Thermon Group Holdings Inc (THR) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Thermon earnings fourth-quarter and full fiscal 2012 conference call. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded.

I would now like to introduce our host for today, Ms. Sarah Alexander, Director of Investor Relations. Ma'am, please go ahead.

Thank you, Karen. Good morning and thank you for joining us for today's earnings conference call. We issued an earnings press release this morning, which has been filed with the SEC on Form 8-K, and is also available on the Investor Relations section of our website at www.Thermon.com. A replay of today's call will be available on our website beginning two hours after the conclusion of this call.

This broadcast is property of Thermon. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of the Company is strictly prohibited.

During this call our comments may include forward-looking statements. These forward-looking statements are subject to risks and uncertainties and our actual results may differ materially from the views expressed today. Some of these risks have been set forth in the press release and in our annual report on Form 10-K filed with the SEC on June 20, 2011.

We also would like to advise you that all forward-looking statements made on today's call are intended to fall within the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These statements may include, among others, our outlook for future performance and revenue growth, leverage ratios, acquisitions and various other aspects of our business.

During the call we will also discuss some items that do not conform to generally accepted accounting principles, including adjusted EPS and adjusted EBITDA. We have reconciled those items to the most comparable GAAP measures in the earnings release. Adjusted EPS and adjusted EBITDA should be considered in addition to, not as substitutes for, income from operations, net income, net income per share and other measures of financial performance reported in accordance with GAAP.

And now it is my pleasure to turn the call over to our President and Chief Executive Officer Rodney Bingham.

Thank you, Sarah. Good morning everyone and thank you for your continued interest in Thermon. Today we also have two of our executive team leaders joining us on this earnings call. Jay Peterson, our Chief Financial Officer, will follow me in the presentation and present the financial details of our FY 2012 fourth-quarter. George Alexander, our Executive Vice President of Global Sales will assist in the Q&A session by answering questions that pertain to global markets and industry trends.

For those of you who are not familiar with Thermon we are a leading global provider of thermal solutions. We serve mainly the oil, gas, chemical and power generation industries. Our heat tracing systems provide freeze protection and temperature control for piping, vessels and instrumentation. These mission-critical systems ensure the continuous and safe operation of industrial facilities.

Well, we had a very good year in 2012. We set new records for our revenue, orders, gross margin and backlog. We continue to say this is a very good time to be in the heat tracing business. All of our geographical business centers are doing well and our main market sectors -- oil, gas, power and chemical -- continue to drive our revenues and earnings.

For 2012 we achieved a growth rate of 13% over prior year, and we grew gross margin to 48.8% of sales. This margin performance was due in part to the revenue mix of 61% MRO/UE and 39% greenfield projects. This is significant because our MRO/UE margins are typically higher than our greenfield project margins.

Our new heater cable manufacturing plant in San Marcos, Texas, is now complete and operational. We will be in full production by mid-June. This increased capacity will lay the foundation for our future growth plans.

We are enjoying a strong tailwind. Our energy level is high as a result of a strong business climate, the introduction of our new products, and the capacity expansion of our heating cable production facilities in San Marcos.

Our guidance for 2013 is still low to modest double-digit growth. We would like to remind our investors that the timing of our revenues and earnings can fluctuate as a result of product mix and construction schedule delays. This lumpiness does not reduce our earnings or revenues, but can impact the financials of a particular time segment.

Our management team would like to thank our employees, customers and investors for a very successful year. Again, on a personal note, thank you again for joining us today. And at this time I would like to turn it over our presentation to Jay Peterson, who will present our financials.

Good morning, and thank you, Rodney. Thermon demonstrated another solid quarter in fiscal Q4, and we again set several financial records, including orders, revenues, backlog and earnings. This morning I will focus on the results of our core operating business, and exclude those expenses relating to the optional bond redemption that was announced at the end of March.

First off, return on equity. On a Q4 EBITDA basis our ROE was 39% this past quarter. Let's turn to orders and revenue. Our revenue this past quarter grew to $69 million, and that is a new record for Thermon, and an increase of 15% over the prior-year quarter level of $59.8 million, with both hemispheres showing growth.

For the full year our revenues totaled over $270 million and are up 13% over the prior year. This quarter was also a new record for orders, a little over $84 million, and that was slightly ahead of our previous record of $83.7 million. And note that our orders grew 52% year-on-year and our book-to-bill this quarter was 122.

Our backlog of orders ended March at $118 million, and that is also a new high for Thermon. That was relative to the $76 million level at the end of Q4 fiscal year 2011, an increase of 54% with both hemispheres showing double-digit growth.

Our book-to-bill for fiscal year 2012 ended at 116. And by definition our backlog contains only signed, but unperformed purchase orders and agreements.

Next we had record gross margins. Our margin dollars grew this past quarter by 19% to $34.5 million and that is up from last year's level of $29 million, an increase or approximately $5 million. On a relative basis our margins last quarter were just under 50% versus 48.5% one year ago, and that is an increase of 140 basis points. And this relative increase was primarily due to product mix with our maintenance and MRO business constituting 61% of our revenues in Q4.

In terms of operating expenses and headcount, our core operating expenses for the quarter, excluding depreciation and amortization of intangibles, totaled $16 million.

Due to the recent redemption in our bonds our quarterly interest payments have been reduced from $5 million a quarter to approximately $3 million a quarter, and this equates to an increase in EPS of $0.04 a share per quarter. And I would like to point out that our EPS is negatively impacted by $0.09 a share pretax, and that is each quarter, due to the non-cash amortization expense due to the acquisition of our Company by CHS in 2010.

The number of full-time employees at the end of March was 755. That is up from 658 as of calendar year March 2011. And 93% of these additional headcount were in either production, sales, engineering, and all of them relate to managing our growing business.

Earnings. GAAP net income for the quarter totaled $6.3 million compared to a prior-year loss of $4 million. GAAP EPS was $0.20 a share versus a $0.16 loss in the prior-year period. And adjusted EPS came in at $0.21 a share versus $0.10 loss one year ago. And, again, the adjustments are expenses relating either to the paydown of our debt or, in the case of fiscal year 2011 transaction-related expenses.

And our EPS was impacted negatively by approximately $0.01 a share from the combined effects of foreign exchange when considering translation and transaction impacts, and the exact number was about $319,000.

Let's turn to the balance sheet and cash flow. Our cash balance at the end of March was $21 million compared to $51 million in the prior year. And this cash decrease was due to the optional redemptions of our long-term debt.

From a free cash flow perspective we generated $9.3 million this past quarter or $0.30 a share, and that is a new quarterly record for Thermon. Our DSO was 64 days versus 59 days one year ago. Our days in inventory at the end of March increased to 100 days versus 91 days one year ago. And the recent growth in our inventory was planned and is due to the transition to our new production facility.

Lastly, in aggregate our cash conversion cycle increased to 124 days versus 96 days in the comparable period. And we anticipate a reduction both in our inventory and our cash conversion cycle in the coming months.

From a debt perspective at the end of March our long-term debt has been reduced to $139 million versus $210 million 12 months ago. And note that all of the $71 million in debt reduction was due to optional redemptions enabled by our strong cash flows, and to a lesser extent the proceeds from our IPO of last year. Earlier this fiscal quarter we redeemed an additional $21 million in debt, and our new debt balance is less than $120 million.

One year ago our debt leverage was approximately 4.2, and we believe we will end this fiscal year at approximately 1.5.

Our business continues to be highly capital efficient. For example, this past quarter our maintenance CapEx amounted to less than 1% of revenue, and that excludes the investment we made in our new manufacturing facility.

In summary, we continue to perform at record levels, including order activity, topline revenue and earnings, and all of these achievements were accomplished within an uncertain global economic environment. We will continue to manage our expenses and capital investments, and we plan to reduce our debt leverage. Looking forward we remain guardedly optimistic about our future due to our current order activity and our increasing backlog.

And a cautionary note however. Due to the current level of large projects in our backlog we believe that our margins this year could have slight downward exposure relative to the margins we have experienced in the last 12 months. In addition, with the recent strength of the US dollar and with 70% of our revenues coming from outside the US, we have a near-term headwind in terms of currency.

Thank you for your interest and support. We plan to next announce our financial results for Q1 fiscal 2013 via a conference call and press release in August of this year.

I would now like to turn the call back over to Karen to moderate our Q&A session.

(Operator Instructions). Brian Drab, William Blair.

You guys are developing a habit of reporting on very poor days for the market. Another Thermon earnings where you're the only stock that is up on my stock screen here.

It is a good day to be into heat tracing.

So you mentioned the very strong order growth, and I was wondering if you could give us a sense for how that is weighted towards MRO versus greenfield?

Brian, this is George Alexander. As was mentioned in Jay's report, our order growth has been strong across the globe in both hemispheres. It is also been strong across all of our primary end markets in the upstream oil and gas, downstream and power sectors.

The MRO business, as reflected by the 61%/39% split is also strong. And, again, coming off of the heating season in Q4, it still remained strong. We are actively pursuing preventive maintenance with our customers, and so we think we are experiencing the benefit of the significant significantly higher installed base that we have gained over the last five years of substantial growth, and also the fact that we are putting more emphasis on the MRO/UE market opportunities.

Okay. Okay, thanks. And I imagine with the backlog being up so significantly that the pipeline that you typically talk about, which has hovered around $1 billion, maybe $1 billion plus, has that moved up from that $1 billion figure that we've talked about in the past?

Well, the pipeline is an evergreen document database, and currently it is still hanging in there at around the $1 billion mark. We are actively involved in a process to make that more of a longer-term vision, put more focus on what we see in front of us beyond just the next couple of years. But, yes, it is still hanging in there at around $1 billion mark.

Okay. And then on the backlog that you reported, what percent of that would you expect to be delivered in say the next six months?

Rough numbers, let's say 50%, 60% or so. We believe the entirety, or virtually all of the backlog will be delivered within the next 12 to maybe 15 months. That is our thoughts on that at present.

Okay. And then with the additional capacity that came on line recently, do you think that we would expect that to allow you to move the quarterly revenue run rate up into the $70 million plus type of range at this point?

Certainly from a capacity perspective it is more a question of when our customers will accept delivery of some of these greenfield orders, but by definitely from a sheer capacity perspective.

And, Brian, from the standpoint of one of the major objectives of our new building and added capacity is to ensure that we have the capacity and the ability to react to upside potential as it relates to adjacent markets and our OEMs that we service. That was a limiting factor in the past, and we believe now that we have the capacity and we have the capability to go out and take advantage of that.

Okay, then a last quick one for you. Are you seeing any push out of projects given the drop in oil and gas prices lately?

Not yet, no. We are not seeing anything at this point, but that is an issue that we are obviously watching closely, but so far we have not seen any negative effects or pushbacks.

Okay, thanks very much. Congratulations on a great quarter and a great year.

Jeff Hammond, KeyBanc Capital Markets.

So maybe just to follow on Brian's comments -- I mean, we are two months into the quarter and the new year, so it doesn't sound like there is any change in projects, but any -- in terms of the just tone of business and some of the uncertainty out there, any real change from what you have seen in your March reported quarter and the order rates?

No, our order rates continue to be healthy. And we are seeing no near-term impact from some of the macro events. I did mention, however, the FX impact that has materialized over the last several months. However, we believe we will be able to continue to grow this business this year with healthy gross margins.

Okay, great. And then just a little more granularity along a couple of things there. Are you able to quantify what you think the FX headwind is given where current rates are? And just on the gross margin comment, I think you have been using this 45% and your qualitative count was down a little bit from the high 48% level. Can you give us some more granularity on how you think that gross margin falls out?

From an FX perspective, it is very difficult to determine the impact of what is going to happen with, for example, the orders we have in our backlog in that they are not impacted until they are invoiced. And that could happen at a time -- at current effects levels or they could get better or they could get worse. However, we are able to mitigate that from a balance sheet perspective, or virtually eliminate that, in that we do hedge forward those intercompany balances.

From a margin perspective, we had a banner year in margins this last year, well above what we have experienced, let's say, two or three years ago. We are comfortable with what the analysts are currently forecasting for our margins for this coming year. And at this point in time we don't see any risk with some of the models out there.

Okay. So I guess the counterbalancing factor is you have more project business coming in, but a lot of your new capacity is really more at the higher-margin MRO tracing equipment?

Yes.

Yes, and as you know, through time those increased greenfield projects, albeit at lower margins, will yield significant MRO returns in the future at significantly higher margins. So it is -- overall it is a very good situation for the Company.

Okay, great. And then, a final question, clearly you have delevered the balance sheet quickly. How should we -- it doesn't seem like there is a lot relative to the acquisition pipeline. How should we think about uses of free cash flow? Are you at a leverage profile that is pretty comfortable? And is there any thought to instituting any kind of dividend or even a special type dividend, if the cash flow continues?

Yes, in terms of delevering, we have the ability in 23 months -- it sounds like a long time -- to call all of our bonds at 104.75. That is something we will currently look at doing, and entertain doing. It seems very attractive relative to our coupon of 9.5%.

Refinancing in this current market is -- does not look like a viable option and a viable use of some of the costs in order to accomplish that, although we will continue to look at that based on the yields and based on how our bonds are trading.

In terms of a securities repurchase program or, for example, a dividend all of those things, I guess, are possible. We certainly have not entertained that at present in that our primary goal is to take our cash and reinvest it back into the business. And the balance of that cash historically has been used to pay down our debt. But going forward that could change; however, we do not have any imminent plans to do that.

Okay, great. I will get back in queue.

Charley Brady, BMO Capital Markets.

On the order number for the quarter, I know you said a little over $84 million, but I wonder if you could just give us specifically what the order number was in the quarter?

It was $84.3 million versus $83.7 million a year ago, so slightly ahead.

Great, thanks. And one of your major competitors have been acquired by Pentair, and I'm just wondering have you seen any impact, do you expect any impact, or is there sort of a status quo in the marketplace right now?

Well, currently we have not seen any impact.

And that transaction is still ongoing as well, so.

Fair enough. And I guess I just want to go back to your commentary on the gross margin -- a gross margin expected downtick in fiscal 2013. As you look at your delivery schedule on the backlog, between say first half, second half of fiscal 2013, is there any meaningful shift to the way some of those large projects will ship out?

This is George Alexander. Our backlog currently reflects the significant part of our greenfield projects in the backlog and shipping it in the second quarter and after the first quarter. So we think that there could be some of that slight downward pressure exerted later on in the year. But again that is pretty hard to predict with the lumpiness of greenfield business.

All right. And I am sorry if I missed this before, but did you give us what the cash from operations were and what CapEx was in the quarter?

In terms of cash from operations, from a free cash flow perspective, including investing activities, it was $9.3 million. And that was $12 million from cash from operations, and purchase of plant and equipment was $2.7 million. So you would net those two and come up with $9.3 million.

That $2.7 million is significantly higher than what we anticipate on a quarterly run rate going forward for this year. In fact, that level is probably closer to what we realized for the full year for fiscal year 2013.

Right.

And plant and equipment constituted the great majority of our $2.7 million of capital spent this quarter. It was virtually the entire balance was related to the growth capital for our business.

All right, one more and I'll hop back in the queue. Your tax rate in the quarter was a little bit higher than we had modeled in. Can you just comment what drove that and what your expectation would be for a tax rate in fiscal 2013?

Yes, a couple of thoughts on that. Going forward we are modeling 38% approximately. The reason it crept up this last quarter is due to the fact that we will not be permanently reinvesting dividends in our foreign subsidiaries due to the fact that there is the ability to have a very accretive effect in our P&L by redeeming our debt at a coupon of 9.5%.

So in the anticipation of that impact we are required to accrue a slightly higher rate, and it was really a true-up this last quarter. And going forward it will be closer to what you have seen over the last several quarters.

Great, thanks very much guys.

Charley, just one thing I would like to clarify in terms of your first question, the $83.7 million order number I mentioned was actually from the prior quarter. If you look back a year ago the order rate was $55 million -- or $56 million approximately. So our current number of $84 million and change is up significantly from our comp period 12 months prior.

Great, thank you for that.

Scott Graham, Jefferies.

So you have this big jump in orders, and I am assuming that you have taken some license here with opening things up, because the facility is coming on line, on track and all that good stuff. My question is really more surrounding lining up the suppliers now.

You're moving into a level of order rates that the Company has not seen before, and a level of sales not seen before. How is it going on -- how is it going behind the scenes with lining up suppliers, particularly with more project activity when that can be start and stop?

Well, from a manufacturing standpoint, we obviously think we have our raw material suppliers and supply chains in order, because we have just gone through a significant expansion in a new facility and we were able to accomplish that and not -- with a minimal amount of downtime, but have no negative impact on revenues or material supply.

We are forecasting obviously growth, as we mentioned earlier. And we feel like we have sufficient controls in place with our vendors and our purchasing initiatives to offset any possible negative scenarios that would develop.

So what I hear you saying, Rodney, is that you think your supplier base is ready for increases in business that your order rates are reporting. .

That is correct. And the other side of our business as we go forward into revenue areas that are, as you said, above where we have been before is our human element. And we are also increasing our infrastructure and the term of people so that we have enough people in place to execute mainly our greenfield orders or orders that have an engineering component. That is as critical of an issue as raw material supply.

Yes, that's very good. That is really all I had. Thanks very much.

Martin Malloy, Johnson Rice.

Congratulations on a strong quarter. In terms of the oil sands are you seeing any evidence of a higher MRO/UE component of your business up there due to the harsh fluids that are being put through the piping up there?

We do believe that is happening. This is George Alexander. But I think more importantly what we are seeing is that, again, the installed base that we have in the oil sands arena has grown significantly. And it has been installed out for a long enough period of time that the MRO business is -- has grown significantly. And, yes, we are seeing a noticeable uptick in that arena. I don't know that I can honestly tell you that it has to do with the processes involved, but we believe it does, yes.

Okay, and then, just in recent months have you seen any change in terms of the outlook for new awards on the greenfield side domestically? And I'm thinking along the Gulf Coast there has been a number of announcements regarding proposed expansions of ethylene capacity, petrochem capacity and fractionation plants.

Yes, that is something that is -- that we have noticed and that we are following closely. And we certainly view that as a potential positive upside prospective in the future as a result of all the new gas reserves and productivity that we see out there. Also the fact that the gas provides a very attractive feedstock for those processes. So, yes, we think that is a potential upside going forward.

But those kinds of plants require some time to evolve, and we are involved on -- and as far as from a revenue standpoint on the tail end of them. But we do see that both in the petrochem area as well as in the power industry.

Okay. And in terms of the timing of -- if these expansions go forward is it more of a fiscal 2014 type event for you?

In the power industry it's fiscal 2013. We are actively seeing that now. In the petrochemical industry, yes, it would probably be more something we would see either in fiscal 2014, yes.

Okay, thank you very much.

Andrew Gadlin, CJS Securities.

It is actually Arnie Ursaner backing up Andrew, who is on his honeymoon. Can you remind us of the key currencies you are exposed to, and is your exposure translational or transactional?

We are exposed at present in Canada, the ruble, the euro, and to a lesser extent pound sterling. Those are the three or four majors. And from a hedging perspective we hedge the balance sheet risk once the receivables from an intercompany perspective are on our books. So from a translation perspective those are the currencies that we hedge. And we started that program about nine months ago, and we have had some success at that. We still have, I think, some additional work to do on that, but we are definitely making progress.

Okay. You mentioned your new facility is ramping up starting in June. Can you walk us through perhaps the next few quarters of how we should think about the revenue ramp from that facility and the type of operating margin leverage we might see from that as it does ramp?

This is George. Again, just revisiting the comment from earlier, we do -- some of our business is seasonal in that the heating season does affect the order rates in our MRO/UE sector of our business, which is a large part of it. It also affects the adjacent markets that we serve, our OEM basis and so forth, because again that is when the peak demands are.

We are obviously working with our partners on forecast and so forth to make sure that we manage that requirement efficiently. But again, an important part of that added capacity is our ability to handle upticks in forecast when our partners do better than they expect. So we -- that is a little bit difficult to forecast, because they don't -- sometimes they don't tell us that it is going to happen because they don't know it is going to happen.

But we believe we are in position now to take advantage of that. And the other thing that affects that is obviously if we are fortunate enough to have a cold winter in the Northern Hemisphere or a severe winter early -- we like cold weather early. So if it does -- all those things come together MRO/UE business can have an uptick as far as margin exposure, but we are not -- right now our model is based on where we are at now.

In terms of gross margin -- it is Rodney -- in terms of gross margin, and when you move any piece of equipment from point A to point B you have some tweaking of manufacturing processes that you need to do. Currently though everything is going extremely well. All of our extruder lines are up and running. The parts that we are still pulling in are not the extrusion lines. And so we expect a minimal downturn in margin as it relates to cost of goods sold or moving the processes from one building to another.

We expect that to be offset not only by volume, but our ability to install and operate under lean initiatives that our previous footprint would not allow us to do. So by the time the fall season gets here we believe there'll be an upturn in terms of our efficiencies as it relates to the move and the new building that we have put together.

A final question. You have spoken a lot about gross margins, but perhaps it is worth highlighting the almost 600 basis point improvement in operating margin driven by really tight SG&A control. To the extent you have modest gross margin pressure, do you still have some levers on the G&A side so that your operating margin can be maintained at the higher levels you have demonstrated this year?

Yes, a couple of thoughts on that. Definitely. We have a -- what we call our timeless business model and that is from an EBITDA perspective we are going to put 25% back to the bottom line from an EBITDA perspective -- 25% of revenues. We have done a little bit better than that over time, but we are comfortable with that number long-term, inclusive of making investments back into the business.

We have got opportunities from several geographies to make some prudent investments that we believe will be accretive in the near term. But we do not see anything that would deviate us to below that 25% number.

We also have a highly variable cost structure such that we do believe with increases in revenues we will be able to put that into an accretive position for the Company.

Congratulations, thank you.

Jon Braatz, Kansas City Capital.

George, from your experience -- going back to the big picture -- is there a -- do you think there's a magic number that oil falls to at which projects begin to be pushed out, canceled if you want to call it that -- is there a magic number do you think?

Well, I think certainly there is a number out there that drives investment and investment capital. And the number in the oil sands that was hanging around in a lot of circles for years was around $60 a barrel, that it was the point in which investment capital would be questioned or postponed.

We didn't see -- even during the last recession there were several projects that got pushed back. There was one major project that didn't get pushed back, which was Kearl. And so it is probably somewhere in the $60 to $70 range as far as again the initiatives for investment in the oil sands and any other area that -- where the production of the hydrocarbons is considered to be on the high end.

Okay, okay. Thank you. Jay, I guess maybe I'm a little bit confused. You can -- you redeemed, or you repurchased some debt subsequent to the end of the quarter. But debt repurchases and debt retirement continues to be something that you're looking at in this fiscal year?

Yes, however, it is predicated on us being able to go into the open market and acquire that debt at an attractive price.

Okay. And that $21 million you retired recently that was in the open market?

No, that was the last call provision, if you will, where we could go in and acquire 10% or $21 million of the initial offering of $210 at 103. And we -- because we announced that in March we had to take the P&L impact on that 3% premium in March and the actual redemption in terms of the cash being sent to the bondholders occurred in this fiscal quarter. So going forward we will have the benefit of that reduced interest expense.

Okay. So you don't have that retirement charge in the first quarter here then?

No, we do not.

Okay, okay. Perfect. Go ahead.

We have a partial quarter in terms of reduced [interest].

Yes, right, right, okay. And, Rodney, last question is, as you look out and business continues to be strong, where do you think the next investment that you need to make in terms of manufacturing, people or whatever, sort of a growth capital investment that you need to make, and how significant do you think that might be?

Our investment going forward over the next couple of years needs to be in our infrastructure and the key areas that we are currently having significant growth rates, and that is both in the West and the Eastern Hemispheres.

And that infrastructure not only does it need to be in people but in facilities and in software tools as we grow our business. So that investment we have been making and we're going to continue to make it because the tailwind that we see, we see it continuing beyond this year.

Also, we will be looking to make significant investments in R&D, as it relates to new products on our core materials. There is -- they're involved in our heat tracing world. And those are the two main areas that I see us making investments in in the future.

Where there is one other -- now that I think of it, there is another product line that we are -- if we continue our growth rate we will look to expand the production facilities of another one of our product lines in the near future.

Would that be maybe as substantial as what you made last year in terms of production capacity?

No, in terms of actual cost it will be roughly half.

Okay. Do you think that is a this year item or next year

No, I think it will be next fiscal year for us.

Okay, all right. Rodney, thank you very much.

And I just wanted to clarify one thing. My comments before on what charges hit what quarter was purely from a cash perspective. We took the charge in Q4 due to the premium; however, there are bond issuance costs that are on our balance sheet that have been amortized over the life of the bond. We will take a non-cash charge in Q1 -- non-cash -- and we will articulate what that was when we announce earnings for this quarter in August.

How substantial do you think it might be?

I don't know the exact number, but somewhere, let's say $2 million -- let's say $0.06 or $0.07 pretax. Just a rough number at this point. We will have to work with the auditors in terms of the appropriate accounting for that and the timing of it.

And that is all related to the $21 million that you retired?

Yes, it is.

Okay, thank you.

(Operator Instructions). Jeff Hammond, KeyBanc Capital Markets.

Just a quick follow-up. If you look at project timing and your normal seasonality, any kind of nuances this year on seasonality? Are there any particular quarters where you are outside of that low to moderate double-digit growth you talked about?

On a quarterly basis, nothing that we are aware of at this point in time.

Again, it is Rodney. This is -- it is a little hard for us to predict that due to the construction schedules. You have got to complete roughly 95% of a processing plant before the heat tracing goes in. And most people don't want lots of materials delivered on a just-in-time basis. So that flexibility or that restriction on us delivering products of that timing schedule just makes it very difficult to have any high degree of granularity in there.

Okay, that is helpful. Thanks, guys.

Charley Brady, BMO Capital Markets.

Thanks, I just want to clarify one thing. Your comment that your expectation of low double-digit topline growth in 2013, that is inclusive of the FX headwinds?

Yes, it is. Yes, it is.

And just back on the last question on your expectation on a quarterly basis, did I hear you correctly that you're not anticipating that you have any of the quarters that are below a double-digit growth rate? My question really goes to looking at the first quarter, where you didn't have -- you're not having full production of the expansion online yet.

Yes, just to clarify on that, that was more for a protracted period of time for the year. We do have a difficult comp in front of us. We had a very strong start of our year last year. And at this point in time due to customer acceptance of some of these large projects, we are really uncertain at this five seconds in time whether those projects will go out the last week of June or whether they might shift to July or August. Okay? But in aggregate, we are comfortable that we will be able to grow this business low double-digits.

Got you. And just one more, just so I'm clear. Am I correct that you do not have any more of that $21 million call provisions? That is essentially done. The only one you have left is the one that is out 23 months from now?

That is correct. However, we do have the ability, and have done this in the past, to go into the open market. The issue here though is our bonds have been thinly traded at a very robust premium. However, as we move closer to the call date by nature that premium will go away. Okay?

So six months from now, nine months from now, it will be hard to say what that premium is, but at the current premium of 111, 112 it is not financially prudent to go into the market.

Yes, yes, absolutely. Great, thanks.

I see no additional questions at this time. I would like to turn the conference back to Thermon for any final remarks.

Once again, we appreciate everyone's interest in Thermon. And we look forward to our next earnings call in August. And everybody have a safe weekend. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a good day.