepaid expenses and other current assets and other non-current assets represent those required to be set aside by a contractual agreement, which generally contain cash deposits pledged as collateral on performance bonds and letters of credit. Amounts shown in restricted cash in other non-current assets represent such agreements that presenting these amounts as current income tax receivables providesrequire a better understanding of our position related to taxation obligations.   

commitment term longer than one year.
Recent Accounting Pronouncements
Revenue RecognitionIncome taxes - In May 2014,December 2023, the Financial Accounting Standards Board (“FASB”("FASB") issued Accounting Standards Update No. 2014-09 "Revenue from Contracts with Customers" (Topic 606), which amends("ASU") 2023-09, Improvements to Income Tax Disclosures. ASU 2023-09 enhances annual income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity’s worldwide operations. The two primary enhancements disaggregate existing revenue recognition requirementsincome tax disclosures related to the effective tax rate reconciliation and guidance. The core principle of the new standard is to recognize revenue that reflects the consideration the Company expects to receive for goods or services when or as the promised goods or services are transferred to customers. Topic 606 requires more judgement than current guidance, as management will now be required to: (i) identify each performance obligation in contracts with customers, (ii) estimate any variable consideration included in the transaction price and (iii) allocate the transaction price to each performance obligation. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of


adoption. The Company is currently planning to adopt the amended guidance using the modified retrospective method as of April 1, 2018.
To assess the impact of the standard, we utilize internal resources to lead the implementation effort and supplement our internal resources with external consultants. As of the third quarter of fiscal 2018, the Company has completed the evaluation of its revenue streams and has selected a sample of customer contracts that we believe fairly represent contract traits that could be accounted for differently under amended guidance. The Company has begun evaluating the potential impact of the new revenue standard on each of the selected contracts including: (i) estimating the contract consideration under the new standard, (ii) identifying the performance obligations within the customer contracts, (iii) calculating the anticipated allocation of contract consideration to each performance obligation, (iv) determining the timing of revenue recognition for each performance obligation, and (v) determining the classification of the contract revenue for disclosure purposes. The contract reviews are currently in process and we anticipate theyincome taxes paid. This ASU will be completed by the end of the 2018effective in our fiscal year. After this work is complete, we believe we will have identified and assessed all material performance obligations impacted by the amended guidance.
Stock Compensation - Inyear ended March 2016, the FASB issued Accounting Standards Update 2016-09 “Compensation-Stock Compensation” (Topic 718), which changes the accounting31, 2026 for certain aspects of share-based payments to employees. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. Additionally, cash flows related to excess tax benefits will no longer be separately classified as a financing activity and will be included as an operating activityour annual report on the consolidated statements of cash flows. The guidance allows for an accounting policy election to account for forfeitures as they occur. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted this standard effective April 1, 2017 and it did not have a material impact on our consolidated financial statements.

Inventory- In July 2015, the FASB issued Accounting Standards Update 2015-11 “Simplifying the Measurement of Inventory” (Topic 330). Under the new guidance, inventory is measured at the lower of cost and net realizable value, and the new guidance eliminates the use of replacement cost and net realizable value less a normal profit margin as techniques to value inventory. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The new guidance will be applied prospectively for annual periods and interim periods within fiscal years beginning after December 15, 2016. We adopted this standard effective April 1, 2017 and it did not have a material impact on our consolidated financial statements.

Financial Instruments- In January 2016, the FASB issued Accounting Standards Update 2016-01 “Financial Instruments-Overall” (Subtopic 825-10), which amends the guidance on the classification and measurement of financial instruments. The amendment requires all equity investments to be measured at fair value with changes in the fair value recognized through earnings. The amendment also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the credit risk when an entity has elected the fair value option. The guidance eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The new guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. Early adoption is permitted for certain provisions of the accounting standards update. Upon adoption of the standard, an entity will be required to make a cumulative-effect adjustment to retained earnings as of the beginning of such reporting period. Upon adoption, we do not anticipate this standard will have a material impact on our consolidated financial statements.

Leases - In February 2016, the FASB issued Accounting Standards Update 2016-02 “Leases” (Topic 842), which provides guidance on the recognition, measurement, presentation and disclosure on leases. Under the standard, substantially all leases will be reported on the balance sheet as right-of-use assets and lease liabilities. The new guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted.Form 10-K. We are currentlystill evaluating the requirements of the standard and have not yet determined its impact on our consolidated financial statements.

Financial Instruments- In June 2016, the FASB issued Accounting Standards Update 2016-13 “Financial Instruments-Credit Losses” (Topic 326), which amends the guidance on the impairment of financial instruments. The standard adds an impairment model, referred to as current expected credit loss, which is based on expected losses rather than incurred losses. The standard applies to most debt instruments, trade receivables, lease receivables, reinsurance receivables, financial guarantees and loan commitments. Under the guidance, companies are required to disclose credit quality indicators disaggregated by year of origination for a five-year period. The new guidance is effective for fiscal years and interim periods


within those fiscal years beginning after December 15, 2019. We do not anticipate this will have a material impact to our consolidated financial statements.

7

Statement of Cash Flows- Segment Reporting - In August 2016,November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures. This update enhances segment reporting under ASC 280 - Segment Reporting by requiring registrants to disclose: significant segment expenses regularly provided to the chief operating decision maker ("CODM") and included within the reported measure(s) of a segment’s profit or loss, how the CODM uses the reported measure(s) of a segment’s profit or loss to assess segment performance and decide how to allocate resources, and the amount and composition of other segment items, which reconciles segment revenue, less significant expenses, to the reported measure(s) of a segment’s profit or loss, and the CODM's title and position. This ASU will be effective in our fiscal year ended March 31, 2025 for our annual report on Form 10-K and in interim periods thereafter. We are still evaluating the impact of this ASU on our consolidated financial statements.
Business Combinations - In October 2021, the FASB issued ASU 2021-08, Accounting Standards Update 2016-15 “Statement of Cash Flows” (Topic 230), which amends Topic 230 of the accounting standards codification (ASC) to add or clarify guidance on the classification of certain cash receiptsfor Contract Assets and paymentsContract Liabilities from Contracts with Customers. This update requires an acquirer in the statement of cash flows. The standard addresses eight types of cash flows, some of which we believe could or will impact our financial statements upon adoption, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination to recognize and proceedsmeasure contract assets and contract liabilities (deferred revenue) from acquired contracts using the revenue recognition guidance in ASC 606. Under this "ASC 606 approach," the acquirer applies the revenue model as if it had originated the contracts. This is a departure from the settlementprevious requirement to measure contract assets and contract liabilities at fair value. The ASU is effective for all public business entities in annual and interim periods starting after December 15, 2022, and early adoption was permitted. We adopted this standard on April 1, 2023, and applied it accordingly to our recent acquisition.
2. Acquisitions
Vapor Power
On January 2, 2024, we announced our acquisition (the "Vapor Power Acquisition") of insurance claims. Under100% of the guidance,issued and outstanding equity interests of Vapor Power International, LLC and its affiliates, (“Vapor Power”), a leading provider of high-quality industrial process heating solutions, including electric, electrode and gas fired boilers. The acquisition was consummated on December 29, 2023 (the "Vapor Power Acquisition Date") and the seller was Stone Pointe, LLC. We plan to integrate Vapor Power into our United States and Latin America ("US-LAM") reportable segment.
The total purchase price for Vapor Power was $107,523, with cash paymentsacquired of $7,051, for debt prepaymenta net closing purchase price of $100,472. The total purchase price is based on customary adjustments for cash acquired, preliminary working capital adjustments, outstanding indebtedness, and transaction expenses. The Vapor Power acquisition was funded with cash on hand, the existing revolving credit facility, and an expanded term loan amended on December 29, 2023 in connection with the transaction. We have not recognized any material operating income or extinguishmentexpenses related to Vapor in Interim 2024.
Acquisition Costs
In accordance with GAAP, costs must be classifiedto complete an acquisition are expensed as cash outflows from financing activities. Contingent consideration payments thatincurred. Total acquisition costs recognized in the Vapor Power acquisition were not made soon after a business combination must be separatedapproximately $1,527, all recognized in the quarter ended December 31, 2023. These fees represent legal, advisory, and classifiedother professional fees paid by the Company to complete the acquisition and are reflected in operating"Selling, general and financing activities. Cash payments upadministrative expenses" in our condensed consolidated statement of operations and comprehensive income.
Preliminary Purchase Price Allocation
We have accounted for the Vapor Power acquisition according to the amount of the contingent consideration liabilitybusiness combinations guidance found in ASC 805, Business Combinations, henceforth referred to as acquisition accounting. Acquisition accounting requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition dates,date. We used primarily Level 2 and 3 inputs to allocate the purchase price to the major categories of assets and liabilities shown below. For valuing the customer-related intangible assets, we used a common income-based approach called the multi-period excess earnings method; for the marketing-related and developed technology intangible assets, we used a relief-from-royalty method. The carrying values of inventories and property, plant, and equipment, and leases were adjusted to fair value, while the carrying value of any other asset or liability acquired approximated the respective fair value at time of closing.
The allocation of the purchase price to the assets acquired and liabilities assumed, including any measurement-period adjustments, should be classified in financing activities, while any excess cash payments should be classified in operating activities. Cash proceedsthe residual amount allocated to goodwill, is based upon preliminary information and is subject to change within the measurement period (up to one year from the settlement of insurance claims should be classified on the basisVapor Power Acquisition Date) as additional information concerning final asset and liability valuations is obtained. The fair value of the natureacquired intangible assets at December 31, 2022, of $45,911, was provisional pending receipt of the loss.final valuation report for those assets from a third-party valuation expert. Additionally, we are still evaluating Vapor Power's customer contracts and related revenue recognition policies, and as such, the value of contract assets and/or contract liabilities is subject to change. During the measurement period, if new information is obtained about facts and circumstances that existed as of the Vapor Power Acquisition Date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date, we will revise the preliminary purchase price allocation. The guidanceeffect of any measurement period adjustments to the estimated fair values will be reflected in future updates to our purchase price allocation. Goodwill will be deductible for tax purposes and generally represents expected synergies from the combination of efforts of the acquired business and the Company.
8

Preliminary Purchase Price Allocation - Vapor Power
Amortization Period (years)Fair Value
Cash$7,051 
Accounts receivable9,208 
Inventories8,640 
Other current assets776
Property, plant and equipment2,436 
Operating lease right-of-use assets2,700 
Intangibles:
Customer relationships(1)
2 - 1524,343 
Trademarks107,879 
Developed technology1513,689 
Goodwill46,143 
Total fair value of assets acquired$122,865 
Current liabilities(12,793)
Operating lease liability(2,549)
Total fair value of liabilities acquired$(15,342)
Total purchase price$107,523 
(1) Included in the customer relationships intangible assets is effective$5,536 related to customer backlog with an estimated useful life of 2 years.
Powerblanket
On May 31, 2022, (the "Powerblanket Acquisition Date"), Thermon Holding Corp., as buyer, acquired 100% of the issued and outstanding equity interests of Powerblanket (“Powerblanket”) from Glacier Capital LLC, as seller (the "Powerblanket Acquisition"). Powerblanket is a leading North American supplier of heated blankets built upon patented heat spreading technology. The Powerblanket Acquisition increases our exposure to growing industrial and commercial end-markets through its freeze protection, temperature control and flow assurance solutions. We have integrated Powerblanket into our US-LAM reportable segment.
The initial purchase price for the Powerblanket Acquisition was $35,000, subject to an adjustment for net working capital acquired at closing. Subsequent to the Powerblanket Acquisition Date, and commensurate with the purchase agreement, we increased the purchase price by $299 for net working capital acquired. We financed the Powerblanket Acquisition through the use of our Revolving Credit Facility as well as cash on hand. Powerblanket's revenue structure does not result in material contract assets or liabilities.
Acquisition Costs
In accordance with GAAP, costs incurred to complete an acquisition are expensed as incurred. Total acquisition costs, which represent transaction costs, legal fees, and third-party professional fees were $278, of which $126 were recognized in fiscal years2023. No costs related to the Powerblanket Acquisition have been recognized in fiscal 2024. Acquisition costs are reflected in "Selling, general and administrative expenses" in our condensed consolidated statement of operations and comprehensive income.
Purchase Price Allocation
We have accounted for the Powerblanket Acquisition in accordance with acquisition accounting. We primarily used Level 2 and Level 3 inputs to allocate the purchase price to the major categories of assets and liabilities shown below. For valuing the customer relationships intangible asset, we used a common income-based approach called the multi-period excess earnings method; for the trademarks and developed technology intangible assets, we used a relief-from-royalty method; and for the contract-based intangible asset, we used the with and without method. The carrying values of inventories, property, plant and equipment as well as leased assets approximated their respective fair values at the time of closing.
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Purchase Price Allocation - Powerblanket
Amortization Period (years)Fair Value
Accounts receivable$1,267 
Inventories3,545 
Other current assets290 
Property, plant and equipment391 
Other non-current assets954 
Intangibles:
Customer relationships9.83,301 
Trademarks9.83,397 
Contract-based5.01,280 
Developed technology15.85,189 
Goodwill18,620 
Total fair value of assets acquired$38,234 
Accounts payable(1,098)
Accrued liabilities(637)
Other liabilities(1,200)
Total fair value of liabilities acquired$(2,935)
Total purchase price$35,299 
Unaudited Pro Forma Financial Information
The following unaudited pro forma results of operations assume that both acquisitions mentioned above occurred at the beginning after December 15, 2017, including interimof the periods within those years. Early adoption is permittedpresented. These unaudited pro forma results are presented for all entities. Entities must applyinformational purposes only and are not necessarily indicative of what the guidance retrospectively to allactual results of operations would have been if the Vapor Power Acquisition and Powerblanket Acquisition had occurred at the beginning of the periods presented, but may be applied prospectively if retrospective application would be impracticable. We do not anticipate this will have a material impact tonor are they indicative of future results of operations. The pro forma results presented below are adjusted for the removal of Vapor Power Acquisition and other related costs of $5,912 and $217, in the three months ended December 31, 2023 and 2022, respectively, and $6,346 and $650 in the nine months ended December 31, 2023 and 2022, respectively. Also, the pro forma results presented below are adjusted for the removal of Powerblanket Acquisition and other related costs of $126, which were incurred in our consolidated financial statements.first fiscal quarter ended June 30, 2022.
Three Months Ended December 31, 2023Three Months Ended December 31, 2022Nine Months Ended December 31, 2023Nine Months Ended December 31, 2022
Sales$154,927 $135,030 $407,434 $348,390 
Net income20,072 12,207 48,145 30,386 

2.3. Fair Value Measurements
Fair Value.
We measure fair value based on authoritative accounting guidance, which defines fair value, establishes a framework for measuring fair value, and expands on required disclosures regarding fair value measurements.
Inputs are referred to as assumptions that market participants would use in pricing the asset or liability. The usesuse of inputs in the valuation process are categorized into a three-level fair value hierarchy.
•Level 1 — uses quoted prices in active markets for identical assets or liabilities we have the ability to access.
•Level 2 — uses observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3 — uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. 
Financial assets and liabilities with carrying amounts approximating fair value include cash tradeand cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities. The carrying amount of these financial assets and liabilities approximates fair value because of their short maturities. At December 31, 20172023 and March 31, 2017,2023, no
10

assets or liabilities were valued using Level 3 criteria.criteria, except for those acquired in our acquisitions of Powerblanket and Vapor Power, as discussed in Note 2, "Acquisitions." 
Information about our investmentsfinancial assets and long-term debt that is not measured at fair valueliabilities is as follows:
 December 31, 2017 March 31, 2017  
 
Carrying
Value
 Fair Value 
Carrying
Value
 Fair Value Valuation Technique
Financial Assets   
  
  
  
Certificates of deposits with maturities greater than 90 days$1,031
 $1,031
 $44,786
 $44,786
 Level 2 - Market Approach
Financial Liabilities 
  
  
  
  
Outstanding principal amount of senior secured credit facility$250,000
 $250,000
 $81,000
 $81,000
 Level 2 - Market Approach
 December 31, 2023March 31, 2023 
 Carrying
Value		Fair ValueCarrying
Value		Fair ValueValuation Technique
Financial Assets:    
Deferred compensation plan assets$7,790 $7,790 $6,350$6,350Level 1 - Active Markets
Foreign currency contract forwards assets177 177 6060Level 2 - Market Approach
Financial Liabilities: 
Outstanding borrowings from revolving line of credit$32,500 $32,500 $14,500 $14,500 Level 2 - Market Approach
Outstanding principal amount of senior secured credit facility180,840 180,388 98,361 98,115 Level 2 - Market Approach
Deferred compensation plan liabilities7,080 7,080 5,671 5,671 Level 1 - Active Markets
Foreign currency contract forwards liabilities— — 26 26 Level 2 - Market Approach
At December 31, 20172023 and March 31, 2017,2023, the fair value of our variable rate term loan approximates its carrying value as we pay interestlong-term debt is based on the current market rate.quotes available for issuance of debt with similar terms. As the quoted price is only available for similar financial assets, the Company concluded the pricing is indirectly observable through dealers and has been classified as Level 2.

Additionally, we acquired certain assets and liabilities as disclosed in Note 2, "Acquisitions" at fair value according to acquisition accounting.

Deferred Compensation Plan

Investments
At    The Company provides a non-qualified deferred compensation plan for certain highly compensated employees where payroll contributions are made by the employees on a pre-tax basis. Included in “Other non-current assets” in the condensed consolidated balance sheets at December 31, 20172023 and March 31, 2017, the Company maintained $1,0312023 were $7,790 and $44,786,$6,350, respectively, of term deposit accountsdeferred compensation plan assets held by the Company. Deferred compensation plan assets (mutual funds) are measured at several foreign financial institutions with whom we have an established relationship. Maturitiesfair value on these deposits are greater than 90 days and less than one year and accordingly are classified as investments. The Company concluded that since the interest rates for these term deposits area recurring basis based on the quoted rates from the various financial institutions that the pricing is indirectly observable and has been classified as a Level 2 market approach. 
Acquisition Related Foreign Exchange Option
In connection with the execution of the purchase agreement for the CCI acquisition on October 3, 2017, we entered into a combination of option contracts to secure the exchange rate of $200,000 CAD that would be contributed by Thermon Holding Corp. at closing on October 30, 2017. The options were structured such that the $200,000 CAD would be exchanged for no more than $162,061 and no less than $159,198 USD. At settlement date, Thermon took delivery of $200,000 CAD for $159,198. At closing of the CCI acquisition, the Canadian dollar weakened such that the actual spot foreign exchange rate was $155,872. The resulting difference of $3,326 was recognized as realized loss on Foreign Exchange.
Cross Currency Swap
prices in active markets (Level 1). The Company has entered into a long term cross currency swapcorresponding liability to hedgeparticipants of $7,080 and $5,671 included in “Other non-current liabilities” in the currency rate fluctuations related to a $112,750 intercompany receivable from our wholly-owned Canadian subsidiary, Thermon Canada Inc., maturing on October 30, 2022. Periodic principal payments are to be settled twice annually with interest payments settled quarterly through the cross currency derivative contract. We do not designate the cross currency swap as a cash flow hedge under ASC 815. Atcondensed consolidated balance sheets at December 31, 2017 we recorded $4,877 of unrealized mark to market loss on the Cross Currency Swap which2023 and March 31, 2023, respectively. Deferred compensation plan expense/(income) is reportedincluded as "Other non-current liabilities",such in the Condensed Consolidated Balance Sheet. The mark to market valuation has been determined by actual quoted prices (Level 2).
Forcondensed consolidated statement of operations, and therefore is excluded from "Selling, general and administrative expenses." Deferred compensation plan expense/(income) was $651 and $464 for the three months ended December 31, 2023 and 2022, respectively, and $677 and $(499) for the nine months ended December 31, 2017 the loss on the Long-term Derivative Contract2023 and 2022, respectively. Expenses and income from our deferred compensation plan were offset by unrealized gains and losses for the deferred compensation plan included in "Other income/expense" on our condensed consolidated statements of operations and comprehensive income. Our unrealized (gains) and losses on investments were $(659) and $(484), respectively, for the intercompany note of $2,609three months ended December 31, 2023 and 2022, respectively, and $(709) and $450 for a net loss of $2,268.

the nine months ended December 31, 2023 and 2022, respectively.
Trade Related Foreign Currency Forward Contracts
We transact business in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to offsetaddress the risk associated with the effects of certain foreign currency exposures. Under this program, increases or decreases in our foreign currency exposures are offset by gains or losses on the forward contracts to mitigate foreign currency transaction gains or losses. These foreign currency exposures arise from intercompany transactions as well as third party accounts receivable or payable that are denominated in foreign currencies. Our forward contracts generally have terms of 30 days. We do not use forward contracts for trading purposes or designate these forward contracts as hedging instruments pursuant to ASC 815. We adjust the carrying amount of all contracts to their fair value at the end of each reporting period and unrealized gains and losses are included in "Other income/(expense)" on our resultscondensed consolidated statements of operations for that period.and comprehensive income. These gains and losses are designed to offset gains and losses resulting from settlement of receivables or payables by our foreign operations which are settled in currency other than the local transactional currency. The fair value is determined by quoted prices from active foreign currency markets (Level 2). TheFair value amounts for such forward contracts on our condensed consolidated balance sheets reflect unrealized gains withinare either classified as accounts receivable, net and unrealized losses withinor accrued liabilities.
11

liabilities depending on whether the forward contract is in a gain (accounts receivable, net) or loss (accrued liabilities) position. Our ultimate realized gain or loss with respect to currency fluctuations will depend on the currency exchange rates and other factors in effect as the contracts mature. As of December 31, 20172023 and March 31, 2017,2023, the notional amounts of forward contracts were as follows:
Notional amount of foreign currency forward contracts by currency
December 31, 2023March 31, 2023
Canadian Dollar$3,000 $4,500 
South Korean Won— 1,500 
Mexican Peso3,000 — 
Chinese Renminbi— 500 
Great Britain Pound— 500 
Total notional amounts$6,000 $7,000 
Notional amount of foreign currency forward contracts by currency
 December 31, 2017 March 31, 2017
Russian Ruble$3,442
 $250
Euro4,000
 —
South Korean Won10,700
 1,300
Mexican Peso300
 450
Australian Dollar950
 375
Total notional amounts$19,392
 $2,375


The following table representsIn the fair value of ourthree and nine months ended December 31, 2023 and 2022, foreign currency forward contracts:
  December 31, 2017 March 31, 2017
  Fair Value Fair Value
  AssetsLiabilities AssetsLiabilities
Foreign currency forward contracts $356
$61
 $62
$10
Foreign currency gains or losses related to our forward contracts in the accompanying condensed consolidated statements of operations and comprehensive income were lossesgains of $186$213 and $476 in the three months ended December 31, 2017 and 2016,$102, respectively, and lossesa gain of $54$242 and $622 for the nine months ended December 31, 2017 and 2016.a loss of $(510), respectively. Gains and losses from our forward contracts were offset by transaction gains or losses incurred with the settlement of transactions denominated in foreign currencies. For the three months ended December 31, 2017 and 2016, our net foreign currency transactions were losses of $5,527 and $34, respectively, and losses of $5,641 and $432 for the nine months ended December 31, 2017 and 2016, respectively.

3. Acquisitions
On October 30, 2017, 2071827 Alberta Ltd. ("MergerSub"), an indirect, wholly owned subsidiary of the Company, completed the acquisition of 100% of the equity interests of CCI and certain related real estate assets for $261,950 CAD (approximately $204,235 USD at the exchange rate as of October 30, 2017) in cash. MergerSub and CCI amalgamated immediately after the closing of the acquisition to form Thermon Heating Systems, Inc. ("THS"), an indirect, wholly-owned subsidiary of the Company. THS is engaged in industrial process heating, focused on the development and production of advanced heating and filtration solutions for industrial and hazardous area applications and is headquartered in Edmonton, Alberta, Canada. THS markets its products through several diverse brands known for high quality, safety and reliability, and serves clients in the energy, petrochemical, electrical distribution, power, transit and industrial end markets globally. We believe we will be able to leverage our existing global sales force to further expand the reach of THS's product offerings. We recognized $87,540 of goodwill in connection with the THS transaction. THS has contributed $16,057 and $2,851 of revenue and operating income, respectively, to our Condensed Consolidated Statements of Operations and Comprehensive Income forIn the three and nine months ended December 31, 2017.2023 and 2022, our net foreign currency transactions resulted in a loss of $(8) and a gain of $193, respectively, and losses of $(21) and $(140), respectively.
Pro forma financial information- The following table presents selected unaudited pro forma information for
4. Restructuring and Other Charges/(Income)
Fiscal 2024 charges/(income)
As a result of the continued impact of the Russo-Ukrainian war, including the sanctions related thereto, the Company assumingcommenced a strategic assessment of its operations in its Russian subsidiary. On January 31, 2023, our board of directors authorized the acquisition of CCI had occurred as of April 1, 2016. This pro forma financial information is presented for informational and illustrative purposes and does not purportCompany to represent what the Company’s actual results would have been if the acquisition had occurred as of the date indicated or what such results would be for any future periods. In addition, the unaudited pro forma results do not include any anticipated synergies or other expected benefits of the acquisition or costs necessary to obtain the anticipated synergies and benefits. The pro forma financial information includes the amortization associated with the acquired intangible assets, interest expense associated with debt used to fund the acquisition, amortization of the inventory step-up, removal of aircraft and rent expense for assets not assumedwithdraw from its operations in the transaction, acquisition related expenses, and the income tax affected for the pro forma results.

(Dollars in Thousands, except share and per share data)
  Pro Forma Financial Information (Unaudited)
  Three months ended December 31, Nine months ended December 31,
  2017 2016 2017 2016
Revenues $99,281
 $83,779
 $245,878
 $241,890
Net income available to Thermon Group Holdings, Inc. (loss) 362
 4,550
 (294) (1,716)
Earnings per share:        
Basic $0.01
 $0.14
 $(0.01) $(0.05)
Diluted $0.01
 $0.14
 $(0.01) $(0.05)


The following table details the purchase priceRussian Federation (the “Russia Exit”), through a planned disposition of the THS transaction:
Consideration to or on behalf of sellers at close

$204,235
Fair value of total consideration transferred204,235

The following table summarizes the preliminary fair value ofits Russian subsidiary. In fiscal 2023, we moved the assets acquired and liabilities assumed:
Assets acquired: 
     Cash$1,534
     Accounts receivable14,351
     Inventories20,489
     Other current assets731
     Property, plant and equipment29,464
     Identifiable intangible assets79,002
     Goodwill87,540
Total assets233,111
Liabilities assumed: 
     Current liabilities6,255
     Other non-current liabilities500
     Non-current deferred tax liability22,121
Total liabilities28,876
Total consideration$204,235


In total, $3,839 of transaction costs were incurred related to our Russian subsidiary into a separate asset group deemed as "assets held-for-sale," and wrote down the THS transaction, all of which were incurred during and priorrelated net assets to a nominal value. In the three and nine months ended December 31, 2017.

Our provisional estimate of identifiable intangible assets at December 31, 2017 that were2023, pursuant to requirements to remeasure the assets-held-for-sale, we recognized total charges related to the THSRussia Exit of $1,336 and $2,221, respectively, recorded to "Restructuring and other charges/(income)" on our condensed consolidated statement of operations and comprehensive income. This brings the total charge from fiscal 2023 and fiscal 2024 associated with the Russia Exit to $14,859, excluding transaction inclusive of currency translation adjustments for the period, consisted of the following:costs.
All charges described above were recorded in our Europe, Middle East and Africa ("EMEA") reportable segment.
 Amortization period Gross Carrying Amount at December 31, 2017 Accumulated Amortization Net Carrying Amount at December 31, 2017
        
Products10 Years $66,408
 $1,107
 $65,301
Customer relationships17 Years 11,465
 112
 11,353
Backlog1 Year 3,320
 553
 2,767
Total  $81,193
 $1,772
 $79,421

The weighted average useful life of acquired finite lived intangible assets related to THS transaction is 10.6 years.


4.5. Net Income per Common Share
Basic net income per common share is computed by dividing net income available to Thermon Group Holdings, Inc. by the weighted average number of common shares outstanding during each period. Diluted net income per common share is computed by dividing net income available to Thermon Group Holdings, Inc. by the weighted average number of common shares and common share equivalents outstanding (if dilutive) during each period. The number of common share equivalents,


which includes options and both restricted and performance stock units, is computed using the treasury stock method. With regard to the performance stock units, we assumed that the associated performance targets will be met at the target level of performance for purposes of calculating diluted net income per common share.
The reconciliations of the denominators used to calculate basic and diluted net income per common share for the three and nine months ended December 31, 20172023 and 2016,2022, respectively, are as follows:
 Three Months Ended December 31, 2023 Three Months Ended December 31, 2022Nine Months Ended December 31, 2023Nine Months Ended December 31, 2022
Basic net income per common share  
Net income$15,837 $8,425 $41,505 $25,965 
Weighted-average common shares outstanding33,703,845 33,493,540 33,946,201 33,457,048 
Basic net income per common share$0.47 $0.25 $1.22 $0.78 
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  Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Nine Months Ended December 31, 2017 Nine Months Ended December 31, 2016
Basic net income per common share        
Net income available to Thermon Group Holdings, Inc. $599
 $5,358
 $5,856
 $11,390
Weighted-average common shares outstanding 32,447,838
 32,330,392
 32,408,608
 32,280,539
Basic net income per common share $0.02
 $0.17
 $0.18
 $0.35
 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Nine Months Ended December 31, 2017 Nine Months Ended December 31, 2016
Three Months Ended December 31, 2023Three Months Ended December 31, 2023Three Months Ended December 31, 2022Nine Months Ended December 31, 2023Nine Months Ended December 31, 2022
Diluted net income per common share      
  
Diluted net income per common share  
Net income available to Thermon Group Holdings, Inc. $599
 $5,358
 $5,856
 $11,390
Net income
Weighted-average common shares outstanding 32,447,838
 32,330,392
 32,408,608
 32,280,539
Common share equivalents:        
Stock options
Stock options
Stock options 233,618
 222,152
 222,857
 224,291
Restricted and performance stock units 232,916
 99,386
 131,077
 114,455
Weighted average shares outstanding – dilutive (1) 32,914,372
 32,651,930
 32,762,542
 32,619,285
Diluted net income per common share $0.02
 $0.16
 $0.18
 $0.35
(1) For the three and nine months ended December 31, 2017,2023 and 2022, zero and 28,499, and 70,164 equity awards, respectively, were not included in the calculation of diluted net income per common share, as they would have had an anti-dilutive effect. For the three and nine months ended December 31, 2016, 45,1402023 and 44,3682022, 1,275 and 39,517 equity awards, respectively, were not included in the calculation of diluted net income per common share, as they would have had an anti-dilutive effect.
The number of common share equivalents, which includes options and both restricted and performance stock units, is computed using the treasury stock method. With regard to the performance stock units, we assume that the associated performance targets will be met at the target level of performance for purposes of calculating diluted net income per common share until such time that it is probable that actual performance will be above or below target.
5.
6. Inventories
Inventories consisted of the following:
 December 31,
2017		 March 31,
2017
Raw materials$33,279
 $12,270
Work in process6,078
 1,769
Finished goods27,330
 21,310
 66,687
 35,349
Valuation reserves(1,619) (1,329)
Inventories, net$65,068
 $34,020
December 31, 2023March 31,
2023
Raw materials$65,471 $53,845 
Work in process5,194 5,338 
Finished goods32,217 29,511 
102,882 88,694 
Valuation reserves(6,583)(6,562)
Inventories, net$96,299 $82,132 









6.7. Goodwill and Other Intangible Assets

Goodwill
The carrying amount of goodwill by operating segment as of December 31, 20172023, is as follows:
 United States Canada Europe Asia Total
Balance as of March 31, 2017$52,016
 $43,444
 $18,437
 $8,624
 $122,521
Goodwill acquired—
 87,540
 —
 —
 87,540
Foreign currency translation impact—
 4,003
 2,134
 —
 6,137
Balance as of December 31, 2017$52,016
 $134,987
 $20,571
 $8,624
 $216,198
 United States and Latin AmericaCanadaEurope, Middle East and AfricaAsia-PacificTotal
Balance as of March 31, 2023$81,345 $112,945 $18,679 $6,643 $219,612 
Goodwill acquired(1)
46,143 — — — 46,143 
Foreign currency translation impact— 2,622 274 (113)2,783 
Balance as of December 31, 2023$127,488 $115,567 $18,953 $6,530 $268,538 

(1) Refer to Note 2, "Acquisitions," for more information on the goodwill acquired through our recent acquisition of Vapor Power.
Goodwill is tested for impairment on an annual basis and between annual tests if indicators of potential impairment exist. We perform a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If required, we also perform a quantitative analysis using the income approach, based on discounted future cash flows, which are derived from internal forecasts and economic expectations, and the market approach, which is based on market multiples of guideline public companies. The most significant inputs in the Company's quantitative goodwill impairment tests are projected financial information, the weighted average cost of capital and market multiples for similar transactions. Our annual impairment test is performed during the fourth quarter of our fiscal year.
In prior years, we experienced sizable declines in revenue and operating results within our Canadian operations, and considered such to be an indication To date, there have been no indicators of potential goodwill and intangible asset impairment. These declines in operating results principally resulted from lower crude oil prices, which had a significant adverse impact on capital spending in Canada. During fiscal year 2018, we have experienced increased revenues and operating results in Canada, and project continued growth. Accordingly, during the third quarter of fiscal 2018, we did not conclude a triggering event existed within our Canadian reporting units requiring further analysis. We will continue to evaluate our Canadian operations and assess on a quarterly basis whether it is more likely than not that the fair value of the Canadian reporting unit is less than its carrying amount.
Similarly, based upon our qualitative analyses, we have not determined that it is more likely than not that the fair value of our U.S. reporting unit is less than its carrying amount; however, we have experienced losses in the U.S. for each of the first two quarters of fiscal 2018. If changes in estimates and assumptions used to determine whether impairment exists, or if we experience future declines in actual and forecasted operating results and/or market conditions in the United States, we may be required to reevaluate the fair value of our United States reporting unit, which could ultimately result in an impairment to goodwill and/or indefinite-lived intangible assets in future periods.


Our total intangible assets consisted of the following:
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 Gross Carrying Amount at December 31, 2017 Accumulated Amortization Net Carrying Amount at December 31, 2017 Gross Carrying Amount at March 31, 2017 Accumulated Amortization Net Carrying Amount at March 31, 2017
Gross Carrying Amount at December 31, 2023Gross Carrying Amount at December 31, 2023Accumulated AmortizationNet Carrying Amount at December 31, 2023Gross Carrying Amount at March 31, 2023Accumulated AmortizationNet Carrying Amount at March 31, 2023
Products $66,408
 $1,107
 $65,301
 $—
 $—
 $—
Trademarks $46,248
 $742
 $45,506
 $44,563
 $521
 $44,042
Developed technology 10,181
 3,989
 6,192
 9,796
 3,454
 6,342
Customer relationships 114,148
 75,094
 39,054
 99,676
 64,682
 34,994
Certifications 459
 —
 459
 442
 —
 442
Other 5,958
 3,034
 2,924
 2,626
 2,268
 358
Total $243,402
 $83,966
 $159,436
 $157,103
 $70,925
 $86,178





7.8. Accrued Liabilities
Accrued current liabilities consisted of the following:
 December 31, 2023March 31,
2023
Accrued employee compensation and related expenses$19,726 $17,709 
Accrued interest112 414 
Customer prepayments87 89 
Warranty reserves1,200 758 
Professional fees3,541 2,696 
Sales taxes payable4,347 4,301 
Accrued litigation payable(1)
3,869 5,880 
Other(2)
7,510 7,517 
Total accrued current liabilities$40,392 $39,364 
 December 31,
2017		 March 31,
2017
Accrued employee compensation and related expenses$12,269
 $8,364
Accrued interest1,517
 —
Customer prepayment706
 168
Warranty reserve346
 300
Professional fees2,456
 1,631
Sales tax payable1,352
 1,573
Other1,012
 1,106
Total accrued current liabilities$19,658
 $13,142
(1) - The Company has insurance receivables recorded to Prepaid expenses and other current assetson our condensed consolidated balance sheets relating to and materially offsetting the accrued litigation payable noted above.
(2) - Other includes approximately $3,384 of non-cash, foreign currency translation impacts related to the Russia Exit. Once the disposition of our Russian affiliate is complete, this balance will be offset against accumulated other comprehensive loss on our condensed consolidated balance sheets.
8. Short-Term Revolving Credit Facilities
The Company’s subsidiary in the Netherlands has a revolving credit facility in the amount of Euro 4,000 (equivalent to $4,791 at December 31, 2017). The facility is collateralized by such subsidiary's receivables, inventory, equipment, furniture and real estate. No amounts were outstanding under this facility at December 31, 2017 or March 31, 2017.
The Company’s subsidiary in India has a revolving credit facility in the amount of 80,000 Rupees (equivalent to $1,251 at December 31, 2017). The facility is collateralized by such subsidiary's receivables, inventory, real estate, a letter of credit and cash. No amounts were outstanding under this facility at December 31, 2017 or March 31, 2017. 
The Company’s subsidiary in Australia has a revolving credit facility in the amount of $230 Australian Dollars (equivalent to $180 at December 31, 2017). The facility is collateralized by such subsidiary's real estate. No amounts were outstanding under this facility at December 31, 2017 or March 31, 2017.
Under the Company’s senior secured revolving credit facility described below in Note 9, “Long-Term Debt,” there were no outstanding borrowings at December 31, 2017 or March 31, 2017. During the three and nine months ended December 31, 2017, the Company had $6,000 and $10,000, respectively, in borrowings from the revolving credit facility. All subsequent revolving credit facility borrowings were repaid in full by the end of the reporting period.

9. Long-Term Debt
Long-term debt consisted of the following:
December 31, 2023March 31,
2023
December 31,
2017		 March 31,
2017
Variable Rate Term Loan, due October 2024, net of deferred debt issuance costs and debt discounts of $9,089 as of December 31, 2017$240,911
 $—
Variable Rate Term Loan, due April 2019, net of deferred debt issuance costs of $524 as of March 31, 2017—
 80,476
U.S. Term Loan Facility due September 2026, net of deferred debt issuance costs of $252 and $335 as of December 31, 2023, and March 31, 2023, respectively
Canadian Term Loan Facility due September 2026, net of deferred debt issuance costs of $29 and $94 as of December 31, 2023, and March 31, 2023, respectively
Incremental Term Loan A due September 2026, net of deferred debt issuance costs of $659 and zero of December 31, 2023, and March 31, 2023, respectively
Less current portion(1,875) (20,250)
Total long-term debt$239,036
 $60,226
Senior Secured Credit FacilityFacilities
On September 29, 2021, Thermon Group Holdings, Inc. as a credit party and a guarantor, Thermon Holding Corp. (the “US Borrower”) and Thermon Canada Inc. (the “Canadian Borrower” and together with the US Borrower, the “Borrowers”), entered into an Amended and Restated Credit Agreement with several banks and other financial institutions or entities from time to time and JPMorgan Chase Bank, N.A., as Administrative Agent, ("the Agent") which was further amended on November 19, 2021, and March 7, 2023.
The Credit Agreement is an amendment and restatement of that certain Credit Agreement dated October 30, 2017, we entered into a credit agreement withby and among Borrowers, the lenders party thereto and JPMorgan Chase Bank, N.A. as administrative agent that(the “Prior Credit Agreement”), and provides for a $250,000 variable rate senior secured term loan B facility and $60,000 seniorthe following credit facilities described below (collectively, the “Facilities”).
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•Revolving Credit Facility: A USD $100,000 five-year secured revolving credit facility which we refermade available to collectively as our “credit facility”.the U.S. Borrower. The proceedsRevolving Credit Facility includes sub-limits for letters of the term loan B were used to (1) pay in full $70,875 principalcredit and interest on a previously issuedswing-line loans (the “Revolving Credit Facility”).
•U.S. Term Loan Facility: A USD $80,000 five-year secured term loan A due April 2019; (2) repay $6,000 in unpaid principal(the “U.S. Term Loan”) made available to the U.S. Borrower (the “U.S. Term Loan Facility”); and interest on
•Canadian Term Loan Facility: A CAD $76,182 five-year term loan A (the “Canadian Term Loan” and, together with the Company's terminated revolving line of credit; (3)U.S. Term Loan, the “Term Loans”) made available to fund a portionthe Canadian Borrower (the “Canadian Term Loan Facility,” and together with the U.S. Term Loan Facility, the “Term Loan Facilities”).
Proceeds of the purchase price ofFacilities were used at closing to repay and refinance the acquisition ofBorrowers’ existing indebtedness under the Prior Credit Agreement and pay all


of the equity interests of CCI and certain related real estate assets for approximately $164,900; and (4) pay certain transaction interest, fees and expenses in connectionrelated thereto, and thereafter are expected to be used for working capital and general corporate purposes.
On December 29, 2023, the Company and the Borrowers entered into an Amendment No. 3 to Credit Agreement, Amendment No. 2 to the Guarantee and Collateral Agreement and Amendment No. 2 to the Canadian Guarantee and Collateral Agreement (collectively, the “Amendment”) with the THS transactionLenders and the credit facility.Agent.
Interest rates and fees. The Company will haveAmendment provides for, among other things, changes to the optionCredit Agreement to pay interest on(a) provide the term loan B atUS Borrower with a base rate, plus an applicable margin, or at a rate based on LIBOR, (subject to a floor of 1.00%), plus an applicable margin. The applicable margin for base rate loans is 275 basis points and the applicable margin for LIBOR loans is 375 basis points. The Company may borrow revolving loans in US dollars and the Company may also borrow revolving loans in Canadian dollars. Borrowings under the revolving credit facility (a) made in US dollars will bear interest at a rate equal to a base rate, plus an applicable margin of 225 basis points or at a rate based on LIBOR, plus an applicable margin of 325 basis points and (b) made in Canadian dollars will bear interest at a rate equal to a Canadian base rate, plus an applicable margin of 225 basis points or at a rate based on CDOR, plus an applicable margin of 325 basis points, provided that, following the completion of the fiscal quarter ending March 31, 2018, the applicable margins in each case will be determined based on a leverage-based performance grid, as set forth in the credit agreement. In addition to paying interest on outstanding principal under the revolving credit facility, the Company is required to pay a commitment fee in respect of unutilized revolving commitments of 0.50% per annum. Following the completion of the fiscal quarter ending March 31, 2018, the commitment fee will be determined based on a leverage-based performance grid.
Maturity and repayment. The revolving credit facility terminates on October 28, 2022. The scheduled maturity date of thenew incremental term loan facility is October 30, 2024. Commencing April 1, 2018,as further described below (the “2023 Incremental U.S. Term Loan Facility”), (b) reset the term loan will amortizeaccordion feature in equal quarterly installments of 0.25% of the $250,000 term loan, with the payment of the balance at maturity. The Company will be able to voluntarily prepay the principal of the term loan without penalty or premium (subject to breakage fees) at any time in whole or in part; provided thatCredit Agreement for the first six months after the October 30, 2017 closing date, the Company is required to pay a 1% premium for prepaymentsincurrence of the term loan with the proceeds of certain re‑pricing transactions. The Company is required to repay the term loan with certain asset sale and insurance proceeds, certain debt proceeds and, commencing for the fiscal year ending March 31, 2019, 50% of excess cash flow (reducing to 25% if the Company’s leverage ratio is less than 4.0 to 1.0 but greater than or equal to 3.5 to 1.0 and 0% if the Company’s leverage ratio is less than 3.5 to 1.0).
Accordion. The credit facility allows foradditional incremental term loans and incremental revolving commitments into an amount not to exceed $30,000USD $100.0 million, (c) permit the Canadian Borrower to borrow under the existing Revolver Facility (as defined in the Credit Agreement) in Canadian dollars, (d) permit Letters of Credit (as defined in the Credit Agreement) to be issued for the account of the Canadian Borrower, (e) replace the Canadian Dollar Offered Rate with the Canadian Overnight Repo Rate Average as the benchmark rate applicable to Term Benchmark Loans (each as defined in the Credit Agreement) denominated in Canadian dollars and an unlimited additional amountimplementing corresponding technical changes, and (f) expand the definitions of “Specified Cash Management Agreement” and “Specified Swap Agreement” (each as defined in the Credit Agreement) to provide for the inclusion of obligations arising under Swap Agreements (as defined in the Credit Agreement) and cash management agreements between any subsidiary of the US Borrower to be included in the Obligations (as defined in the Credit Agreement) that would not causeare secured and guaranteed under the consolidatedLoan Documents (as defined in the Credit Agreement).
Certain principal terms of the 2023 Incremental U.S. Term Loan Facility are as follows:
•A USD $100.0 million secured leverage ratioterm loan A made available to exceed 4.0the US Borrower on substantially the same terms as the existing U.S. Term A Loans (as defined in the Credit Agreement), but with a pricing increase across the grid of 0.375% above the pricing applicable to 1.0 (or, if less, the maximum consolidated leverage ratio permittedexisting U.S. Term A Loans.
•Loans made to the US Borrower under the 2023 Incremental U.S. Term Loan Facility (the “2023 Incremental U.S. Term Loans”) shall rank pari passu in right of payment and security with the existing U.S. Term A Loans and shall be secured and guaranteed under the Loan Documents on a pro rata basis with the existing U.S. Term A Loans.
•The 2023 Incremental U.S. Term Loans shall mature on September 29, 2026 (same as the existing U.S. Term A Loans) and shall amortize with installment payments due on the first day of each fiscal quarter (commencing with the fiscal quarter commencing on April 1, 2024) with the same percentage of principal being due on each payment date as the percentage of principal of the existing U.S. Term A Loans due on such date.
•Proceeds of the 2023 Incremental U.S. Term Loans were used at the closing of the transactions contemplated by the revolving credit facility on such date).Amendment to (a) finance the Vapor Acquisition (as defined in the Amendment), (b) refinance certain indebtedness of the Target (as defined in the Amendment), and (c) pay fees and expenses incurred by the US Borrower in connection with the foregoing.
At December 31,The Amendment also provides for certain conforming changes relating to the expanded definitions of Specified Cash Management Agreement and Specified Swap Agreement in the Credit Agreement to (x) the Guarantee and Collateral Agreement, dated as of October 30, 2017, we had no outstanding borrowings under our revolving credit facility. The interest rate hadby and among the Company, had outstanding borrowings on December 31,the US Borrower and the Agent (the “US Security Agreement”) and (y) the Canadian Guarantee and Collateral Agreement, dated as of October 30, 2017, would be 5.13%. Asby and between the Canadian Borrower and the Agent (the “Canadian Security Agreement”, and together with the US Security Agreement, the “Security Agreements”), and also provides for changes in each Security Agreement to the waterfall for application of December 31, 2017, we had $55,085proceeds of available borrowing capacitycollateral set forth therein so that Obligations (as defined in such Security Agreement) arising under our revolving credit facility after taking into accountSpecified Cash Management Agreements and Specified Swap Agreements (other than indemnities, fees and similar obligations and liabilities) are paid pro rata with principal Obligations arising under Loans, Reimbursement Obligations and the borrowing base and letterscash collateralization of credit outstanding. Letters of Credit (each as defined in such Security Agreement).
15

The variable rate term loan bears interest at the LIBOR rate plus an applicable margin dictated by our leverage ratio (as described above). Commencing April 1, 2018, the Company will be required to make quarterly principal paymentsforegoing summary of the term loanAmendment does not purport to be complete and is qualified in its entirety by reference to the full text of $625 throughthe Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 10-Q and incorporated herein by reference.
Maturity and Repayment
Each of the Facilities terminates on September 29, 2026. Each of the Term Loans will amortize as set forth in the table below, with payments on the first day of each January, April, July 31, 2024. The remaining $233,750 isand October, with the balance of each Term Loan Facility due at maturitymaturity.
Installment DatesOriginal Principal Amount
January 1, 2022 through October 1, 20221.25 %
January 1, 2023 through October 1, 20241.88 %
January 1, 2025 through July 1, 20262.50 %
Guarantees
The U.S. Term Loan and 2023 Incremental U.S. Term Loan Facility and the obligations of the term loan facility on October 30, 2024.
Guarantees; security. The term loan isU.S. Borrower under the Revolving Credit Facility are guaranteed by the Company and all of the Company'sU.S. Borrower’s current and future wholly-ownedwholly owned domestic material subsidiaries (the “US“U.S. Subsidiary Guarantors”), subject to certain exceptions. Obligations of the Company under the revolving credit facility areThe Canadian Term Loan is guaranteed by the Company, and the US Subsidiary Guarantors. The obligations of Thermon Canada Inc. (the "Canadian Borrower") underU.S. Borrower, the revolving credit facility are guaranteed by the Company, Thermon Holding Corp. (the "US Borrower"), the USU.S. Subsidiary Guarantors and each of the wholly owned Canadian material subsidiaries of the Canadian Borrower, subject to certain exceptions.
Security
The term loanU.S. Term Loan and 2023 Incremental U.S. Term Loan Facility and the obligations of the USU.S. Borrower under the revolving credit facilityRevolving Credit Facility are secured by a first lien on all of the Company’s assets and the assets of the USCompany, the U.S. Borrower and the U.S. Subsidiary Guarantors, including 100% of the capital stock of the USU.S. Subsidiary Guarantors and 65% of the capital stock of the first tier material foreign subsidiaries of the Company, the USU.S. Borrower and the USU.S. Subsidiary Guarantors, subject to certain exceptions. The obligations of the Canadian Borrower under the revolving credit facility areTerm Loan is secured by a first lien on all of the Company's assets of the USCompany, the U.S. Borrower, the U.S. Subsidiary Guarantors' assets,Guarantors, the Canadian Borrower’s assetsBorrower and the assets of the material Canadian subsidiaries of the Canadian Borrower, including 100% of the capital stock of the Canadian Borrower’s material Canadian subsidiaries.
Financial covenants. The term loan is not subject to any financial covenants. The revolving credit facility requiresCovenants
In connection with the Credit Agreement, the Company is required, on a consolidated basis, to maintain certain financial covenant ratios. TheOn the last day of any period of four fiscal quarters ending during a period set forth below, the Company must maintain a consolidated leverage ratio onthat does not exceed the last dayratios for such period set forth below (each of which ratios may be increased by 0.50:1.00 for each of the four fiscal quarters following periods: 5.5:1.0 for December 31, 2017 through September 30, 2018; 5.0:1.0 for December 31, 2018 through September 30, 2019; 4.5:1.0 for December 31, 2019 through September 30, 2020; and 3.8:1.0 for December 31, 2020 and each fiscal quarter thereafter. certain acquisitions at the election of the U.S. Borrower):
Fiscal Quarter EndingConsolidated Leverage Ratio
December 31, 2022, and each fiscal quarter thereafter3.50:1.00
In addition, on the last day of any period of four fiscal quarters ending on or after September 30, 2021, the Company must maintain a consolidated fixed charge coverage ratio of not less than 1.3:1.0.1.25:1.00. As of December 31, 2017,2023, we were in compliance with all financial covenants of the credit facility.Credit Agreement.

Other Covenants

Restrictive covenants.The credit agreement governing our facilityCredit Agreement contains various restrictive covenants (in each case, subject to certain exclusions) that limit, among other things, restrict or limit ourthe ability of the Company and its subsidiaries (including the Borrowers) to (subject to certain negotiated exceptions): incur additional indebtedness;indebtedness, grant liens;liens, make fundamental changes;changes, sell assets;assets, make restricted payments;payments, enter into sales and leasebacks;leasebacks, make investments;investments, prepay certain indebtedness;indebtedness, enter into transactions with affiliates;affiliates, and enter into restrictive agreements.


10. Related-Party Transactions

In connectionThe covenants are subject to various baskets and materiality thresholds, with the Sumac Fabrication Co. Ltd. ("Sumac") transaction, onecertain of the former Sumac principals retained 25%baskets to the restrictions on the repayment of subordinated or unsecured indebtedness, restricted payments and investments being available only when the Company’s pro forma leverage ratios are less than a certain level.
The Credit Agreement contains certain customary representations and warranties, affirmative covenants and events of default, including, among other things, payment defaults, breach of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, judgment defaults, actual or asserted
16

failure of any guaranty or security documents to be in full force and effect and change of control. If such an event of default occurs, the Agent will be entitled to take various actions, including the termination of the ownershipcommitment for the Revolving Credit Facility, the acceleration of the Sumac business unit. This individual is employed by the Company and serves as the general manager of the Sumac business unit. During fiscal 2017, this individual, together with the two other former principals of Sumac, who are not employed by the Company were paid $5,805 in the aggregate in full satisfaction of the Company's obligationsamounts due under the $5,905 non-interest bearing performance-based note issuedCredit Agreement and certain other actions that a secured creditor is customarily permitted to take following a default.
    At December 31, 2023, we had $32,500 in connection withoutstanding borrowings under the Sumac transaction.Revolving Credit Facility. We had $64,892 of available borrowing capacity thereunder after taking into account the borrowing base and $2,607 of outstanding letters of credit and the outstanding borrowings under the Revolving Credit Facility as of December 31, 2023. The Term Loans bear interest at the Secured Overnight Financing Rate ("SOFR"), or Canadian Overnight Repo Rate Average ("CORRA"), as applicable, in each case plus an applicable margin dictated by our leverage ratio (as described above). The interest rates on the Term Loan Facilities on December 31, 2023 were 6.59%for the Canadian Term Loan Facility, 6.71%for the U.S. Term Loan Facility, 7.21% for the 2023 Incremental U.S. Term Loan Facility, and 6.71% for the U.S. Revolving Credit Facility. Interest expense has been presented net of interest income on our condensed consolidated statements of operations and comprehensive income.
11.10. Commitments and Contingencies
At December 31, 2017, the Company had in place letter of credit guaranteesLegal Proceedings and performance bonds securing performance obligations of the Company. These arrangements totaled approximately $18,178. Of this amount, $1,738 is secured by cash deposits at the Company’s financial institutions and an additional $4,915 represents a reduction of the available amount of the Company's short-term and long-term revolving lines of credit.  Included in prepaid expenses and other current assets at December 31, 2017 and March 31, 2017 was approximately $1,738 and $1,450, respectively, of cash deposits pledged as collateral on performance bonds and letters of credit. Our Indian subsidiary also has $5,678 in customs bonds outstanding to secure the Company's customs and duties obligations in India.Other Contingencies
We are involved in various legal and administrative proceedings that arise from time to time in the ordinary course of doing business. Some of these proceedings may result in fines, penalties or judgments being assessed against us, which may adversely affect our financial results. In addition, from time to time, we are involved in various disputes, which may or may not be settled prior to legal proceedings being instituted and which may result in losses in excess of accrued liabilities, if any, relating to such unresolved disputes. As of December 31, 2023, we have established an estimated liability associated with the aforementioned disputes. Expenses related to litigation and other such proceedings or disputes reduce operating income. As of December 31, 2017, management believes that adequate reserves have been established for any probable and reasonably estimable losses. We do not believe that the outcome of any of these proceedings or disputes would have a significant adverse effect on our financial position, long-term results of operations, or cash flows. It is possible, however, that charges related to these matters could be significant to our results of operations or cash flows in any one accountingreporting period. Refer to Note 8, "Accrued Liabilities" for more information regarding our accruals related to these proceedings.
In January 2020, the Company received service of process in a class action application in the Superior Court of Quebec, Montreal, Canada related to certain heating elements previously manufactured by Thermon Heating Systems and incorporated into certain portable construction heaters sold by certain manufacturers. The Company has no outstanding legal matters outside of matters arising inreached an agreement with the ordinary course of business. We can give no assurancesplaintiff and other defendants to resolve this matter without admitting to any liability, and we will prevail in any of these matters.
12. Stock-Based Compensation Expense
Our board of directors has adopted and the shareholders have approved two stock option award plans.  The 2010 Thermon Group Holdings, Inc. Restricted Stock and Stock Option Plan (“2010 Plan”) was approved on July 28, 2010.  The 2010 Plan authorized the issuance of 2,767,171 stock options or restricted shares (on a post-stock split basis).  On April 8, 2011, the board of directors approved the Thermon Group Holdings, Inc. 2011 Long-Term Incentive Plan (“2011 LTIP”). The 2011 LTIP made available 2,893,341 sharesrecently obtained approval of the same by the Superior Court. The settlement did not have a material impact on the Company’s common stock that mayconsolidated financial position or results of operations and will be awarded to employees, directors or non-employee contractors as compensation in the formpaid with no material impact on cash flows.
Letters of stock options, restricted stock awards or restricted stock units. Credit and Bank Guarantees
At December 31, 2017, there were 391,598 options outstanding. For2023, the three months ended December 31, 2017Company had in place letter of credit guarantees and 2016, stock compensation expense was $895performance bonds securing certain performance obligations of the Company. These arrangements totaled $12,818. Of this amount, $687 is secured by cash deposits at the Company’s financial institutions and $837, respectively,an additional $2,607 represents a reduction of the available amount of the Company's revolving credit facility. In addition to the arrangements totaling $12,818, our Indian subsidiary also has $4,356 in non-collateralized customs bonds outstanding to secure the Company's customs and $2,627duties obligations in India.
11. Revenue
Disaggregation of Revenue
We disaggregate our revenue from contracts with customers by geographic location, as well as revenues recognized at point in time and $2,658 forrevenues recognized over time, as we believe these best depict how the nine months ended December 31, 2017,nature, amount, timing and 2016, respectively.uncertainty of our revenue and cash flows are affected by economic factors.
DuringRevenue recognized at a point-in-time based on when control transfers to the nine months ended December 31, 2017, 106,891 restricted stock units were issuedcustomer is generally related to our employees with an aggregate grant date fair value as determined by the closing price ofproduct sales. Point-in-time revenue does not typically require engineering or installation services. Revenue recognized over time occurs on our stock on the respective grant dates of $1,985. The awards will be expensed onprojects where usually in addition to materials, engineering or installation services, or a straight-line basis over the three-year service period. At each anniversarycombination of the restricted stock units' grant date,two, are also required. We recognize revenue related to such projects in a proportionate numbersystematic way that reflects the transfer of stock units will become vested forgoods or services, or a combination of goods and services, to the employees and the shares will become issued and outstanding.customer.
We maintain a plan to issue our directors awardsDisaggregation of fully vested common stock every three months for a total award over a twelve-month period of approximately $420. During the three and nine months ended December 31, 2017, 5,782 and 15,834 fully vested common shares, respectively, were issued in the aggregate to our directors. The aggregate grant date fair value as determined by the closing price of our common stock on the grant date was $105 and $306, respectively,revenues from contracts with customers for the three and nine months ended December 31, 2017. The fair value of the awards2023 and 2022 is expensed on each grant date.as follows:

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Three Months Ended December 31, 2023Three Months Ended December 31, 2022
Revenues recognized at point in timeRevenues recognized over timeTotalRevenues recognized at point in timeRevenues recognized over timeTotal
United States and Latin America$39,881 $32,823 $72,704 $34,762 $24,988 $59,750 
Canada30,659 10,455 41,114 32,725 10,446 43,171 
Europe, Middle East and Africa7,366 5,119 12,485 6,643 4,582 11,225 
Asia-Pacific7,606 2,518 10,124 4,268 3,696 7,964 
Total revenues$85,512 $50,915 $136,427 $78,398 $43,712 $122,110 

Nine months ended December 31, 2023Nine months ended December 31, 2022
Revenues recognized at point in timeRevenues recognized over timeTotalRevenues recognized at point in timeRevenues recognized over timeTotal
United States and Latin America$101,515 $88,482 $189,997 $82,627 $70,150 $152,777 
Canada80,806 31,780 112,586 83,512 26,638 110,150 
Europe, Middle East and Africa20,577 14,996 35,573 17,811 12,993 30,804 
Asia-Pacific20,393 8,426 28,819 15,565 8,813 24,378 
Total revenues$223,291 $143,684 $366,975 $199,515 $118,594 $318,109 
During the nine months endedPerformance Obligations
    At December 31, 2017, a target2023, revenues to be recorded associated with our open performance obligations totaled $158,823. Within this amount, of 15,438 performance stock units were issued to certain members of our senior management that had a total grant date fair value of $340. The performance indicator for these performance stock units is based on the market performance of our stock price, from the date of grant through March 31, 2020, relative to the market price performance of a pre-determined peer group of companies. Since the performance indicator is market-based, we used a Monte-Carlo valuation model to calculate the probable outcome of the performance measure to arrive at the fair value. The requisite service period required to earn the awards is through March 31, 2020. We will expense the fair value of the performance stock units over the service period on a straight-line basis whether or not the stock price performance condition is met. At the end of the performance period, the performance stock unitsapproximately $13,588 will be evaluated with the requisite numberearned as revenue in excess of shares being issued. The possible number of shares that could be issued ranges from zero to 30,876 in the aggregate. Shares that are not awarded at the measurement date will be forfeited.

In addition to the market-based performance stock units issued to certain members of senior management, we also granted these individuals, during the nine months ended December 31, 2017, a target amount of 58,246 performance stock units based on the Company's Adjusted EBITDA performance over a three-year period ending March 31, 2020. The total grant date fair value, as determined by the closing price of our common stock on the date of the grant, was $1,080. At each reporting period, we will estimate how many awards senior management may achieve and adjust our stock compensation expense accordingly. At the end of the performance period, the performance stock units will be evaluated with the requisite number of shares issued. The possible number of shares that could be issued under such performance stock units ranges from zero to 116,492 in the aggregate. Shares that are not awarded after the end of the measurement period will be forfeited.

13. Income Taxes
On December 22, 2017, the United States enacted significant changes to the U.S. tax law following the passage and signing of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) (previously known as “The Tax Cuts and Jobs Act”).  The Tax Act included significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, a one-time repatriation tax on deferred foreign income (“Transition Tax”), deductions, credits and business-related exclusions. 
On December 22, 2017, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin 118 (“SAB 118”).  SAB 118 expresses views of the SEC regarding ASC Topic 740, Income Taxes (“ASC 740”) in the reporting period that includes the enactment date of the Tax Act.  The SEC staff issuing SAB 118 (the “Staff”) recognized that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. The Staff’s view of the enactment of the Tax Act has been developed considering the principles of ASC Topic 805, Business Combinations, which addresses the accounting for certain items in a business combination for which the accounting is incomplete upon issuance of the financial statements that include the reporting period in which the business combination occurs.  Specifically, the Staff provides that the accounting guidance in ASC Topic 805 may be analogized to the accounting for impacts of the Tax Act.  If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Tax Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year. ForWe expect to recognize the threeremaining revenues associated with unsatisfied or partially satisfied performance obligations within the next 12 months.
Contract Assets and nine months ended December 31, 2017, the Company has recorded all known and estimable impacts of the Tax Act that are effective for fiscal year 2018.  Future adjustments to the provisional numbers will be recorded as discrete adjustments to income tax expense in the period in which those adjustments become estimable and/or are finalized.Liabilities
Accordingly, our income tax provision as    As of December 31, 2017 reflects (i) the current year impacts2023 and March 31, 2023, contract assets were $19,397 and $16,272, respectively. As of the Tax Act on the estimated annual effective tax rateDecember 31, 2023 and (ii) the following discrete items resulting directly from the enactment of the Tax Act based on the information available, prepared, or analyzed (including computations) in reasonable detail. 
 Three and Nine Months Ended
 December 31,
2017
Transition Tax (provisional)$5,126
Net impact on U.S. deferred tax assets and liabilities (provisional)(6,030)
Net changes in deferred tax liability associated with anticipated repatriation taxes (provisional)1,704
Net discrete impacts of the enactment of the Tax Act800



Consistent with provisions allowed under the Tax Act, the $5,126 estimated Transition Tax liability will be paid over an eight year period beginning in fiscal year 2019.  The entire amount of the estimated Transition Tax liability has been included in “Other liabilities- long term” in the Condensed Consolidated Balance Sheets.  
The net benefit of $6,030 related to deferred tax assetsMarch 31, 2023, contract liabilities were $15,414 and liabilities is primarily$8,483, respectively. We typically recognize revenue associated with a reduction in deferredour contract liabilities for unamortized intangible assets. Since these intangible assets are not tax deductible, the reduction of the liability is non-cash and will not reduce future tax payments.within 12 months.
Given the Tax Act’s significant changes and potential opportunities to repatriate cash tax free, we are in the process of evaluating our current permanent reinvestment assertions. Accordingly, we will no longer assert a permanent reinvestment position in most of our foreign subsidiaries. We expect to repatriate certain earnings which will be subject to withholding taxes.  These additional withholding taxes are being recorded as an additional deferred tax liability associated with the basis difference in such jurisdictions.  The uncertainty related to the taxation of such withholding taxes on distributions under the Tax Act and finalization of the cash repatriation plan makes the deferred tax liability a provisional amount. 
We continue to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”), which are not effective until fiscal year 2019.  We have not recorded any impact associated with either GILTI or BEAT in the tax rate for our third quarter of fiscal year 2018. 
Within the calculation of our annual effective tax rate we have used assumptions and estimates that may change as a result of future guidance, interpretation, and rule-making from the Internal Revenue Service, the SEC, and the Financial Accounting Standards Board and/or various other taxing jurisdictions.  For example, we anticipate that the state jurisdictions will continue to determine and announce their conformity to the Tax Act which could have an impact on the annual effective tax rate.12. Income Taxes
Our anticipated annual effective income tax rate before discrete events was 25.4%23.2% and 24.7%29.1% for the nine months ended December 31, 20172023 and 2016,2022, respectively. The anticipated annual effectiveCompany recorded a discrete tax rate is established by estimating anticipated tax ratesbenefit of $426 in each of the countries where we earn taxable income as adjusted for known differences as well as our ability to apply any jurisdictional tax losses to prior or future periods. Discrete tax events include the net impact of the enactment of the Tax Act. Additionally, during the threenine months ended December 31, 20172023, and 2016,a discrete tax expense of $680 related to various matters in the nine months ended December 31, 2022. The discrete tax items for both periods include realized stock compensation and the foreign exchange impact of certain deferred tax matters.
As of December 31, 2023, we reduced our liabilitieshave established a long-term liability for uncertain tax positions in the amount of $554 and $176, respectively as$1,023. As of December 31, 2023, the uncertain tax positions relatedyears for the fiscal years ended March 31, 2018 through March 31, 2023, remain open to these periods are no longer subject to audit.examination by the major taxing jurisdictions.


14.13. Segment Information
We operate inmaintain four reportable segments based on four geographic countries or regions in which we operate: the(i) United States and Latin America ("US-LAM"), (ii) Canada, (iii) Europe, Middle East and Asia.Africa ("EMEA") and (iv) Asia-Pacific ("APAC"). Within our four reportable segments, our primarycore products and services are focused on thermalthe following markets: chemical and petrochemical, oil, gas, power generation, commercial, food and beverage, rail and transit, and other, which we refer to as our "key end markets." We offer a full suite of products (heating units, heating cables, industrial heating blankets and related products, temporary power solutions primarily relatedand tubing bundles), services (engineering, installation and maintenance services) and software (design optimization and wireless and network control systems) required to deliver comprehensive solutions to some of the electrical heat tracing industry. Each of our reportable segments serves a similar class of customers, including engineering, procurementworld's largest and construction (“EPC”) companies, international and regional oil and gas companies, commercial sub-contractors, electrical component distributors and direct sales to existing plant or industrial applications.most complex projects. Profitability within our segments is measured by operating income. Profitability can vary in each of our reportable segments based on the competitive environment within the region, the level of corporate overhead, such as the salaries of our senior executives and the level of research and development and marketing activities in the region, as well as the mix of products and services. Since March 2015, we acquired THS, Unitemp, IPI and Sumac. THS (formerly known as CCI) develops and designs advanced industrial heating and filtration solutions that closely align with Thermon's core business and serve similar end markets in North America. As such, we have elected to report THS's operations through our United States and Canada reportable segments. Both Unitemp and IPI offer thermal solutions and have been included in our Europe and United States reportable segments, respectively. Sumac provides temporary power products that differ from our core thermal solutions business. As we anticipate that our full year operating results from Sumac will comprise less than 10% of our total sales and operating income, Sumac has been aggregated in our Canada segment. For purposes of this note, revenue is attributed to individual countries or regions on the basis of the physical location and jurisdiction of organization of the subsidiary that invoices the material and services.
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Total sales to external customers, inter-segment sales, depreciation expense, amortization expense, income from operations, property, plant and equipment, net and total assets for each of our four reportable segments are as follows:
Three Months Ended December 31, 2023Three Months Ended December 31, 2022Nine Months Ended December 31, 2023Nine Months Ended December 31, 2022
Sales to External Customers:  
United States and Latin America$72,704 $59,750 $189,997 $152,777 
Canada41,114 43,171 112,586 110,150 
Europe, Middle East and Africa12,485 11,225 35,573 30,804 
Asia-Pacific10,124 7,964 28,819 24,378 
 $136,427 $122,110 $366,975 $318,109 
Inter-Segment Sales:
United States and Latin America$10,439 $10,041 $30,089 $32,783 
Canada4,254 5,386 12,837 12,042 
Europe, Middle East and Africa392 279 1,067 935 
Asia-Pacific1,102 749 2,635 1,561 
$16,187 $16,455 $46,628 $47,321 
Depreciation Expense:
United States and Latin America$1,159 $1,113 $3,323 $3,700 
Canada912 1,096 2,760 3,396 
Europe, Middle East and Africa41 94 139 283 
Asia-Pacific40 35 118 106 
$2,152 $2,338 $6,340 $7,485 
Amortization Expense:
United States and Latin America$367 $588 $1,427 $1,587 
Canada1,720 1,724 5,208 5,354 
Europe, Middle East and Africa22 21 66 62 
Asia-Pacific12 34 34 69 
$2,121 $2,367 $6,735 $7,072 
Income/(Loss) from Operations:  
United States and Latin America$12,190 $8,338 $36,480 $26,055 
Canada8,743 13,005 19,799 25,781 
Europe, Middle East and Africa492 (5,963)3,159 (7,526)
Asia-Pacific1,917 1,142 4,593 2,888 
Unallocated:
Stock compensation(1,444)(1,994)(4,132)(4,438)
Public company costs(449)(466)(1,352)(1,446)
 $21,449 $14,062 $58,547 $41,314 
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 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016 Nine Months Ended December 31, 2017 Nine Months Ended
December 31, 2016
Sales to External Customers: 
  
    
United States$32,828
 $28,945
 $77,697
 $88,937
Canada30,178
 9,126
 57,714
 32,286
Europe20,309
 18,100
 48,373
 50,417
Asia9,345
 8,169
 22,243
 24,908
 $92,660
 $64,340
 $206,027
 $196,548
Inter-Segment Sales:       
United States$13,232
 $11,355
 $37,123
 $35,090
Canada1,862
 1,345
 5,221
 2,370
Europe487
 267
 1,210
 1,273
Asia546
 129
 1,093
 762
 $16,127
 $13,096
 $44,647
 $39,495
Depreciation Expense:       
United States$1,126
 $905
 $3,190
 $2,656
Canada897
 467
 2,137
 1,418
Europe133
 74
 347
 216
Asia35
 39
 99
 108
 $2,191
 $1,485
 $5,773
 $4,398
Amortization Expense:       
United States$1,505
 $1,505
 $4,515
 $4,355
Canada2,632
 870
 4,373
 2,661
Europe351
 322
 1,030
 990
Asia266
 266
 798
 798
 $4,754
 $2,963
 $10,716
 $8,804
Income (loss) from operations: 
  
    
United States$340
 $3,848
 $(1,757) $4,311
Canada7,622
 1,343
 17,619
 5,787
Europe2,008
 2,344
 4,240
 6,908
Asia1,444
 914
 2,751
 3,797
Unallocated:

 

 

 

Stock compensation(895) (837) (2,627) (2,658)
Public company costs(309) (313) (1,041) (981)
 $10,210
 $7,299
 $19,185
 $17,164
December 31, 2023March 31, 2023
Property, Plant and Equipment, Net:
United States and Latin America$35,511 $31,918 
Canada29,422 28,369 
Europe, Middle East and Africa2,365 2,366 
Asia-Pacific634 635 
$67,932 $63,288 
Total Assets:
United States and Latin America$413,290 $270,404 
Canada288,806 287,221 
Europe, Middle East and Africa61,681 57,680 
Asia-Pacific41,311 34,324 
$805,088 $649,629 

Capital expenditures for our reportable segments were as follows:

Three Months Ended December 31, 2023Three Months Ended December 31, 2022Nine Months Ended
December 31, 2023		Nine Months Ended
December 31, 2022
Capital Expenditures:
United States and Latin America$844 $350 $4,390 $1,773 
Canada1,303 1,042 3,209 3,042 
Europe, Middle East and Africa107 65 144 197 
Asia-Pacific20 102 139 161 
 $2,274 $1,559 $7,882 $5,173 
 December 31, 2017 March 31, 2017
Property, plant and equipment, net:   
United States$36,744
 $34,563
Canada32,744
 4,674
Europe3,521
 3,532
Asia741
 497
 $73,750
 $43,266
Total Assets:   
United States$205,132
 $186,300
Canada343,506
 136,688
Europe87,843
 80,589
Asia44,487
 50,503
 $680,968
 $454,080

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction and Special Note Regarding Forward-Looking Statements
Management’s discussion and analysis of our financial condition and results of operations is provided as a supplement to the unaudited interim condensed consolidated financial statements and accompanying notes thereto for the three and nine months ended December 31, 20172023 and 20162022 to help provide an understanding of our financial condition, changes in our financial condition and results of our operations. In this quarterly report, we refer to the three month periods ended December 31, 20172023 and 20162022 as “Interim 2018”"Interim 2024" and “Interim 2017,” respectively, and"Interim 2023," respectively. We refer to the nine month periods ended December 31, 20172023 and 20162022 as “YTD 2018”"YTD 2024" and “YTD 2017,”"YTD 2023," respectively. The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited condensed consolidated financial statements and related notes included in Item 1 above.
This quarterly report includes forward-looking statements within the meaning of the U.S. federal securities laws in addition to historical information. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding our industry, business strategy, plans, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “should,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “will,” “future”"anticipate," "assume," "believe," "budget," "continue," "contemplate," "could," "should," "estimate," "expect," "intend," "may," "plan," "possible," "potential," "predict," "project," "will," "would," "future," and similar terms and phrases are intended to identify forward-looking statements in this quarterly report. 
Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our financial condition, results of operations and cash flows. TheThese forward-looking statements include, but are not limited to, statements regarding: (i) our plans to strategically pursue emerging growth opportunities, including strategic acquisitions, in diverse regions and across industry sectors; (ii) our plans to secure more new facility or Greenfield, project bids; (iii) our ability to generate more facility maintenance, repair and operations or upgrades or expansions or MRO/UE, revenue, from our existing and future installed base; (iv) our ability to timely deliver backlog; (v) our ability to respond to new market developments and technological advances;
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(vi) our expectations regarding energy consumption and demand in the future and its impact on our future results of operations; (vii) our plans to develop strategic alliances with major customers and suppliers; (viii) our expectations that our revenues will increase; (ix) our belief in the sufficiency of our cash flows to meet our needs for the next year; and (x) our ability to integrate acquired companies and successfully divest certain businesses, including our Russia business; (xi) our ability to successfully achieve the anticipated benefitssynergies from the CCI acquisition.acquisitions; and (xii) our ability to make required debt repayments.
Actual events, results and outcomes may differ materially from our expectations expressed in such forward-looking statements due to a variety of factors. Although it is not possible to identify all of these factors, they include, among others, (i) general economic conditions and cyclicality in the markets we serve; (ii) future growth of energy, and chemical processing and power generation capital investments; (iii) our ability to operate successfully in foreign countries; (iv) the outbreak of a global pandemic, including COVID-19 and its variants; (v) our ability to successfully develop and improve our products and successfully implement new technologies; (vi) competition from various other sources providing similar heat tracing and process heating products and services, or alternative technologies, to customers; (vii) our ability to deliver existing orders within our backlog; (iv)(viii) our ability to bid and win new contracts; (v) competition from various other sources providing similar heat tracing products(ix) the imposition of certain operating and services, or alternative technologies,financial restrictions contained in our debt agreements; (x) our revenue mix; (xi) our ability to customers; (vi)grow through strategic acquisitions; (xii) our ability to manage risk through insurance against potential liabilities (xiii) changes in relevant currency exchange rates; (vii) potential liability related(xiv) tax liabilities and changes to our products as well as the


deliverytax policy; (xv) impairment of productsgoodwill and services; (viii) our ability to comply with the complex and dynamic system of laws and regulations applicable to international operations; (ix) our ability to protect data and thwart potential cyber attacks; (x) a material disruption at any of our manufacturing facilities; (xi) our dependence on subcontractors and suppliers; (xii) our ability to obtain standby letters of credit, bank guarantees or performance bonds required to bid on or secure certain customer contracts; (xiii)other intangible assets; (xvi) our ability to attract and retain qualified management and employees, particularly in our overseas markets; (xiv)(xvii) our ability to continueprotect our trade secrets; (xviii) our ability to generate sufficient cash flowprotect our intellectual property; (xix) our ability to satisfyprotect data and thwart potential cyber-attacks; (xx) a material disruption at any of our liquidity needs;manufacturing facilities; (xxi) our dependence on subcontractors and (xv)third-party suppliers; (xxii) our ability to profit on fixed-price contracts; (xxiii) the extentcredit risk associated to which federal, state, local,our extension of credit to customers; (xxiv) our ability to achieve our operational initiatives; (xxv) unforeseen difficulties with expansions, relocations, or consolidations of existing facilities; (xxvi) potential liability related to our products as well as the delivery of products and services; (xxvii) our ability to comply with foreign governmentalanti-corruption laws; (xxviii) export control regulations or sanctions; (xxix) changes in government administrative policy; (xxx) the current geopolitical instability in Russia and Ukraine and related sanctions by the U.S. and Canadian governments and European Union; (xxxi) environmental and health and safety laws and regulations as well as environmental liabilities; (xxxii) climate change and related regulation of energy, chemical processinggreenhouse gases; and power generation products and services limits or prohibits the operation of our business. See also(xxxiii) those factors listed under Item 1A, “Risk Factors” for information regarding the additional factors that have impacted or may impact our business and operationsincluded in our Annual Report on Form 10-K for the fiscal year ended March 31, 20172023, filed with the SECSecurities and Exchange Commission (the “SEC”) on May 30, 201725, 2023, and in any subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K or other filings that we have filed or may file with the SEC. Any one of these factors or a combination of these factors could materially affect our future results of operations and could influence whether any forward-looking statements contained or incorporated by reference in this quarterly report ultimately prove to be accurate.
Our forward-looking statements are not guarantees of future performance, and actual results and future performance may differ materially from those suggested in any forward-looking statements. We do not intend to update these statements unless we are required to do so under applicable securities laws.
Business Overview
and Company History
We are one of the largest providers of highly engineered industrial process heating solutions for process industries. For over 6065 years, we have served a diverse base of thousands of customers around the world in attractive and growing markets, including chemical and petrochemical, oil, & gas, chemical processingpower generation, commercial, food and power generation. We are a global leaderbeverage, rail and one of the few thermal solutions providers with a global footprint.transit, and other, which we refer to as our "key end markets." We offer a full suite of products (heating units, electrode and gas-fired boilers, heating cables, industrial heating blankets and related products, temporary power solutions and tubing bundles and control systems) andbundles), services (design optimization, engineering,(engineering, installation and maintenance services) and software (design optimization and wireless and network control systems) required to deliver comprehensive solutions to some of the world's largest and most complex projects. With a legacy of innovation and continued investment in research and development, Thermon has established itself as a technology leader in hazardous or classified areas, and we are committed to developing sustainable solutions for our customers. We serve our customers through a global network of sales and service professionals and distributors in more than 30 countries and through our five11 manufacturing facilities on threetwo continents. These global capabilities and longstanding relationships with some of the largest multinational oil, & gas, chemical processing, power and engineering, procurement and construction ("EPC") companies in the world have enabled us to diversify our revenue streams and opportunistically access high growth markets worldwide. During YTD 20182024 and YTD 2017,2023, approximately 62%51% and 55%, respectively, of our revenues were generated from outside of the United States, respectively. Since March 2015, we have acquired four companies, Thermon Heating Systems, Inc. (formerly known as CCI Thermal Technologies Inc.) ("THS"), Unitemp Close Corporation ("Unitemp"), Sumac Fabrication Co. Ltd. ("Sumac") and Industrial Process Insulators, Inc. ("IPI"), that offer complementary products and services to our core thermal solution offerings. We actively pursue both organic and inorganic growth opportunities that serve to advance our corporate strategy.States.
Revenue.  Our revenues are derived from providing customers with a full suite of innovative and reliable heat tracingprocess heating solutions, including electric and steam heat tracing, tubing bundles, control systems, design optimization, engineering services, installation services and portable power solutions. Additionally, THS offers a complementary suite of advanced heating and filtration solutions for industrial and hazardous area applications. Historically,Revenue recognized at a point in time based on when control transfers to the customer is generally related to our salesproduct sales. Point in time revenue does not typically require engineering or installation services. Revenue recognized over time occurs on our projects where usually in addition to materials, engineering or installation services, or a combination of the two, are primarilyrequired.
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We recognize revenue related to industrial customers for petroleumsuch projects in a systematic way that reflects the transfer of goods or services, or a combination of goods and chemical plants, oil and gas production facilities and power generation facilities. Our petroleum customers represent a significant portion of our business. services, to the customer.
We serve all three major categories of customersmaintain four reportable segments based on four geographic countries or regions in the petroleum industry - upstream exploration/production, midstream transportation and downstream refining. Overall, demand for industrial heat tracing solutions falls into two categories: (i) new facility construction, which we refer to as Greenfield projects,operate: (i) United States and Latin America ("US-LAM"), (ii) recurring maintenance, repairCanada, (iii) Europe, Middle East and operations and facility upgrades or expansions, which we refer to as MRO/UE. Greenfield construction projects often require comprehensive heat tracing solutions. We believe that Greenfield revenue consists of sales revenues by a customer in excess of $1 million annually (excluding sales to resellers)Africa ("EMEA"), and typically includes most orders for projects related to facilities that are new or that are built independent of existing facilities. We refer to sales revenues by a customer of less than $1 million annually, which we believe are typically derived from MRO/UE, as MRO/UE revenue. Based on our experience, we believe that $1 million in annual sales is an appropriate threshold for distinguishing between Greenfield revenue and MRO/UE revenue. However, we often sell our products to intermediaries which subcontract our services; accordingly, we have limited visibility into how our products or services may ultimately be used and can provide no assurance that our categorization may accurately reflect the sources of such revenue. Furthermore, our customers do not typically enter into long-term forward maintenance contracts with us. In any given year, certain of our smaller Greenfield projects may generate less than $1 million in annual sales, and certain of our larger plant expansions or upgrades may generate in excess of $1 million in annual sales, though we believe that such exceptions are few in number and insignificant to our overall results of operations. We are currently in the process of assessing THS revenues, however, substantially all of THS revenue is MRO/UE.(iv) Asia-Pacific ("APAC").
We believe that our pipeline of planned projects, in addition to our backlog of signed purchase orders,written contractual commitments received from customers, provides us with some visibility into our future revenue, as historicallyrevenue. Historically, we have experienced few order cancellations, and the cancellations that have


occurred in the past have not been material compared to our total contract volume or total backlog. The small number of order cancellations is attributable in part to the fact that a large portion of our solutions are ordered and installed toward the end of Greenfieldlarge project construction. Our backlog at December 31, 20172023, was $167.7$158.8 million, inclusive of $35.1 million for THS, as compared to $106.9$163.3 million at March 31, 2017.2023. The timing of recognition of revenue out of backlog is not always certain, as it is subject to a variety of factors that may cause delays, many of which are beyond our control (such as customers' delivery schedules and levels of capital and maintenance expenditures). When delays occur, the recognition of revenue associated with the delayed project is likewise deferred.

Cost of sales. Our cost of sales primarily includes primarily the costcosts of raw material items used in the manufacturemanufacturing of our products, costcosts of ancillary products that are sourced from external suppliers and construction labor cost. Additional costs of revenuesales include contract engineering costcosts directly associated to projects, direct labor cost,costs, shipping and handling costs, and other costs associated with our manufacturing/fabrication operations. The other costs associated with our manufacturing/fabrication operations are primarily indirect production costs, including depreciation, indirect labor costs, warranty-related costs, and the costs of manufacturing support functions such as logistics and quality assurance. Key raw material costs include polymers, copper, stainless steel, insulating material, and other miscellaneous parts related to products manufactured or assembled as part of our heat tracing solutions. Historically, our primary raw materials have been readily available from multiple suppliers and rawRaw material costs have been stable andover the years; however, we may face challenges from time to time with temporary shortages related to global supply chain issues, such as those that have been generally successful with passing along raw material cost increasespersisted since the COVID-19 pandemic which have led to our customers. Therefore, increasesshortages in the cost of keycertain raw materials as well as an increase in costs of our products have not generally affected our gross margins.these materials due to use of alternate suppliers, higher freight costs, increased lead times, expedited shipping and other inflationary factors. We cannot provide any assurance that we maywill continue to mitigate temporary raw material shortages or be able to pass along such cost increases, including the potential impacts of tariffs or supply chain challenges, to our customers in the future, and if we are unable to do so, our results of operations may be adversely affected.

Operating expenses. Our marketing,selling, general and administrative and engineering expenses ("SG&A") are primarily comprised of compensation and related costs for sales, marketing, pre-sales engineering and administrative personnel, as well asplus other sales related expenses andas well as other costs related to research and development, insurance, professional fees, the global integrated business information system, and provisions for bad debtscredit losses. In addition, our deferred compensation expense includes a non-qualified deferred compensation plan for certain highly compensated employees where payroll contributions are made by the employees on a pre-tax basis. The expense/income associated with our deferred compensation plan is titled "Deferred compensation plan expense/(income)" on our condensed consolidated statements of operations and warranty expense.comprehensive income.
Key drivers affecting our results of operations.  Our results of operations and financial condition are affected by numerous factors, including those described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the SEC on May 30, 201725, 2023, and elsewhere in this quarterly report andany subsequent Quarterly Reports on Form 10-Q that we have filed or may file with the SEC, including those described below:below. These factors include the following:
Timing•Impact of Greenfieldproduct mix. Typically, our customers require our products as well as our engineering and construction services. The level of service and construction needs affect the profit margin for each type of revenue.
We tend to experience lower margins from our design optimization, engineering, installation and maintenance services, which are typically large projects tied to our customers' capex budgets and are comprised of more than $0.5 million in total revenue. For clarity, we will refer to these as "Over time large projects." Our results of operations in recent years have been impacted by the various construction phases of Over time large Greenfield projects. On our large Greenfield projects, weWe are typically designated as the heat tracing provider of choice by the project owner. We then engage with multiple contractors to address incorporating various heat tracing solutions throughout the overall project. Our largest Greenfield projects may generate revenue for several quarters. In the early stages of a Greenfieldan Over time large project, our revenues are typically realized from the provision of engineering services. In the middle stages, or the material requirements phase, we typically experience the greatest demand for our heat tracing cable, at which point our revenues tend to accelerate. Revenues tend to decrease gradually in the final stages of a project and are generally derived from installation services and demand for electrical panels and other miscellaneous electronic components used in the final installation of heat tracing cable, which we frequently outsource from third-party manufacturers. Therefore,
Projects which do not require installation and maintenance services are smaller in size and representative of maintenance, repairs and small upgrades necessary to improve efficiency and uptime. These small projects are
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typically tied to our customers operating expense budgets with improved profit margins, and are generally less than $0.5 million in total revenue. We will refer to such projects as "Over time small projects."
The most profitable of our sales are derived from selling our heating products, for which we typically providerecognize revenue at a point in time. We also tend to experience lower margins from our outsourced products, such as electrical switch gears and transformers, than we do from our manufactured products. Accordingly, our results of operations are impacted by our mix of products and services.
We estimate that Point in time and Over time revenues have each made the following contribution as a percentage of total revenue in the periods listed:
Three Months Ended December 31,Nine months ended December 31,
 2023202220232022
Point in time63 %64 %61 %63 %
Over time:37 %36 %39 %37 %
Small projects12 %14 %13 %15 %
Large projects25 %22 %26 %22 %
Our Over time revenue includes (i) products and services which are billed on a time and materials basis, and (ii) fixed fee contracts for complex turnkey solutions. For our time and materials service contracts, we recognize revenues as the products and services are provided over the term of the contract and have determined that the stated rate for installation services and products is representative of the stand-alone selling price for those services and products.
Our turnkey projects, or fixed fee projects, offer our customers a comprehensive solution for heat tracing from the initial planning stage through engineering/design, manufacture, installation and final proof-of-performance and acceptance testing. Turnkey services also include project planning, product supply, system integration, commissioning and on-going maintenance. Turnkey solutions, containing multiple deliverables, are customer specific and do not have an alternative use and present an unconditional right to payment, and thus are treated as a single performance obligation with revenues recognized over time as work progresses.
For revenue recognized under fixed fee turnkey contracts, we measure the costs incurred that contribute towards the satisfaction of our performance obligation as a percentage of the total cost of production (the “cost-to-cost method”), and we recognize a proportionate amount of contract revenue, as the cost-to-cost method appropriately depicts performance towards satisfaction of the performance obligation. Changes to the original cost amount may be required during each phasethe life of the contract and such estimates are reviewed on a Greenfield project,regular basis. Sales and gross profits are adjusted using the cumulative catch-up method for revisions in estimated contract costs. Reviews of estimates have not generally resulted in significant adjustments to our margins fluctuate accordingly.
results of operations.
Point in time revenue represents goods transferred to customers at a point in time and is recognized when obligations under the terms of the contract with the customer are satisfied; generally this occurs with the transfer of control upon shipment.
•Cyclicality of end-users' markets. Demand for our products and services depends in large part upon the level of capital and maintenance expenditures of our customers and end users, in particular those in the energy, oil, gas, chemical processing and power generation industries, and firms that design and construct facilities for these industries. These customers' expenditures historically have been cyclical in nature and vulnerable to economic downturns. GreenfieldLarge projects and in particular large Greenfield projects (i.e., new facility construction projects generating in excess of $5 million in annual sales), historically have been a substantial source of revenue growth, and Greenfieldlarge project revenues tend to be more cyclical than MRO/UEmaintenance and repair revenues. In recent years we have experienced particular cyclicality in capital spending for new facilities in Canada, Eastern Europe and the Middle East. During fiscal year 2017, we experienced a 27% year-over-year revenue decline in our Canadian operations, where the decline in the price of oil resulted in the postponement or suspension of a number of significant upstream exploration and production projects. In YTD 2018, our Canadian operations experienced a revenue increase of 79% as compared to YTD 2017 due to an increase in MRO/UE demand and the THS transaction. A sustained decrease in capital and maintenance spending or in new facility construction by our customers could have a material adverse effect on the demand for our products and services and our business, financial condition and results of operations.


•Acquisition strategy. In recent years, we have begunbeen executing on a strategy to grow the Company through the acquisition of businesses that are either in the heat tracingprocess heating solutions industry or provide complementary products and solutions for the markets and customers we serve. Since March 2015,Refer to Note 2, "Acquisitions," for more discussion of our recent acquisitions.
Recent Developments
On December 29, 2023, we have acquired four companies, Thermon Heating Systems, Inc. (formerly known as CCI Thermal Technologies Inc.) ("THS"Vapor Power International, LLC and its affiliates, (“Vapor Power”), Unitemp Close Corporation ("Unitemp"), Sumac Fabrication Co. Ltd. ("Sumac")a leading provider of high-quality industrial process heating solutions, including electric, electrode and Industrial Process Insulators, Inc. ("IPI"), that offer complementarygas fired boilers. The initial purchase price was $107.0 million.
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Our investment in Vapor Power marks another important step forward in executing our strategy to profitably grow through decarbonization, diversification and digitization initiatives. This acquisition expands the portfolio to include electric resistance, electrode and supercritical coil tube boilers and steam generators. By adding these products and services to our core thermal solution offerings.portfolio, we are accelerating our diversification into attractive end markets while increasing our exposure to the large and growing electrification and decarbonization opportunities. The addition provides an expanded range of sustainability solutions we can now offer our large installed base of global customers. Together with the talented team from Vapor Power, we will play a pivotal role in accelerating the transition to cleaner energy sources across a diverse range of global end markets. We actively pursue both organic and inorganic growth opportunities that serveare diligently working toward integrating Vapor Power into our US-LAM reportable segment. Refer to advanceNote 2, "Acquisitions" for more information.
On January 29, 2024, we received approval from the requisite authorities to complete the Russia Exit. As a result, we expect to complete the Russia Exit in our corporate strategy.    
Impactfourth fiscal quarter ending March 31, 2024. As previously disclosed, in fiscal 2023, we recorded total charges of product mix. Typically, both Greenfield and MRO/UE customers require our products$12.6 million related to the Russia Exit as well as $0.2 million in transaction costs to prepare for the disposal of the subsidiary. During YTD 2024, we recorded an additional $2.2 million of charges associated with the Russia Exit. Refer to Note 4, "Restructuring and Other Charges/(Income)" for more information.
The Company continues to invest in our three long-term strategic initiatives. First, we expect to continue to diversify our revenues into adjacent markets like commercial, food & beverage, transportation and other non-oil and gas industries where we can continue to differentiate our offerings through quality, safety and customer service, while also aligning Thermon’s strategy around the energy transition toward a more sustainable global economy. Second, we believe a multi-decades investment trend is beginning to emerge based on the rapidly increasing desire for industrial customers to electrify equipment to reduce their carbon footprint, which represents an opportunity for the Company to leverage its leading expertise in heat transfer engineering and construction services. The level of service and construction needs will affect the profit margin for each type of revenue. We tend to experience lower margins from our design optimization, engineering, installation and maintenance services than we do from sales of our heating cable, tubing bundle and control system products. We also tend to experience lower margins from our outsourced products, such as electrical switch gears and transformers, than we do from our manufactured products. Accordingly, our results of operations are impacted by our mix of products and services.
We estimate that Greenfield and MRO/UE related revenues have each made the following contribution as a percentage of total revenue in the periods listed:
 Three Months Ended December 31,* Nine Months Ended
December 31,*
 2017 2016 2017 2016
Greenfield38% 33% 37% 38%
MRO/UE62% 67% 63% 62%
* THS has been excluded from table above. Substantially all of THS's revenue would be classified as MRO.
solutions. We believe that our analysis of Greenfield and MRO/UE is an important measure to explain the trendsThermon's expertise will be a key factor in our business to investors. Greenfield revenue is an indicator of both our ability to successfully compete for new capital projects as well as the economic health of the industries we serve. Furthermore, Greenfield revenue is an indicator of potential MRO/UE revenue in future years. THS has been excluded from MRO/UE calculations to enhance comparability across periods as substantially all of THS's revenue is MRO.
For MRO/UE orders, the sale of our manufactured products typically represents a higher proportion of the overall revenues associated with such orders than the provision of our services. Greenfield projects, on the other hand, require a higher level of our services than MRO/UE orders and often require us to purchase materials from third party vendors. Therefore, we typically realize higher margins from MRO/UE revenues than Greenfield revenues. 
Large and growing installed base. Customers typically use the incumbent heat tracing provider for MRO/UE projects to avoid complications and compatibility problems associated with switching providers. As new Greenfield projects are completed, our installed base continues to grow,successful, sustainable transition, and we expect thatto invest in additional resources to quickly respond to changing customer demand. Finally, we expect to continue expanding our technology-enabled maintenance solutions, like our recently launched Genesis Network, which helps our customers more efficiently and safely monitor and maintain their heating systems by utilizing our software, analytics, hardware and process heating maintenance expert services. Our efforts to diversify the business's end markets are starting to show early signs of success through increased customer engagement in diversified end markets such as rail and transit, food and beverage, commercial and power. Additionally, we are continuing to receive orders from key customers related to our recently launched Genesis Network technology, with the number of installed base will continue to generate ongoing high margin MRO/UE revenues. For YTD 2018 and YTD 2017, MRO/UE sales comprised approximately 63% and 62% of our consolidated revenues, respectively. Overcircuits using Genesis Network accelerating in the last year, we have experienced a decline in Greenfield revenues in our United States segment. A sustained decline in Greenfield projects could slowmost recent fiscal year. We are benefiting from the growth in our installed base and reduceincreasing global demand for our MRO/UE business and have a material adverse effect on our business, financial condition and results of operations.solutions, particularly in North America.
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Seasonality of MRO/UE revenues. Revenues realized from MRO/UE orders tend to be less cyclical than Greenfield projects and more consistent quarter over quarter, although MRO/UE revenues are impacted by seasonal factors. MRO/UE revenues are typically highest during the second and third fiscal quarters, as most of our customers perform preventative maintenance prior to the winter season.

Recent Events-Acquisition of CCI Thermal Technologies Inc. On October 30, 2017,MergerSub, an indirect, wholly owned subsidiary of the Company, completed the acquisition of 100% of the equity interests of CCI and certain related real estate assets for $262.0 CAD (approximately $204.2 USD at the exchange rate as of October 30, 2017) in cash. MergerSub and CCI amalgamated immediately after the closing of the acquisition to form THS, an indirect, wholly-owned subsidiary of the Company. THS is engaged in industrial process heating, focused on the development and production of advanced heating and filtration solutions for industrial and hazardous area applications and is headquartered in Edmonton, Alberta, Canada. The THS


transaction was funded in part by a new $250.0 million senior secured term loan B facility that was consummated on October 30, 2017.

To date, we have incurred $3.8 million in transaction related expenses associated with the THS transaction. The addition of THS into our operations will also have a material impact on our forecasted results for the balance of fiscal 2018 including additional revenue and expenses. Our discussion and analysis of the interim and year to date results of operations does not include the estimated future impact of the THS transaction on these results. Specifically, we have not included an estimate for the impact of the CCI acquisition as it relates to our forecast items such as transaction expenses, intangible amortization and the impact on our effective tax rate.

Recent Developments-United States and Canadian operations. Goodwill is tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist. We perform a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If required, we also perform a quantitative analysis using the income approach, based on discounted future cash flows, which are derived from internal forecasts and economic expectations, and the market approach based on market multiples of guideline public companies. The most significant inputs in the Company's quantitative goodwill impairment tests are projected financial information, the weighted average cost of capital and market multiples for similar transactions. Our annual impairment test is performed during the fourth quarter of our fiscal year.
In prior years, we experienced sizable declines in revenue and operating results within our Canadian operations, and considered such to be an indication of potential goodwill and intangible asset impairment. These declines in operating results principally resulted from lower crude oil prices, which had a significant adverse impact on capital spending in Canada. During fiscal year 2018, we have experienced increased revenues and operating results in Canada, and project continued growth. Accordingly, during the third quarter of fiscal 2018, we did not conclude a triggering event existed within our Canadian reporting units requiring further analysis. We will continue to evaluate our Canadian operations and assess on a quarterly basis whether it is more likely than not that the fair value of the Canadian reporting unit is less than its carrying amount.

Similarly, based upon our qualitative analysis, we have not determined that it is more likely than not that the fair value of our U.S. reporting unit is less than its carrying amount; however, we have experienced losses in the U.S. in two of the three quarters of fiscal 2018. If changes in estimates and assumptions used to determine whether impairment exists, or if we experience future declines in actual and forecasted operating results and/or market conditions in the United States, we may be required to reevaluate the fair value of our United States reporting unit, which could ultimately result in an impairment to goodwill and/or indefinite-lived intangible assets in future periods




Results of Operations (Three-month- Three-month periods ended December 31, 20172023 and 2016)2022
The following table sets forth our unaudited condensed consolidated statements of operations for the three months ended December 31, 20172023 and 20162022 and indicates the amount of change and percentage change between periods.
(Dollars in thousands)Three Months Ended December 31,Increase/(Decrease)
 20232022$%
Consolidated Statements of Operations Data:    
Sales$136,427 $122,110 $14,317 12 %
Cost of sales79,017 71,660 7,357 10 %
Gross profit57,410 50,450 6,960 14 %
Operating expenses:  
Selling, general and administrative expenses31,853 30,889 964 3 %
Deferred compensation plan expense/(income)651 464 187 40 %
Amortization of intangible assets2,121 2,367 (246)(10)%
Restructuring and other charges/(income)1,336 2,668 (1,332)(50)%
Income from operations21,449 14,062 7,387 53 %
Other income/(expenses): 
Interest expense, net(1,754)(1,877)123 (7)%
Other income/(expense)653 659 (6)(1)%
Income before provision for income taxes20,348 12,844 7,504 58 %
Income tax expense4,511 4,419 92 2 %
Net income$15,837 $8,425 $7,412 88 %
As a percent of sales:Change in basis points
Gross profit42.1 %41.3 %80 bps
Selling, general and administrative expenses23.3 %25.3 %-200 bps
Income from operations15.7 %11.5 %420 bps
Net income11.6 %6.9 %470 bps
Effective tax rate22.2 %34.4 %
 Three Months Ended December 31, Increase/(Decrease)
 (dollars in thousands)    
 2017 2016 $ %
Consolidated Statements of Operations Data: 
  
  
  
Sales$92,660
 $64,340
 $28,320
 44 %
Cost of sales50,446
 35,721
 14,725
 41 %
Gross profit$42,214
 $28,619
 $13,595
 48 %
Gross margin %45.6% 44.5%  
  
Operating expenses: 
  
  
  
Marketing, general and administrative and engineering$26,356
 $17,520
 $8,836
 50 %
Stock compensation expense895
 837
 58
 7 %
Amortization of intangible assets4,753
 2,963
 1,790
 60 %
Income from operations$10,210
 $7,299
 $2,911
 40 %
Interest expense, net: 
  
  
  
Interest income161
 131
 30
 23 %
Interest expense(2,528) (765) (1,763) 230 %
Loss on extinguishment of debt(376) —
 (376) 100 %
Amortization of debt costs(259) (97) (162) 167 %
Interest expense, net(3,002) (731) (2,271) 311 %
Other expense(5,492) (6) (5,486) 91,433 %
Income before provision for income taxes$1,716
 $6,562
 $(4,846) (74)%
Income tax expense883
 1,245
 (362) (29)%
Net income$833
 $5,317
 $(4,484) (84)%
Income attributable to non-controlling interests (1)234
 (41) 275
 671 %
Net income available to Thermon Group Holdings, Inc.$599
 $5,358
 $(4,759) (89)%

(1) Represents income attributable to the 25% non-controlling equity interest in the Sumac business that was retained by sellers in the Sumac transaction.
Three Months Ended December 31, 20172023 (“Interim 2018”2024”) Compared to the Three Months Ended December 31, 20162022 (“Interim 2017”2023”)
Revenues. Revenues forincreased in Interim 2018 were $92.72024, coming mainly from our US-LAM and APAC reportable segments, which grew revenues $13.0 million, or 22%, and $2.2 million, or 27%, respectively, compared to $64.3 million for Interim 2017,2023. Particularly strong demand continued in our US-LAM segment stemming from an increase of $28.3in projects activity. In our EMEA segment, revenues increased by $1.3 million, or 44%11%, compared to Interim 2023. Revenue in our Canada segment contracted $2.1 million, or 5%, in Interim 2024 compared to Interim 2023 due in part to a warmer-than-average heating season as well as a more restrictive fiscal policy enacted by the Canadian government. Separately, foreign exchange rates negatively impacted revenues in Interim 2024by $1.2 million as the U.S. dollar strengthened relative to the Company's foreign currency-denominated operations.
Point in time revenues in Interim 2024 were $85.5 million, or 63% of total sales, while Over time revenues were $50.9 million, or 37% of total sales. This compares to 64% Point in time revenues and 36% Over time revenues in Interim 2023. Refer to the "Overview" section above for definitions of Point in time and Over time revenue. Both types of revenue grew, with Over time growing at a faster rate as revenue mix shifted toward projects in Interim 2024 compared to Interim 2023.
Gross profit and margin. The higher gross profit in Interim 2024 is primarily attributable to higher volume and pricing, partially offset by a less profitable mix of revenue. Interim 2023 was impacted in part by charges associated with the
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Russia Exit in our EMEA segment that impacted cost of sales in addition to incremental costs associated from global supply chain challenges present at that time.
Selling, general and administrative expenses. The increase in revenue is mostly dueSG&A expenses in Interim 2024 was driven by investments to advance our decarbonization, diversification and digitization strategy and variable costs associated with increased sales activity, such as sales commissions and salaries and benefits. SG&A as a percent of sales was 23.3% in Interim 2024 versus 25.3% in Interim 2023. This decrease in SG&A as a percent of sales was attributable to higher costs in Interim 2023, in part from greater stock compensation expense associated with performance-based shares as well as higher bad debt expense, which included $0.8 million related to our THS transaction, which contributed $16.1 million of additional revenue for Interim 2018. Our sales mix (excluding THS)Russia Exit.
Deferred compensation plan expense/(income). The increase in deferred compensation plan income in Interim 2018 was 38% Greenfield and 62% MRO/UE, as compared2024 is attributable in part to 33% Greenfield and 67% MRO/UEmarket fluctuations in Interim 2017. Greenfield revenue is typically at or near 40% of our total revenue. Project delays are primarily at the discretion of our customers and relatedunderlying balances owed to Greenfield projects.  Accordingly, the proportion of Greenfield revenues in Interim 2018 and Interim 2017 were lower than historical averages.
As compared to Interim 2017, Interim 2018 revenue grew in all of our segments. Canada revenues increased by $21.1 million, or 231%,employees as compared to Interim 2017. Our acquisition of THS contributed $14.3 million of2023. To note, this compensation plan expense/(income) is materially offset in other income/(expense) where the overall Canada revenue increase. Additionally, within our Canadian segment, we continueCompany records market gains/(losses) on the related investment assets. Refer to see increased demandNote 3, "Fair Value Measurements," for MRO/UE, and improvement in the overall market conditions within Canada. Interim 2018 revenues in the United States increased $3.9 millionmore information.


or 13%. United States revenues were impacted by increasing Greenfield revenues, which is primarily attributable to Greenfield project timing. United States MRO/UE remained flat as compared to Interim 2017. Additionally, our acquisition of THS contributed $1.8 million of the overall United States revenue increase. Interim 2018 revenue in Europe increased by $2.2 million or 12%.  Our Asia segment revenue increased by $1.2 million or 14% in Interim 2018 as compared to Interim 2017.  Both Europe and Asia saw Interim 2018 growth in Greenfield revenues.
Gross profit and margin. Gross profit totaled $42.2 million in Interim 2018, compared to $28.6 million in Interim 2017, an increase of $13.6 million or 48%. The increase is due to higher sales which include the THS transaction and a slight increase in gross margins, overall. Gross margins were 45.6% and 44.5% in Interim 2018 and Interim 2017, respectively. Our Interim 2018 gross margins were within our historical average range of 45%-50%, whereas our Interim 2017 gross margins were slightly below this range. Our Interim 2018 gross margins were positively impacted by strong project execution and product mix that included more of Thermon's core manufactured products within both MRO/UE and Greenfield sales. Based on our existing definition of Greenfield and MRO/UE, substantially all of our sales in Interim 2018 that related to the THS transaction would be classified as MRO/UE. 
Marketing, general and administrative and engineering. Marketing, general and administrative and engineering costs were $26.4 million in Interim 2018, compared to $17.5 million in Interim 2017, an increase of $8.8 million or 50%. As a percentage of total revenue, marketing, general and administrative and engineering costs represented 28.4% and 27.2% in Interim 2018 and Interim 2017, respectively. The increase in Interim 2018 marketing, general and administrative and engineering costs is primarily attributable to the THS transaction.  In Interim 2018, the two months of operations of THS contributed $2.8 million of marketing, general and administrative and engineering expense, and we incurred increases in legal, audit and professional fees related to the THS transaction of $3.5 million.  Additionally, our accrual for annual incentive was $2.1 million higher in Interim 2018. We accrue for an annual incentive bonus for our officers and employees based on quarterly results toward attainment levels established by our board of directors. In future periods, this accrual will be adjusted based on quarterly attainment of the full year incentive bonus.
Stock compensation expense. Stock compensation expense was $0.9 million and $0.8 million in Interim 2018 and Interim 2017, respectively. For the remainder of fiscal 2018, we estimate our stock compensation expense will be comparable throughout the year.
Amortization of intangible assets. Amortization of intangible assets was $4.8in Interim 2024 decreased when compared to Interim 2023. As we amortize certain intangible assets through the end of their useful lives, related expense decreases when compared to past periods. Although we acquired new intangibles assets in our Vapor Power Acquisition, we have not recognized material amortization expense for those assets in Interim 2024. Refer to Note 2, "Acquisitions" for more information.
Restructuring and other charges/(income). Restructuring and other charges/(income) were $1.3 million in Interim 20182024 and $3.0$2.7 million in Interim 2017.2023. Refer to Note 4, "Restructuring and Other Charges/(Income)" for more information.
Interest expense, net. The acquired intangible assets of THS accounted for $1.7 milliondecrease in amortizationinterest expense is primarily due to a lower average debt balance in Interim 2018.  For the remainder2024 of fiscal 2018, we estimate our future quarterly amortization expense will be approximately $5.6$122 million with the inclusion of the THS transaction.
Interest expense. Interest expense, net,versus $138 million at Interim 2023, partially offset by a higher average interest rate during Interim 2024, which was $3.0 million inapproximately 6.80% versus approximately 4.82% during Interim 2018, compared to $0.7 million in Interim 2017, an increase of $2.3 million. Interest expense on outstanding long-term debt principal increased $1.8 million in Interim 2018 as compared to Interim 2017 due to our new $250.0 million senior secured term loan B credit facility incurred in part to finance the THS transaction (see2023. See Note 9, "Long-Term Debt","Debt," for additional information on our long-term debt)debt.
Other income/(expense). In addition, we incurred $0.4 million loss on the retirement of our former credit facility.
The change in Other expense. Other expense was $5.5 million and $0.0 millionincome/(expense) in Interim 20182024 is attributable to market fluctuations in the underlying investments associated with our non-qualified deferred compensation plan. These unrealized gains and Interim 2017, respectively, an increase of $5.5 million. During Interim 2018, we recorded approximately $5.6 million of foreign exchange losses related to the CCI acquisition. The one-time foreign currency related losses include $3.3 million on a $200 million CAD option contract to hedge part of the CCI acquisition purchase price and $2.3 million related to a derivative contract to hedge a $112 million long term intercompany loan between Canada and the United States for the CCI acquisition (see Note 2, "Fair Value Measurements", for additional information on the Acquisition Foreign Exchange Option and the Cross currency Swap).investments were materially offset by deferred compensation plan expense/(income) as noted above.
Income taxes. tax expense.Income tax expense was $0.9$4.5 million in Interim 20182024 on pre-tax income of $1.7$20.3 million compared to an income tax expense of $1.2$4.4 million in Interim 20172023 on pre-tax net income of $6.6 million, an increase of $0.4 million which is mostly attributable to the estimated impact of the recently enacted tax reform act.$12.8 million. Our effective tax rate was 51.5%22.2% and 19.0%34.4% in Interim 20182024 and Interim 2017,2023, respectively.
On December 22, 2017, Impacting Interim 2024 was a discrete tax benefit item of $0.4 million. In Interim 2023, the United States enacted significant changes to the U.S. tax law following the passage and signing of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) (previously known as “The Tax Cuts and Jobs Act”).  The Tax Act included significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, a one-time repatriation tax on deferred foreign income (“Transition Tax”), deductions, credits and business-related exclusions. The net impact to our tax provision for the effects of the Tax Act was $0.8 million for Interim 2018.


Our anticipated annual effective income tax rate before discrete events was 25.4% and 24.7% in Interim 2018 and Interim 2017, respectively. The anticipated annualCompany's effective tax rate is establishedwas impacted nominally by estimating anticipatedthe discrete tax rates in each of the countries where we earn taxable income as adjusted for known differences as well as our ability to apply any jurisdictional tax losses to prior or future periods. See Note 13, “Income Taxes,” to our unaudited condensed consolidated financial statements included elsewhere in this quarterly report, for further detail on income taxes and the effects of the Tax Act.
Net income available to Thermon. Net income available to the Company, after non-controlling interest, was $0.6 million in Interim 2018 as compared to $5.4 million in Interim 2017, a decrease of $4.8 million or 89%. The decrease in Interim 2018 net income is primarily due to a $8.8 million increase in marketing, general and administrative and engineering expense due to the THS operations and CCI acquisition-related expenses.  In addition,foreign exchange impact of certain deferred tax matters. Refer to Note 12, “Income Taxes,” for additional detail.
Net income. The change in Interim 2018, THS acquired intangible assets contributed $1.7 millionnet income is explained by the changes noted in increased amortization expense, and we experienced an other expense increase of $5.6 million due to losses on foreign currency related hedges we entered into during the quarter and an increase of $2.3 million in interest expense relating to our new credit facility debt. These decreases were offset in part by a $13.6 million increase in gross profit.sections above.







26






















Results of Operations (Nine-month- Nine-month periods ended December 31, 20172023 and 2016)2022
The following table sets forth our unaudited condensed consolidated statements of operations for the nine months ended December 31, 20172023 and 20162022, respectively, and indicates the amount of change and percentage change between periods.
(Dollars in thousands)Nine Months Ended
December 31,		Increase/(Decrease)
 20232022$%
Consolidated Statements of Operations Data:    
Sales$366,975 $318,109 $48,866 15 %
Cost of sales207,798 184,508 23,290 13 %
Gross profit159,177 133,601 25,576 19 %
Operating expenses:
Selling, general and administrative expenses90,997 83,046 7,951 10 %
Deferred compensation plan expense/(income)677 (499)1,176 (236)%
Amortization of intangible assets6,735 7,072 (337)(5)%
Restructuring and other charges/(income)2,221 2,668 (447)(17)%
Income from operations58,547 41,314 17,233 
Other income/(expenses):
Interest expense, net(5,263)(4,120)(1,143)28 %
Other income/(expense)727 (592)1,319 (223)%
Income before provision for income taxes54,011 36,602 17,409 48 %
Income tax expense12,506 10,637 1,869 18 %
Net income$41,505 $25,965 $15,540 60 %
As a percent of sales:Change in basis points
Gross profit43.4 %42.0 %140 bps
Selling, general and administrative expenses24.8 %26.1 %-130 bps
Income from operations16.0 %13.0 %300 bps
Net income11.3 %8.2 %310 bps
Effective tax rate23.2 %29.1 %
 Nine Months Ended
December 31,		 Increase/(Decrease)
 (dollars in thousands)    
 2017 2016 $ %
Consolidated Statements of Operations Data: 
  
  
  
Sales$206,027
 $196,548
 $9,479
 5 %
Cost of sales109,039
 112,891
 (3,852) (3)%
Gross profit$96,988
 $83,657
 $13,331
 16 %
Gross margin %47.1% 42.6%  
  
Operating expenses: 
  
  
  
Marketing, general and administrative and engineering$64,462
 $55,031
 $9,431
 17 %
Stock compensation expense2,627
 2,658
 (31) (1)%
Amortization of intangible assets10,714
 8,804
 1,910
 22 %
Income from operations$19,185
 $17,164
 $2,021
 12 %
Interest expense, net: 
  
  
  
Interest income553
 366
 187
 51 %
Interest expense(3,943) (2,372) (1,571) 66 %
Loss on extinguishment of debt(376) —
 (376) 100 %
Amortization of debt costs(433) (299) (134) 45 %
Interest expense, net(4,199) (2,305) (1,894) 82 %
Other expense(5,563) (156) (5,407) 3,466 %
Income before provision for income taxes$9,423
 $14,703
 $(5,280) (36)%
Income tax expense2,798
 3,068
 (270) (9)%
Net income$6,625
 $11,635
 $(5,010) (43)%
Income attributable to non-controlling interests (1)769
 245
 524
 214 %
Net income available to Thermon Group Holdings, Inc.$5,856
 $11,390
 $(5,534) (49)%
(1) Represents income attributable to the 25% non-controlling equity interest in the Sumac business that was retained by sellers in the Sumac transaction.
Nine Months Ended December 31, 20172023 (“YTD 2018”2024”) Compared to the Nine Months Ended December 31, 20162022 (“YTD 2017”2023”)
Revenues. Revenues for YTD 2018 were $206.0 million, compared to $196.5 million for YTD 2017, an increase of $9.5 million or 5%. The increase in revenue is mostly due to our THS transaction, which contributed $16.1 million of additional revenue for YTD 2018. Our sales mix (excluding THS) Revenue increased in YTD 2018 was 37% Greenfield and 63% MRO/UE, as compared to 38% Greenfield and 62% MRO/UE in YTD 2017. Greenfield revenue is typically at or near 40% of our total revenue. Although our order rates are higher in YTD 2018 and backlog is growing, YTD 2018 revenue has declined due to customer delays on Greenfield projects.
YTD 2018 revenue declined in all geographic regions with the exception of Canada which increased by $25.4 million or 79% as2024 compared to YTD 2017. Within our2023 due to growth in all segments. US-LAM revenue increased $37.2 million, or 24%, EMEA increased $4.8 million, or 15%, APAC increased $4.4 million, or 18%, and Canada segment, we saw increased $2.4 million, or 2%. The strong demand for MRO/UE, and improvementprojects, particularly in our US-LAM segment, impacted the overall market conditions within the Canadian region.revenue performance during YTD 2018 revenues in the United States declined $11.2 million or 13%. United States revenues continue to be2024. Separately, revenue was negatively impacted by declining Greenfield revenues, which is primarily attributable to Greenfield project timing. The United States decline was partially offset by our acquisition of THS, which contributed $1.8 million of the overall United States revenues.  YTD 2018 revenue in Europe declined by $2.0 million or 4%.  Our Asia segment revenue declined by $2.7 million or 11% in YTD 20182024by foreign exchange rates of approximately $4.5 million as the U.S. dollar strengthened relative to the Company's foreign currency-denominated operations.
Point in time revenue and Over time revenue comprised 61% and 39% of sales in YTD 2024, respectively, and 63% and 37% in YTD 2023, respectively.
Gross profit and margin. Gross profit increased $25.6 million on greater sales volumes and greater profitability with gross margin improving by 140 bps. YTD 2023 was impacted in part by charges associated with the Russia Exit in our EMEA segment that impacted cost of sales in addition to incremental costs associated from global supply chain challenges present at that time. Although mix towards relatively lower-margin Over time revenue impacted margins, YTD 2024 gross margin was supported by customer price increases as well as operational efficiencies.
27

Selling, general and administrative expenses. Selling, general and administrative expenses increased $8.0 million in YTD 2024 compared to YTD 2017. Revenue reductions2023 driven mainly by investments to advance our decarbonization, diversification and digitization strategy and variable costs associated with increased sales activity, such as sales commissions as well as salaries and benefits. SG&A as a percent of sales decreased -130 bps driven off of greater sales and disciplined cost management.
Deferred compensation plan expense/(income). Deferred compensation plan expense/(income) incurred expense in AsiaYTD 2024 due to market fluctuations in the underlying balances owed to employees. This compensation plan expense/(income) is materially offset in other income/(expense), where the Company recorded market gains/(losses) on related investment assets. Refer to Note 3, "Fair Value Measurements," for more information.
Restructuring and Europe were


attributable to project delays by our customers.  We expect revenue levels to recover later in fiscal 2018 for Asiaother charges/(income). Restructuring and Europe based on strong backlog of orders in those regions.
Gross profit and margin. Gross profit totaled $97.0other charges/(income) was $2.2 million in YTD 2018, compared to $83.7 million in YTD 2017, an increase of $13.3 million. The increase in gross profit is due to the increase in revenues and gross margins which were 47.1% and 42.6% in YTD 2018 and YTD 2017, respectively. Our YTD 2018 gross margins were within our historical average range of 45%-50%, whereas our YTD 2017 gross margins were below this range. Our gross margin percentage in YTD 2018 has been positively impacted by better sales mix within our MRO/UE sales as well as better pricing and project execution within our Greenfield sales. Our MRO sales include the greatest concentration of sales of our higher margin heat tracing cable. Greenfield revenue generally has lower gross margins than our MRO revenue due to a higher mix of third-party manufactured products and installation labor related costs. Based on our existing definition of Greenfield and MRO/UE, substantially all of our sales in YTD 2018 that related to the THS transaction would be classified as MRO/UE. 
Marketing, general and administrative and engineering. Marketing, general and administrative and engineering costs were $64.5 million in YTD 2018, compared to $55.0 million in YTD 2017, an increase of $9.4 million or 17%. As a percentage of total revenue, marketing, general and administrative and engineering costs represented 31.3% and 28.0% in YTD 2018 and YTD 2017, respectively. The increase in YTD 2018 marketing, general and administrative and engineering costs is primarily attributable to the THS transaction.  In YTD 2018, the two months of operations of THS contributed $2.8 million of marketing, general and administrative and engineering expense, and we incurred increases in legal, audit and professional fees related to the THS transaction of $3.8 million.  Within marketing, general and administrative and engineering costs, increases and decreases largely offset each other. Salaries and benefits decreased $2.6 million in YTD 2018 due to reductions in staffing primarily in the United States. Depreciation increased $1.2 million with the addition of our upgraded ERP systems that was placed in service as well as additional capital investment for our Sumac business unit. Additionally, our accrual for annual incentive was $2.8 million higher in YTD 2018. We accrue for an annual incentive bonus for our officers and employees based on quarterly results toward attainment levels established by our board of directors. In future periods, this accrual will be adjusted based on quarterly attainment of the full year incentive bonus.
Stock compensation expense. Stock compensation expense was $2.6 million2024 and $2.7 million in YTD 20182023. The activity in both periods was due to the Russia Exit. Refer to Note 4, "Restructuring and YTD 2017, respectively. For the remainder of fiscal 2018, we estimate our stock compensation expense will be comparable throughout the year.Other Charges/(Income)" for more information.
Amortization of intangible assets. Amortization of intangible assets was $10.7decreased when compared to YTD 2023. Activity within these accounts is driven by periodic straight-line amortization of our acquired intangibles. As we amortize certain intangible assets through the end of their useful lives, related expense decreases when compared to past periods. Although we acquired new intangibles assets in our Vapor Power Acquisition, we have not recognized a material amount of amortization expense for those assets in YTD 2024. Refer to Note 2, "Acquisitions" for more information.
Interest expense, net. Interest expense, net increased in YTD 2024 as compared to YTD 2023 due primarily to higher average interest rates (6.48% in YTD 2024 versus 3.79% in YTD 2023), partially offset by a lower average debt balance ($122 million in YTD 2018 and $8.82024 versus $131 million in YTD 2017. 2023). Refer to Note 9, "Debt," for more information on our outstanding debt.
Other income/(expense). The increasechange in amortization expenseOther income/(expense) in YTD 2024 is attributable to market fluctuations in the acquired intangible assets of THS, which accounted for $1.7 million in amortization in YTD 2018. underlying investments associated with our non-qualified deferred compensation plan. These unrealized gains and losses on investments were materially offset by deferred compensation plan expense/(income) as noted above.
Interest expense. Interest    Income taxes. Income tax expense net, was $4.2$12.5 million in YTD 2018,2024 on pre-tax income of $54.0 million compared to $2.3income tax expense of $10.6 million in YTD 2017,2023 on pre-tax income of $36.6 million, an increase of $1.9 million. Interest expense on outstanding principal of long-term debt increased $1.8 million in YTD 2018 as compared to YTD 2017 due to our new $250.0 million senior secured term loan B credit facility incurred to finance in part the CCI acquisition (see Note 9, "Long-Term Debt", for additional information on our long-term debt). In addition, we incurred $0.4 million loss on the retirement of our former credit facility indebtedness.  Interest income increased by $0.2 million due to the increase in interest bearing investments in YTD 2018.
Other expense. Other expense was $5.6 million and $0.2 million in YTD 2018 and YTD 2017, respectively, an increase of $5.4 million. During YTD 2018, we recorded approximately $5.6 million of foreign exchange losses related to the CCI acquisition. The one-time foreign currency related losses include $3.3 million on a $200 million CAD option contract to hedge part of the CCI acquisition purchase price and $2.3 million related to a derivative contract to hedge a $112 million long term intercompany loan between Canada and the United States for the CCI acquisition (see Note 2, "Fair Value Measurements", for additional information on the Acquisition Foreign Exchange Option and the Cross currency Swap).
In YTD 2017, we recognized a gain of $0.2 million from sales of land and buildings which we were not utilizing.  Our foreign currency transactions were losses of $5.6 million and of $0.4 million in YTD 2018 and YTD 2017, respectively.
Income taxes. Income tax expense was $2.8 million in YTD 2018 on pre-tax income of $9.4 million compared to an income tax expense of $3.1 million in YTD 2017 on pre-tax net income of $14.7 million, an increase of $0.3 million which is mostly attributable to a higher effective tax rate.expense. Our effective tax rate was 29.7%23.2% and 20.9%29.1% in YTD 20182024 and YTD 2017, respectively.
On December 22, 2017, the United States enacted significant changes to the U.S. tax law following the passage and signing of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) (previously known as “The Tax Cuts and Jobs Act”).  The Tax Act included significant changes to existing tax law, including a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, a


one-time repatriation tax on deferred foreign income (“Transition Tax”), deductions, credits and business-related exclusions. The net impact to our tax provision for the effects of the Tax Act was $0.8 million for Interim 2018.
Our anticipated annual effective income tax rate before discrete events was 25.4% and 24.7% in YTD 2018 and YTD 2017,2023, respectively. The anticipated annualCompany's effective tax rate was impacted by discrete tax items such as realized stock compensation and the foreign exchange impact of certain deferred tax matters. Refer to Note 12, “Income Taxes,” for additional detail.
Net income. The change in net income is establishedexplained by estimating anticipated tax rates in each of the countries where we earn taxable income as adjusted for known differences as well as our ability to apply any jurisdictional tax losses to prior or future periods.changes noted above.
Contingencies
    See Note 13, “Income Taxes,”10, "Commitments and Contingencies," to our unaudited condensed consolidated financial statements included elsewhereabove in Part I, Item 1. Financial Statements (Unaudited) of this quarterly report, for further detail on income taxes.
Net income available to Thermon. Net income available to the Company, after non-controlling interest, was $5.9 million in YTD 2018 as compared to $11.4 million in YTD 2017, a decrease of $5.5 million or 49%. The decrease in YTD 2018 net incomewhich is primarily due a $9.4 million increase in marketing, general and administrative and engineering expense due to the THS operations and CCI acquisition-related expenses.  In addition, in YTD 2018, THS acquired intangible assets contributed $1.7 million in increased amortization expense, and we experienced an other expense increase of $5.6 million of losses on foreign currency related hedges we enteredhereby incorporated by reference into in YTD 2018 and $1.6 million in increase in interest expense relating to our new credit facility debt. These decreases were offset in part by a $13.3 million increase in gross profit.  Additionally, income attributable to non-controlling interests increased $0.5 million due to an increase in Sumac's net income.



Contractual Obligations and Contingencies
Contractual Obligations. The following table summarizes our significant contractual payment obligations as of December 31, 2017 and the effect such obligations are expected to have on our liquidity position assuming all obligations reach maturity.this Item 2. 
28
    Payment due by period
    (dollars in thousands)
  TOTAL 
Less than
1 Year
 1 - 3  Years 3 - 5  Years 
More than
5 Years
Variable rate term loan(1) $250,000
 $1,875
 $5,000
 $5,000
 $238,125
Interest payments on variable rate term loan(2) 83,113
 14,302
 24,108
 23,584
 21,119
Operating lease obligations(3) 8,340
 2,641
 3,537
 2,056
 106
Information technology services agreements(4) 1,011
 899
 112
 —
 —
Total $342,464
 $19,717
 $32,757
 $30,640
 $259,350

(1) Consists of quarterly scheduled principal payments under our credit facility of $0.6 million through maturity in October 2024 with a lump-sum payment of $233.8 million due at maturity in October 2024. Please see Note 9, “Long-Term Debt” in our financial statements, for more information on our new term loan B credit facility.

(2)     Consists of estimated future term loan interest payments under our credit facility based on our current interest rate as of December 31, 2017.
(3)    We enter into operating leases in the normal course of business. Our operating leases include the leases on certain of our manufacturing and warehouse facilities and offices.
(4)    Represents the future annual service fees associated with certain information technology service agreements with several vendors. 
Contingencies.  We are involved in various legal and administrative proceedings that arise from time to time in the ordinary course of doing business. Some of these proceedings may result in fines, penalties or judgments being assessed against us, which may adversely affect our financial results. In addition, from time to time, we are involved in various disputes, which may or may not be settled prior to legal proceedings being instituted and which may result in losses in excess of accrued liabilities, if any, relating to such unresolved disputes. As of December 31, 2017, management believes that adequate reserves have been established for any probable and reasonably estimable losses. Expenses related to litigation reduce operating income. We do not believe that the outcome of any of these proceedings or disputes would have a significant adverse effect on our financial position, long-term results of operations, or cash flows. It is possible, however, that charges related to these matters could be significant to our results of operations or cash flows in any one accounting period. 
The Company has no outstanding legal matters outside of matters arising in the ordinary course of business. We can give no assurances we will prevail in any of these matters.
To bid on or secure certain contracts, we are required at times to provide a performance guaranty to our customers in the form of a surety bond, standby letter of credit or foreign bank guaranty. At December 31, 2017, we had in place standby letters of credit, bank guarantees and performance bonds totaling $18.2 million to support our various customer contracts. Our Indian subsidiary also has $5.7 million in customs bonds outstanding to secure the Company's customs duties obligations in India.
Liquidity and Capital Resources
Our primary sources of liquidity are cash flows from operations and funds available under our revolving credit facility and other revolving lines of credit.facility. Our primary liquidity needs are to finance our working capital, capital expenditures, debt service needs and potential future acquisitions. 
Cash and cash equivalents.At December 31, 2017,2023, we had $51.2$55.4 million in cash and cash equivalents.equivalents and $64.9 million available under our revolving line of credit facility. We maintainmanage our global cash requirements by maintaining cash and cash equivalents at various financial institutions located in many countries throughout the world.world where we operate. Approximately $15.3$17.7 million, or 30%32%, of these amounts were held in domestic accounts with various institutions and approximately $35.8$37.7 million, or 70%68%, of these amounts were held in accounts outside of the United States with various financial institutions.


Investments. At December 31, 2017,While we had $1.0 million in short-term certificates of deposits which are classified as investments. All of these amounts were held in accounts outside ofrequire cash needs at our various foreign operations, excess cash is available for distribution to the United States with various financial institutions.through intercompany dividends or debt reduction in Canada. Please refer to Note 1, "Basis of Presentation," for more information regarding our restricted cash.
Senior secured credit facility. See Note 9, “Long-Term Debt—Senior Secured Credit Facility”Generally, we seek to our unaudited interim condensed consolidated financial statementsmaintain a cash and accompanying notes thereto included above in Item 1. Financial Statements (Unaudited) of this quarterly report for information on our senior secured term loancash equivalents balance between $30.0 and revolving credit facility, which is hereby incorporated by reference into this Item 2. At December 31, 2017, we had no outstanding borrowings under our revolving credit facility and $55.1 million of available capacity thereunder, after taking into account the borrowing base and letters of credit outstanding, which totaled $4.9$40.0 million. From time to time,We will encounter periods where we may choosebe above or below this range, due to, utilize our revolvingfor example, inventory buildup for anticipated seasonal demand in fall and winter months, related cash receipts from credit facility to fund operations,sales in months that follow, debt maturities, restructuring activities, larger capital investments, severe and/or protracted economic downturns, acquisitions, or other investments despite having cash available within our consolidated group in lightsome combination of the cost, timing and other business considerations.
As of December 31, 2017, we had $250.0 million of outstanding principal on our variable rate term loan. Commencing April 1, 2018, we will be required to make quarterly principal payments of the term loan of $0.6 million through July 31, 2024. Thereafter, the remaining principal balance will be settled with a lump-sum payment of $233.8 million due at maturity of the term loan in October 2024.
Guarantees; security. The term loan is guaranteed by the Company and all of the Company's current and future wholly owned domestic material subsidiaries (the “US Subsidiary Guarantors”), subject to certain exceptions. Obligations of the Company under the revolving credit facility are guaranteed by the Company and the US Subsidiary Guarantors. The obligations of Thermon Canada Inc. (the "Canadian Borrower") under the revolving credit facility are guaranteed by the Company, Thermon Holding Corp. (the "US Borrower"), the US Subsidiary Guarantors and each of the wholly owned Canadian material subsidiaries of the Canadian Borrower, subject to certain exceptions. The term loan and the obligations of the US Borrower under the revolving credit facility are secured by a first lien on all of the Company’s assets and the assets of the US Subsidiary Guarantors, including 100% of the capital stock of the US Subsidiary Guarantors and 65% of the capital stock of the first tier material foreign subsidiaries of the Company, the US Borrower and the US Subsidiary Guarantors, subject to certain exceptions. The obligations of the Canadian Borrower under the revolving credit facility are secured by a first lien on all of the Company's assets, the US Subsidiary Guarantors' assets, the Canadian Borrower’s assets and the assets of the material Canadian subsidiaries of the Canadian Borrower, including 100% of the capital stock of the Canadian Borrower’s material Canadian subsidiaries.
Financial covenants. The term loan is not subject to any financial covenants. The revolving credit facility requires the Company, on a consolidated basis, to maintain certain financial covenant ratios.above activities. The Company must maintain a consolidated leverage ratio on the last day of the following periods: 5.5:1.0 for December 31, 2017continues to manage its working capital requirements effectively through September 30, 2018; 5.0:1.0 for December 31, 2018 through September 30, 2019; 4.5:1.0 for December 31, 2019 through September 30, 2020;optimizing inventory levels, doing business with credit-worthy customers, and 3.8:1.0 for December 31, 2020 and each fiscal quarter thereafter. In addition, on the last day of any period of four fiscal quarters, the Company must maintain a consolidated fixed charge coverage ratio of not less than 1.3:1.0. As of December 31, 2017, we were in complianceextending payments terms with all financial covenants of the credit facility.its supplier base.
Restrictive covenants. The credit agreement governing our credit facility contains various restrictive covenants that, among other things, restrict or limit our ability to (subject to certain negotiated exceptions): incur additional indebtedness; grant liens; make fundamental changes; sell assets; make restricted payments; enter into sales and leasebacks; make investments; prepay certain indebtedness; enter into transactions with affiliates; and enter into restrictive agreements.Future Cash Requirements
Repatriation considerations. Given the Tax Act’s significant changes and potential opportunities to repatriate cash tax free, we are in the process of evaluating its current indefinite assertions. Accordingly, we will no longer assert a permanent reinvestment position in most of our foreign subsidiaries. We expect to repatriate certain earnings which will be subject to withholding taxes.  These additional withholding taxes are being recorded as an additional deferred tax liability associated with the basis difference in such jurisdictions.  The uncertainty related to the taxation of such withholding taxes on distributions under the Tax Act and finalization of the cash repatriation plan makes the deferred tax liability a provisional amount. 

Future capital requirements. Our future capital requirements will depend on a number of factors.many factors as noted throughout this report. We believe that, based on our current level of operations and related cash flow from operationsflows, plus cash on hand and available cash, together with available borrowings under our revolving credit facility, we will be adequateable to meet our liquidity needs for the next 12 months.twelve months and the foreseeable future. We cannot assure you thathad $32.5 million of borrowings outstanding on our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our indebtedness, including ourrevolving credit facility borrowings, orat December 31, 2023. Although subject to fundchange and not required by our other liquidity needs. In addition, uponCredit Facility, we intend to pay back the occurrenceoutstanding balance within the next twelve months. Please refer to Note 2, "Acquisitions," for more information regarding our acquisition.
For fiscal 2024, we expect our capital expenditures to be approximately 2.5% of certain events, suchrevenue. Additionally, we expect to pay $15.9 million in principal payments on our long-term debt, as well as $3.4 million related to our leased assets in the next twelve months. See further details in Note 9, "Debt," in Part I, Item 1. Financial Statements (Unaudited) of this quarterly report. We also have payment commitments of $7.5 million, mostly related to long-term information technology contracts, of which $6.0 million is due within the next twelve months.

Discussion and Analysis of Cash Flows
Nine months ended December 31,
20232022Increase/(Decrease)
Total cash provided by/(used in):
Operating activities$28,588 $31,605 $(3,017)
Investing activities(108,279)(40,309)(67,970)
Financing activities97,538 6,729 90,809 
Free Cash Flow:(1)
Cash provided by operating activities$28,588 $31,605 $(3,017)
Less: Cash used for purchases of property, plant, and equipment(7,882)(5,173)(2,709)
Plus: Sales of rental equipment75 163 (88)
Free Cash Flow$20,781 $26,595 $(5,814)
(1) "Free Cash Flow" is a changenon-GAAP financial measure, which we define as net cash provided by operating activities less cash used for the purchase of control, we could be required to repay or refinance our indebtedness. We cannot assure you that we will be able to refinance any of our indebtedness, including our credit facility, on commercially reasonable terms or at all.



For the remainder of fiscal year 2018, we estimate we will invest approximately $1.1 million in property, plant, and equipment, net of sales of rental equipment and proceeds from sales of land and buildings. Free Cash Flow is one measure management uses internally to assess liquidity. Our calculation may not be comparable to similarly titled measures reported by other companies.
Operating Cash Flows
Operating cash flows decreased in YTD 2024 as compared to YTD 2023 primarily due to investment of cash in working capital accounts of approximately $18 million, particularly related to changes in timing of billings on certain project-
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related contracts in our net contract assets given the increase in project-related activity, partially offset by higher net income of approximately $16 million. The remaining decrease in operating cash flows is due to miscellaneous other items such as changes in depreciation and changes in deferred income taxes.
Investing Cash Flows
Cash used in investing increased in YTD 2024 as compared to YTD 2023 primarily due to the cash paid to acquire Vapor Power in YTD 2024, which was a larger purchase than the Powerblanket acquisition in YTD 2023. Also, capital expenditures increased approximately $2.7 million in YTD 2024 versus YTD 2023. Refer to Note 2, "Acquisitions," for more information.
Financing Cash Flows
Financing cash flows increased in YTD 2024 versus YTD 2023 primarily due to the borrowings for our thermal solutions businessacquisition of Vapor Power in YTD 2024, for which we borrowed $105 million using a combination of our term loan and will continuerevolving credit facility. Although we borrowed to make investmentspurchase Powerblanket in Sumac's rental equipment business (based on market demand). Key investments includeYTD 2023, we did so to a lesser extent, and also paid down our debt with free cash flow.
Credit Facilities
On December 29, 2023, the purchaseCompany and the Borrowers entered into an Amendment No. 3 to Credit Agreement, Amendment No. 2 to the Guarantee and Collateral Agreement and Amendment No. 2 to the Canadian Guarantee and Collateral Agreement (collectively, the “Amendment”) with the Lenders and the Agent.
The Amendment provides for, among other things, changes to the Credit Agreement to (a) provide the US Borrower with a new incremental term loan facility as further described below (the “2023 Incremental U.S. Term Loan Facility”), (b) reset the accordion feature in the Credit Agreement for the incurrence of capital equipmentadditional incremental term loans and incremental revolving commitments to an amount not to exceed USD $100.0 million, (c) permit the Canadian Borrower to borrow under the existing Revolver Facility (as defined in the Credit Agreement) in Canadian dollars, (d) permit Letters of Credit (as defined in the Credit Agreement) to be issued for the account of the Canadian Borrower, (e) replace the Canadian Dollar Offered Rate with the Canadian Overnight Repo Rate Average as the benchmark rate applicable to Term Benchmark Loans (each as defined in the Credit Agreement) denominated in Canadian dollars and implementing corresponding technical changes, and (f) expand the definitions of “Specified Cash Management Agreement” and “Specified Swap Agreement” (each as defined in the Credit Agreement) to provide for the inclusion of obligations arising under Swap Agreements (as defined in the Credit Agreement) and cash management agreements between any subsidiary of the US Borrower to be included in the Obligations (as defined in the Credit Agreement) that are secured and guaranteed under the Loan Documents (as defined in the Credit Agreement).
The Credit Agreement is an amendment and restatement of that certain Credit Agreement dated October 30, 2017 by and among Borrowers, the lenders time to time party thereto and JPMorgan Chase Bank, N.A. as administrative agent (the “Prior Credit Agreement”), and provides for the credit facilities described in Note 9, "Debt," in Part I, Item 1. Financial Statements (Unaudited) of this quarterly report. There is no material uncertainty about our ongoing ability to comply with our covenants.
Other Non-GAAP Financial Measures
In addition to evaluating our cash flow generation based upon operating, investing, and financing activities, the Company believes that the non-GAAP measure used in this section may provide investors and key stakeholders with another important perspective regarding our manufacturing facilities, landperformance. The Company does not intend for this non-GAAP metric to be a substitute for the related GAAP measure, nor should it be viewed in isolation and building improvements, website development and continued investments inwithout considering all relevant GAAP measurements. Moreover, our multi-year enterprise resource planning software (or ERP) upgrade. During YTD 2018, we invested $2.1 million,calculation may not be comparable to similarly titled measures reported by other companies.
We define “Free Cash Flow” as net of dispositions, for temporary power products that were or will be deployed to our customers on a rental basis.
Net cash provided by operating activities totaled $11.2 million and $12.5 million for YTD 2018 and YTD 2017, respectively, an decrease of $1.3 million primarily due to a $5.0 million decrease in net income and a $3.0 million increase in working capital accounts, partially offset by increases of $2.1 million of non-cash reconciling items and $4.6 million of income taxes payable.
In YTD 2018, our working capital assets in accounts receivable, inventory, costs and estimated earnings and billings on construction and other current assets were a use of less cash of $23.8 million. In YTD 2017 these assets decreased representing a source of cash of $0.8 million, a comparative increase in the use of cash of $24.7 million. During YTD 2018, accounts receivable increased due to higher revenues, representing a use of cash of $4.8 million. During YTD 2017, accounts receivable increased which represented a use of cash of $0.7 million. In YTD 2018 our inventory balance increased due to higher revenues andused for the build-up of inventory for future periods, representing a use of cash of $9.1 million and in YTD 2017 our inventory decreased by $1.2 million, representing a source of cash. Cost and estimated earnings in excess of billings on uncompleted contracts was a use of cash of $6.8 million and a source of cash of $0.4 million in YTD 2018 and YTD 2017, respectively, which is primarily attributed to timing of billings on our turnkey projects.
Our combined balance of accounts payable, accrued liabilities and other non-current liabilities represented a source of cash of $11.4 million in YTD 2018 and a use of cash of $10.3 million in YTD 2017, a decrease of $21.7 million. The decrease in YTD 2018 is primarily due to the timing of vendor payments. Changes in our income taxes payable and receivable balances represented a source of cash of $2.2 million in YTD 2018 and a use of cash of $2.4 million in YTD 2017.
Net cash used in investing activities totaled $163.4 million and $41.3 million for YTD 2018 and YTD 2017, respectively, an increase in the use of cash for investing activities of $122.1 million, which is the net effect of the following items. During YTD 2018, we completed the acquisition of CCI which represented a use of cash of $202.7 million. In YTD 2018, purchases of cash deposit investments totaled $8.1 million compared to $37.0 million in YTD 2017 a comparative source of cash of $28.9 million. In YTD 2018, cash deposit investments of $53.1 million matured during the period and were transferred to accounts with short term maturities and classified as cash equivalents representing a comparative source of cash of $53.1 million. In YTD 2018 and YTD 2017, we purchased $6.2 million and $5.4 million, respectively,purchase of property, plant, and equipment. Included in total property, plantequipment, net of sales of rental equipment as well as proceeds from sales of land and equipment are net investments of $2.1 million and $1.2buildings. This metric should not be interpreted to mean the remaining cash that is available for discretionary spending, dividends, share repurchases, acquisitions, or other purposes, as it excludes significant, mandatory obligations, such as principal payments on the Company’s long-term debt facility. Free cash flow is one measure that the Company uses internally to assess liquidity.
Free Cash Flow totaled $20.8 million for rental equipmentYTD 2024 as compared to $26.6 million for our Sumac business during YTD 20182023, the drivers of which are explained above under "Discussion and YTD 2017, respectively.Analysis of Cash Flows."
Net cash provided by (used in) financing activities totaled $159.0 million providedContractual Obligations and $10.7 million used in YTD 2018 and YTD 2017, respectively, reflecting an increase in the source of cash of $169.7 million. The increase in the source of cash is primarily attributable the funding of the new term loan B credit facility which was a source of cash of $250.0 million, offset in part by the repayment of the extinguished credit facility of $91.0 million. Additionally, the Company had borrowings of $10.0 million from the revolving credit facility during YTD 2018 which were repaid in full at the end of the reporting period and paid $9.6 million of debt issuance and debt discounts related to the new term loan B credit facility. See Note 9, “Long-Term Debt” for additional information on our term loan B credit facility.

Off-Balance Sheet Arrangements
AsThere have been no material changes outside the ordinary course of December 31, 2017, we dobusiness in the Company’s contractual obligations during Interim 2024. The Company does not have any off balanceoff-balance sheet arrangements. In addition, we do not havearrangements or any interest in entities commonly referred to as variable interest entities, which include special purpose entities and other structured finance entities. See the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed on May 25, 2023, for further details.
Effect of Inflation
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 While inflationary increases in certain input costs, such as wages, have an impact on our operating results, inflation has had minimal net impact on our operating results during the last three years, as overall inflation has been offset by lower commodity prices for our core production materials. We cannot assure you, however, that we will not be affected by general inflation in the future.





Critical Accounting Polices
Our condensed consolidated financial statements are prepared in conformity with GAAP. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. See Part I,II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended March 31, 20172023, filed with the SEC on May 25, 2023, for a discussion of the Company’s critical accounting policies and estimates.
Recent Accounting Pronouncements
See Note 1, “Basis of Presentation, and Accounting Policy Information”” to our unaudited interim condensed consolidated financial statements and accompanying notes thereto included above in Item 1. Financial Statements (Unaudited) of this quarterly report for information on recent accounting pronouncements, which is hereby incorporated by reference into this Item 2. 

Item 3. Quantitative and Qualitative Disclosures about Market Risk
Our primary market risk exposures are the effect of fluctuations in foreign exchange rates, interest rates and commodity prices.
Foreign currency risk relating to operations. We transact business globally and are subject to risks associated with fluctuating foreign exchange rates. Approximately 62%51% of our YTD 20182024 consolidated revenue was generated by sales from our non-U.S. subsidiaries. Our non-U.S. subsidiaries generally sell their products and services in the local currency, but obtain a significant amount of their products from our manufacturing facilities located elsewhere, primarily from the United States, Canada orand Europe. Significant changes in the relevant exchange rates could adversely affect our margins on foreign sales of products. Our non-U.S. subsidiaries incur most of their expenses (other than intercompany expenses) in their local functional currency. These currencies include the Canadian dollar,Dollar, Euro, British Pound, Russian Ruble, Australian Dollar, South Korean Won, Chinese Renminbi, Indian Rupee, Mexican Peso, and Japanese Yen, South African Rand and Brazilian Real. Yen. 
During YTD 2018,2024, our largest exposures to foreign exchange rates consisted primarily of the Canadian Dollar and the Euro against the U.S. dollar.Euro. The market risk related to the foreign currency exchange rates is measured by estimating the potential impact of a 10% change in the value of the U.S. dollar relative to the local currency exchange rates. The rates used to perform this analysis were based on a weighted average of the market rates in effect during the relevant period. A 10% appreciation of the U.S. dollar relative to the Canadian dollar would result in a net decrease in net income of $1.4$1.1 million for YTD 2018.2024. Conversely, a 10% depreciation of the U.S. dollar relative to the Canadian dollar would result in ana net increase in net income of $1.7$1.4 million for YTD 2018.2024. A 10% appreciation of the U.S. dollar relative to the Euro would result in a $0.2 million decrease in net income of $0.2 million for YTD 2018.income. Conversely, a 10% depreciation of the U.S. dollar relative to the Euro would result in ana $0.2 million increase in net income of $0.3 million for YTD 2018.2024.
The geographic areas outside the United States in which we operate are generally not considered to be highly inflationary. Nonetheless, these foreign operations are sensitive to fluctuations in currency exchange rates arising from, among other things, certain intercompany transactions that are generally denominated in U.S. dollars rather than their respective functional currencies. The net impact of foreign currency transactions on our condensed consolidated statements of operations and comprehensive income were losses of $5.6 milliona nominal amount and $0.4$(0.1) million in YTD 20182024 and YTD 2017,2023, respectively.
As of December 31, 2017,2023, we had approximately $19.4$6.0 million in notional forward contracts to reduce our exposure to foreign currency exchange rate fluctuations.fluctuations with respect to currencies. These forward contracts were in place to offset in part the foreign currency exchange risk to intercompany payables due from our foreign operations to be settled in U.S. dollars. See Note 2,3, “Fair Value Measurements” to our unaudited interim condensed financial statements included above in Item 1. Financial Statements (Unaudited) of this quarterly report for further information regarding our foreign currency forward contracts.
Because our consolidated financial results are reported in U.S. dollars, and we generate a substantial amount of our sales and earnings in other currencies, the translation of those results into U.S. dollars can result in a significant increase or decrease in the amount of those sales and earnings. In addition, fluctuations in currencies relative to the U.S. dollar may make it more difficult to perform period-to-period comparisons of our reported results of operations. In YTD 2018, weWe estimate that our sales were positivelynegatively impacted by $3.1$4.5 million in YTD 2024 when compared to foreign exchange translation rates that were in effect in YTD 2017.2023. Foreign currency impact on revenue is calculated by comparing actual current period revenue in U.S. dollars to the theoretical U.S. Dollar revenue we would have achieved based on the weighted-average foreign exchange rates in effect in the comparative prior periods for all applicable foreign currencies. In YTD 2018, we were mostly impacted by the depreciation of the U.S. dollar relative to the Canadian Dollar and the Euro. At each balance sheet date, we translate our assets and liabilities denominated in foreign currency to U.S. dollars. The balances of our foreign equity accounts are translated at their historical


value. The difference between the current rates and the historical rates are posted to our currency translation account and reflected in the shareholders’ equity section of our condensed consolidated balance sheets. The unrealized effects of foreign currency translations were gains of $14.5$4.7 million and losses of $8.9$17.6 million in YTD 20182024 and YTD 2017, respectively, representing a comparative increase in foreign currency translation gains of $23.4 million.2023, respectively. The comparative increase in YTD 2018 foreign currency translation gains is primarilychanges are due to the strengtheningweakening of the Euro and CanadianU.S. dollar relative to the U.S. dollar. InCompany's other primary operating currencies in YTD 2017, most foreign currency exchange rates remained relatively stable against the U.S. dollar.2024 relative to YTD 2023. Foreign currency translation gains or losses are reported as part of comprehensive income or loss which is after net income in the condensed consolidated statements of operations and comprehensive income (unaudited). As discussed above, foreignincome. Foreign currency transactions gains and losses are the result of the settlement of payables and receivables in foreign currency. These gains or losses are included in net income or loss as part of other income and expense in the condensed consolidated statements of operations and comprehensive income (unaudited).income.
Foreign currency risks related to intercompany notes. The Company has entered into a cross currency swap for the purposes of mitigating potential exposures to currency rate fluctuations related to an intercompany note of $112,750 with our wholly-owned Canadian subsidiary. See Note 2, “Fair Value Measurements” to our unaudited interim condensed financial statements included above in Item 1. Financial Statements (Unaudited) of this quarterly report for further information regarding our cross currency swap.
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Interest rate risk and foreign currency risk relating to debt. The interest rate forBorrowings under our new variable rate term loan B credit facility was 5.13% as of December 31, 2017. Borrowings on our revolving credit facility willTerm Loan Facilities and the Revolving Credit Facility incur interest expense that is variable in relation to the LIBORSOFR and CORRA rate. Based on historical balances on our revolving credit facility, we do not anticipate that a one percent increase or decrease in our interest rate would have a significant impact on our operations. We cannot provide any assurances that historical revolver borrowings (if any) will be reflective of our future use of the revolving credit facility.
As of December 31, 2017,2023, we had $250.0$180.8 million of outstanding principal under our variable rate LIBOR-based term loan B credit facility.Term Loan Facilities and $32.5 million in borrowings under the Revolving Credit Facility. The interest rates on the Term Loan Facilities on December 31, 2023 were 6.59%for the Canadian Term Loan Facility, 6.71%for the U.S. Term Loan Facility, 7.21% for the 2023 Incremental U.S. Term Loan Facility, and 6.71% for the U.S. Revolving Credit Facility. Based on the outstanding borrowings, a one percent1% change in the interest rate would result in a $2.5$2.0 million increase or decrease, as applicable, in our annual interest expense.
Commodity price risk.  We use various commodity-based raw materials in our manufacturing processes. Generally, we acquire such components at market prices and do not typically enter into long-term purchase commitments with suppliers or hedging instruments to mitigate commodity price risk. As a result, we are subject to market risks related to changes in commodity prices and supplies of key components of our products. Historically, theRaw material costs of our primary raw materials have been stable and readily available from multiple suppliers. Typically,historically; however, in recent periods we have been ableexperienced, and may continue to pass onexperience, various shortages in certain raw material cost increases to our customers.materials as well as an increase in costs of these materials due to: use of alternate suppliers, higher freight costs, increased lead times, and expedited shipping. We cannot provide any assurance however, that we maywill continue to mitigate temporary raw material shortages or be able to pass along such cost increases, including the potential impacts of tariffs or supply chain challenges, to our customers or source sufficient amounts of key components on commercially reasonable terms or at all in the future, and if we are unable to do so, our results of operations may be adversely affected.
Item 4. Controls and Procedures
Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including itsour Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of itsour disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this quarterly report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this quarterly report, these disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in ourthe Company’s internal control over financial reporting that occurred during the lastmost recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.


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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changes from the legal proceedings previously disclosedSee Note 10, "Commitments and Contingencies," to our unaudited condensed consolidated financial statements included above in Part I, Item 11. Financial Statements (Unaudited) of our Annual Report on Form 10-K for the year ended March 31, 2017 filed with the SEC on May 30, 2017.this quarterly report, which is hereby incorporated by reference into this Item 1. 
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 20172023, filed with the SEC on May 30, 2017.25, 2023.
Item 2.Unregistered Sales of Equity Securities, and Use of Proceeds and Issuer Purchases of Equity Securities
There were no unregistered sales of our equity securities during the three months ended December 31, 2017.2023. 
Item 3. Defaults Upon Senior Securities
None.
Item 4.Mine Safety Disclosures
Not applicableapplicable.



Item 5. OtherInformation
None.Securities Trading Plans of Directors and Executive Officers
During the three months ended December 31, 2023, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”
Item 6. Exhibits
See Exhibit Index on the page immediately following the signature page heretobelow for a list of exhibits filed as part of this quarterly report, which Exhibit Index is incorporated herein by reference.

33


EXHIBIT INDEX
Exhibit
Number		Description
10.1
31.1
31.2
32.1
32.2
101Interactive Data Files formatted in Inline eXtensible Business Reporting Language (iXBRL) pursuant to Rule 405 of Regulation S-T: (i) the cover page, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements*
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)*
 __________________________________

*    Filed herewith







34

SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
THERMON GROUP HOLDINGS, INC. (registrant)
Date: February 8, 20181, 2024By:/s/ Jay PetersonKevin Fox
Name:Jay PetersonKevin Fox
Title:
Senior Vice President, Chief Financial Officer

(Principal Financial and Accounting Officer)


EXHIBIT INDEX
Exhibit
Number
Description
2.1+
Share Purchase Agreement dated October 3, 2017 by 2071827 Alberta Ltd. ("Purchaser") and Camary Holdings Ltd. and Rocor Holdings Ltd. ("Sellers") (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed with the SEC on October 10, 2017 (File No. 001-35159)).
2.2+
Employee Share Agreement dated October 3, 2017 by 2071827 Alberta LTD. ("Purchaser") and certain current and former employee shareholders of CCI ("Employee Shareholders") (incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K filed with the SEC on October 10, 2017 (File No. 001-35159)).
2.3
Real Property Agreement dated October 30, 2017 by and between 2071827 Alberta Ltd. and Whitemud Place Properties. (incorporated by reference to Exhibit 2.3 to the Registrant's Current Report on Form 8-K filed with the SEC on November 3, 2017 (file No.001-35159)).
10.1
Credit Agreement dated October 30, 2017 by and among Thermon Group Holdings, Inc., Thermon Holding Corp., as US Borrower, Thermon Canada Inc., as Canadian Borrower, and The Several Lenders from Time to Time Parties Hereto, Bank of Montreal as Syndication Agent and JPMorgan Chase Bank, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on November 3, 2017 (file No.001-35159)).
31.1
Certification of Bruce Thames, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2
Certification of Jay Peterson, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1
Certification of Bruce Thames, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2
Certification of Jay Peterson, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Cash Flows and (iv) Notes to Condensed Consolidated Financial Statements *
 __________________________________

*    Filed herewith
+ The schedules to this exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). A copy of any omitted schedule will be furnished to the Securities and Exchange Commission upon request.






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