Sarah Alexander - General Counsel Rodney Bingham - President, CEO Jay Peterson - CFO Eric Reirler - SVP of Global Sales and Marketing.

Scott Graham - Jefferies LLC Jeff Hammond - KeyBanc Capital Markets Brian Drab - William Blair & Company Steven Ramsey - Thompson Research Group Jon Braatz - Kansas City Capital.

Good day, ladies and gentlemen and welcome to the Thermon First Quarter 2016 Earnings 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 follow at that time. [Operator Instructions] As a reminder this call is being recorded.

I would now like to turn the call over to Sarah Alexander, General Counsel. You may begin..

Thank you, Latoya. 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 also be available on our website after the conclusion of this earnings call. This broadcast is the property of Thermon. Any redistribution, retransmission or rebroadcast in any form without the express written consent of Thermon is 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 forms 10-K filed with the SEC on June 1st.

We also would like to advise you 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, revenue growth, profitability, leverage ratios, acquisition, acquisition related synergies 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.

We reconciled those items to the most comparable GAAP in the table at the end of the earnings press release. These non-GAAP measures should be considered in addition to, and not as a substitute for, measures of financial performance reported in accordance with GAAP.

Now it is my pleasure to turn the call over to Rodney Bingham, President and Chief Executive Officer..

Thank you, Sarah. Good morning, everyone. Thank you for joining our conference call and your continued interest in Thermon. Today we have two of our Senior Vice Presidents joining me on this earnings call. Jay Peterson, our CFO, will follow me and present the financial details of our FY-2016 first quarter.

Eric Reitler, our Senior VP of Global Sales, will assist in the Q&A session by answering questions that pertain to global market segments and our current industry trends. While Jay will discuss financial details of Q1 in a moment I would like to touch on some of the highlights of our first quarter. Q1 was an interesting quarter for Thermon.

Revenue was $65 million and that included a negative X impact of approximately $6 million as the US dollar strengthened again against the Euro, Russian and Canadian currencies. We do anticipate our historical trend of Q1 being our lowest quarter of the year to continue this fiscal year.

New orders were down year on year, but up sequentially over prior quarter by 22%. Our upstream revenue in the oil sands was the main contributing factor for this downward trend. The remainder of our global revenue was essentially on target for Q1. Our backlog of $76 million remained unchanged over the prior quarter despite the continued FX head winds.

Quotations were down over prior years Q1, but up over the last quarter. Our project pipeline of identified opportunities remain strong at $1.1 billion and was roughly 630 projects making up that total number. Our M&A pipeline continues to be very active. Just this morning we announced the acquisition of industrial process insulators.

This acquisition adds to our service capabilities in the US gulf coast and enhances our ability to deliver complete thermal solutions to more of our customers. Importantly, it will allow Thermon to sell more of our manufacture products and grow our install base. we are truly very excited about the synergies that this deal will provide.

Our plan is to continue our strategic investment initiatives that will launch new products and design software that will enhance our value proposition to customers. While we believe that FY-2016 will be a profitable year of investment our strategy is to have a new product and service platform in place for a growth year in FY-2017.

We still believe that the global demand for energy, chemicals and power will increase over the next several decades. We also believe that our customers will continue to make those investments that support those future increases in demand.

Lower oil and gas prices will help stimulate the downstream processing sector as well as power generation facilities construction. We are experiencing a contraction in our organic business in Canada. I would like to add that Canada is coming off a record year which creates a difficult comp heading into a tough year from a macro perspective.

Our other geographic areas are expected to perform at or above prior year's levels. This performance, along with the three acquisitions we have completed, is expected to offset the downturn in Canada. Our current FY-2016 revenue expectation is for mid-single digit growth.

This includes the contributions from our three recent acquisitions which will be approximately 10% to 12% of the total. We are actively managing costs while investing for future growth. We may experience near term pressure on EPS results and 2016.

Our management team would like to thank our employees throughout our global organization for their hard work and dedication, and we would also like to thank our customers, investors and advisors for their support and confidence. Thank you again for joining us today.

And now I would like to turn this over to Jay Peterson, our CFO, who will address the details of our financial performance for Q1..

Thank you, Rodney. Good morning. This morning I will discuss our first quarter financial results starting with top line revenue. Our revenue this past quartered totaled $65.2 million and that is a reported decrease of 4% relative to the prior year's quarter.

This decrease is attributable to the strong US dollar and reduced capital spend in the Canadian oil sands. It is important to note that our organic revenue totaled $60.6 million and excluding the $5.9 million FX head wind our organic revenue would have been flat at $66.5 million with the prior year.

Also excluding Canada, our organic revenue would have grown 4% year on year and that's unadjusted for currency. Orders for the quarter totaled $64 million relative to $52 million in Q4 of last year showing a sequential growth rate of 22% with all four major geographies showing double-digit order growth. Our backlog of orders ended June at $76 million.

That's $1 million higher than March of 2015. Also, our backlog was negatively impacted by over $7 million and that's a year on year measurement due to currency. Recall that typically only 40% of our orders are ever resident in our backlog. Turning to gross margins, margin dollars this past quarter totaled $31 million.

Compared to Q1 of fiscal year 2015, our margins decreased 290 basis points to 47.1%. This margin decrease was due to the 16% year on year growth in Greenfield revenues. With the US and Europe growing Greenfield revenues by 140% and 218% respectively. MRO/UE declined this past quarter by 13% due to reduced activity in the Canadian oil sands.

Turning to operating expense. Organic operating expenses for the quarter, and that is SG&A and excluding D&A, totaled $16.9 million down from the prior year level of $17.8 million. The number of full time employees at the end of June was 967, and that's up 14% from the head count reported one year ago.

The driver of this increase was the two recently announced acquisitions. In terms of interest expense and taxes our interest expense totaled $911,000 this last quarter versus $1.2 million a year ago and that is a decrease of 25%. Our effective tax rate for the quarter was 28.5%.

In terms of earnings GAAP net income totaled $4.4 million versus $11.5 million in Q1 of fiscal year 2014. Our GAAP EPS totaled $0.14 a share versus $0.36 a share in Q1 fiscal year 2016. And the combined effects of FX translation and transaction impacts reduced our EPS by $0.02 in Q1.

Our adjusted EPS amounted to $0.18 a share in the quarter and these $0.04 in adjustments relate to $1.4 million in contingent consideration, anticipated to be paid to the seller of Sumac Power Systems and a tax rate change on a deferred tax liability in Canada.

Our adjusted EBITDA totaled $14.1 million this past quarter below the prior year performance of $16.9 million. And EBITDA as a percent of revenue was 22% in Q1. As we previously disclosed, our two acquisitions, I would like to mention that both of them were EPS accretive in the first quarter.

In terms of our balance sheet, our cash balance was $79.4 million in Q1. That's an increase of $2.1 million year on year, and this is after paying down $14 million in debt and funding $15 million of cash into two acquisitions.

Leverage at the end of June on a net debt basis was near a historical low of .3x and that is down from approximately 4x in the last five years. CapEx amounted to a total of $3.7 million and that includes both expansion and sustaining capital. That's approximately 6% of revenue.

This percentage is higher than typical due to capital invested into our rental pool at Thermon power solutions and the recent expansion of our warehouse and two bundle operation here in San Marcos. And lastly, our conversion ratio is 95%, and this is consistent with fiscal year 2015's performance.

I would now like to turn the call back over to Latoya to moderate the question-and-answer session..

Thank you. [Operator Instructions] The first question is from Scott Graham from Jeffreys. Your line is open..

Good morning..

Good morning, Scott..

Several questions, thank you. You know, the view on your organic sales now seems to be obviously a lot different than we were two months ago. If you were looking at a slight decline in organic and if my numbers are correct here, I think you are kind of looking for somewhere between 8% and 10% decline in organic.

It sounds to me like it was all of the sands.

What information came to you in the last two months that said the sands would be so much worse than what it was two months ago?.

You're exactly right, Scott, on your comment. This is Eric to answer the question. We had a contraction of spending for the projects that were identified in the oil sands business. That was the number one factor to change that.

Number two, which is also very relevant factor going into, finishing Q1, and looking out with a vision for FY-16, is the FX impact associated with both of those. Both of those combined created a substantial head wind. It was building over the first quarter..

So you are saying this was a specific project or projects that were essentially eliminated from customer thinking?.

We won't go into details of exactly what's going on but our industry level data that we have on the macro level up stream and also total spend within Canada had indicated that we have a pullback reduction of 50% of capital spend in that particular market place.

We have seen that level of pull back associated with the spend, and then it has the correlation associated with the Canadian performance..

So you are minus 8% to 10% organic thinking for fiscal 2016 contemplates about a 50% decline in revenue in the sands is what I think I'm hearing you say?.

That is the macro level, industrial level information. We are not releasing specific numbers within the category, but that order of magnitude is overseeing contracting in the industry..

Fair enough. My next question is substantially similar because I know are you expecting within that guidance the US and rest of world outside Canada to be up I think I heard you say.

We have seen companies so far talk about, I should say last quarter, their backlogs were up and then they come to the second quarter only to realize that the customers pushed out those shipments.

How do you think through the potential for push outs of shipments that are on the books right now?.

From a global perspective and we just talked about Canada so let's talk about X-Canada. The positive side has been the downstream activity specifically on the refining petrochemical, chemical and power industry. Growth in those sectors, the eastern and western hemisphere.

If we look at, orders, backlog and revenue from quarter over quarter comparison, on the global basis, X-Canada, they were all positive and growing and that includes the FX head winds where applicable..

I am with you on that. The first quarter is the seasonal low point for all things industrial and oil and gas.

So I'm wondering how much meaning we should be ascribing to a sequential increase in orders?.

The near term quarters that we are seeing and this goes to macro trend about some of the Canadian oil spends. Much of the upstream business is pushed out into calendar 2016 and calendar 2017.

What we are seeing in the near term is the downstream activity in Canada and the eastern and western hemisphere basis, which is then a majority of the competition of orders and backlog..

Fair enough. Two other questions for you.

The MRO outlook for the rest of the year, should we see that improve? Be up its typical sort of low to mid-single?.

The nature of the business and the opportunity at hand on the downstream side is from the eastern and western hemisphere. We are seeing the activity within the industry spend and the CRM spend associated with Greenfield, Groundfield and - projects with that downstream activity.

If that remains strong then MRO business will be moderating compared to the opportunities on that side of the business. As you mentioned earlier, Q1 being historical low, we will see a positive bias for MRO business based on fluctuating weather conditions around the globe..

I am not so sure if I understand your answer fully.

Essentially in your modeling, are you expecting organic MRO to rise or not in fiscal 2016?.

We expect a mix of our gross margin to stay fairly constant between the 45% and 50% historical range and with the bias and what you have seen in the beginning of this FY-2016 to remain somewhat consistent going into the remainder of FY-16..

I was asking about MRO sales, but move on.

The acquisitions that you made, three acquisitions, should we expect them to be accretive to EPS in fiscal 2016?.

Yes, here is what we know so far, Scott, the first two acquisitions we have had under our belt 90 plus days. We are happy with their performance. No major surprises. Integration has gone well and both were EPS accretive.

We also believe our third acquisition announced this morning will also be EPS accretive in fiscal year 2016 and those integration efforts are underway as we speak..

Very good. Thanks a lot..

Thank you, Scott..

Thank you. The next question is from Jeff Hammond from KeyBanc Capital markets. Your line is open..

Hey, good morning, guys.

So if we could just go to the guidance, can you parse out what you think the FX head wind is for the full year based on current rates?.

Boy, we took a stab at that last 90 days and candidly the dollar strengthened dramatically since that period of time and going forward we are just going to manage our core business and hope our growth will continue and we will manage accordingly. Forecasting the rates is very difficult as you can imagine..

Right. I am not asking you to forecast as much as if you just take current rates, what that implies for FX head wind within that mid-single digit growth..

I am guessing from a revenue perspective it would be somewhere in the range of $15 million year on year..

That's helpful.

And then the acquisitions will contribute 10% to 12% of sales, so $31 million to $37 million?.

Yes..

Great.

And can you give us a sense of how much Canada was down this quarter and how much you think it is down for the year and, again, if you can parse that out between what's core and what's FX?.

Canada was down for the year 40%, okay? The FX component of that reduction was $1.4 million comparing to the budget, or to the FX rate of the year prior. In terms of the forward look I will ask Eric to comment on that..

On the forward look the industry spend data for calendar 2016 and calendar 2017 as well as our CRM and our customer contacts we have had, the consensus view at this moment is that the upstream business has all been pushed to the right or into mid calendar 2016, and the near term outlook is primarily associated with the downstream activities.

Since we are talking about Canada there are near term opportunities associated with downstream from petro chemical and chemical activities that we're seeing. The customers are getting more activity. In reference to the upstream, it's definitely pushed out at this moment to mid calendar 2016 and calendar 2017..

Helpful. And I think you mentioned gross margins came in at 47 and you said your range is 45 to 50.

Was the comment for stability that we stay in the 47% range or we stay within that 45% to 50% band?.

The timeless guidance we provided in the past is still appropriate. 45% with exposure upward from that number, Jeff..

Right. It seems like the preponderance of your challenges are on the MRO/UE side. Is that more of these smaller upgrade projects or are - really tightening down on the MRO? It seems like that piece would be maybe more resilient and less cyclically sensitive..

To answer the question, first of all, MRO, I think the business will follow the historical trends and guidance we have given in the past. The X factor this year is the UE, the upgrades and expansions, the smaller projects under a million dollars. I think that is under subject to more downward pressure this year than others..

So if we just take the MRO contracting and we take the fact that Canada is contracting and that's your highest margin segment, should that start to pressure us toward the 45 number?.

That would surely pressure you away from the 50. It still fits in the range of the timeless model we have given in the past. I hope that answers..

Finally what is a full year CapEx expectation?.

I am going to have to answer that in two different ways. Number one is we have this rental business in Sumac that is growing, it has shown very strong growth. It is also a new business for them so we don't have a lot of historicals in terms of how much capital we are going to invest in that.

We invested a little over a million in Q1, but we believe that number will grow through time. For the organic business, our 1% sustaining and 1% expansion is still a good number..

Can you just maybe get into that Sumac a little bit? What are you actually buying and renting out? What really drives that business?.

Temporary power systems constitute breakers for hazardous and non-hazardous areas. Switch the rack you are mounting them on, connectors, extension cords, everything associated with getting temporary power to the construction site areas where power tools are required. Mostly electrical distribution type equipment along with extension cords and so on.

That's a quick overview..

Great. Thanks, guys..

Thank you..

Thank you. The next question is from Brian Drab of William Blair. Your line is open..

We need to go back and sort out what the organic growth is, or decline is. Because from the previous two callers there I think people at this point feel like you just validated a down 8% to 10% organic revenue.

First, just to make sure the definition is clear when we are talking about organic revenue we are talking about revenue excluding acquisitions and excluding FX, right?.

Yes..

And when you give your total revenue guidance of mid-single digit growth, if we can just talk again about the three components that go into that, organic, acquisitions, FX.

Jay, you mentioned FX would be a negative $15 million which is about a 5-point head wind, right? Acquisitions we talked about as 10% to 12% of total revenue which works out to be 12 points of growth in fiscal 2016. So the plug there is a negative 2% for organic. Not negative 8% to 10%.

Is that right? If I take negative 2 plus 12 minus 5 for FX, plus 12 for acquisitions and minus five for FX, that gets me mid-single digit..

I am not certain I follow you, Brian..

You're giving guidance of revenue growth for mid-single digits. Let's call that 5, right? That's the number we need to get to. There are three components that go into that. Organic, acquisitions and FX. If acquisitions are a positive 12 and FX is a negative 5. We are at 7. The organic at negative two gets you down to a positive 5.

So the components are organic negative to, positive 12 and FX negative 5 and gets me mid-single digit nominal revenue growth..

Okay..

Can you value late that? I think there is confusion there. You didn't correct the first caller when he said you will be down 8% to 10% organically in fiscal 2016, but I don't know what math we are using to get to that kind of number..

Brian, this is Eric. We are trying to reconcile the numbers as you are going through them.

What is a comment prior to the 8% to 10% was that referencing FX head winds in that number?.

It wasn't clear. That's why I want to establish the definition first of all as organic means we are excluding acquisitions in FX as you seem to define in your press release..

I think that's the difference, and I appreciate you trying to clear. The previous number was referencing head winds in there associated with FX..

So he is including I guess the negative 5 points of FX and getting to negative 8 to 10..

The 5 points of FX that you are referencing and the estimate Jay just provided, and that is an estimate or guess. There are plenty of people that can probably provide a lot better information on that from a historical perspective as in the Q1 actuals for this call it was 9%. So if we have a run rate equivalent to Q1 it will be 9% total.

If we are expecting [indiscernible] some type of moderation, then maybe the 5% is a more accurate number. In that 5% to 9% range based on the current actuals and industry projection, that's the ballpark number which then probably offsets the 8% to 10% that you are referencing and then validates the numbers that you are compiling there..

Okay. But just to be clear here, if it was a 9% FX head wind and you are sticking with mid-single digit it would mean the organic is even stronger than what I am, than in the picture I am painting. Let's assume it is five.

If you are sticking with the mid-single digit, the conclusion here is that your organic revenue declined excluding acquisitions in FX is a low single digit number. Call it around 2%. That is actually the same organic revenue decline that you expected when you reported your fourth quarter results.

At that time you said down slightly in terms of organic revenue excluding acquisitions and FX.

So can I ask it another way? Are you forecasting a large or organic revenue decline today compared with the forecast that you gave us on the fourth quarter earnings call?.

Yes because we didn't have, we're holding guidance, but we didn't have the third M&A transaction contemplated at that time..

Right, I understand. Now you are getting another four or five points, right, from the acquisition, but you also layered in another three or four points, call it three points from FX. So it looks like your organic revenue forecast would be down a point or two..

Which is consistent with what happened in Q1..

I am saying it is down a point or two from your forecast that you gave us on the fourth quarter earnings report, is that fair? You have a slight downward revision of organic revenue growth or more meaningful than one or two points?.

No. No, I think we are on the same page, Brian..

Okay. That is really helpful. Thanks for talking through that. We started to talk about this, but just to be more specific, we talked about $20 million in projects that were pushed out from fiscal 2016 in the oil sands. I think the hope was that those would hit in fiscal 2017.

Has your view point on the $20 million specifically changed?.

The answer goes back to the industry trends and CRM data and customer meetings as soon as this past week associated with them. There is an expectation that spend will return in the 2016 calendar, 2017. That's what the industry is stacking up. That's where it is residing at this point. In the FY-2017 performance projections..

Thanks. I took enough of your time. I will get back in line. Thank you..

Thank you. The next question is from Katherine Thompson from Thompson Research Group. Your line is open..

Good morning. This is Steven Ramsey filling in for Katherine. I have just a couple of questions here.

First, can you share gross margins for each MRO at Greenfield?.

Gross margins are a range appropriate for modeling would be 30% to 40% and MRO/UE would be 50% to 60% which is good for a timeless model that fits in that range a large proportion of the time..

Are you able to share what they were for Q1?.

Typically we don't give that information out in terms of exact numbers..

But they are in those bracketed numbers..

Great. My next question just a couple on acquisitions.

Are you finding in the acquisitions you've made cost reductions or are you able to lower capital intensity for those? And alongside that do these acquisitions feed both into Greenfield and MRO, and would you expect that 60/40 split to stay the same as these acquisitions come into the business? Thank you..

In terms of synergies, all of the acquisitions are fairly new. We are still going through the integration process. It's a little early. Next earnings call we will have some more information than that. As we look at the acquisitions, we use $1 million, which is what we use to determine Greenfield projects.

The last acquisition would be the one that would have the highest Greenfield component. The others would be mostly MRO/UE's majority of their sales, like 90% plus..

Great. Thank you guys..

Thank you. The next question is from Jon Braatz from Kansas City Capital. Your line is open..

Good morning, gentlemen..

Good morning..

I was on the website of the latest acquisition industrial installation, and it looks like to me that they have a product line that is somewhat different than yours. There are some similarities.

Is there an ability for you to take some of their products and work with them with your customers? I am trying to get a better sense of what the combined companies might be able to do as one.

The second question is, as you talk to your customer base across all geographical areas, it seems as though oil prices, and I am not going to be a prognosticator, but it seems like oil prices want to go down a little bit more.

When you talk to your customers across all of these areas, is there a sense that, yeah, we have cut budgets a little more, but, hey, you never know what's going to happen.

We may cut them a little more because there seems to be additional downside pressure? I am trying to get a sense of what may be at the margin is there maybe some additional room for some cuts in the CapEx budgets of these companies?.

Your last question about, I just addressed that. Our answer is the same as the previous caller. We are still working on looking at synergies to these particular acquisitions, and we have not, you know, made a definitive position on that yet.

And your first question was, would you mind repeating that please?.

About the CapEx budgets of your customers. Is there a sense that maybe there is some additional cuts possible assuming oil prices continue to decline? I'm trying to get a sense that maybe you think we have seen the bottom..

Well, some of our customers especially in the oil sands they like to think they have hit the bottom. Their input to us is a little tentative especially those closest to the drill bit in believing that that point is being reached.

But we have customers getting away from North America for a little bit or getting away from Canada and the US people are still bullish on the downstream activity so they are a positive. They are not in cost-cutting mode. The people in the eastern hemisphere have a totally different outlook.

They believe this is a rebound year for them especially in the Middle East and Russian and Europe. It depends what geographical section you are talking about. So that's my answer to that one. The other one was the visit to the website of IPI. IPI is a business that is core to us. That's part of our core business.

In fact we perform the same service they do, but on a smaller scale. Their business model in terms of turnkey construction, what they would do is provide us a larger construction management and a larger insulation service component to our business. We are providing both of those now, but to the extent we have staffed for.

This particular company will increase significantly the amount of total turn key opportunities that presents ourselves, and the key with that to Thermon is our overall strategy is to install products we manufacture which puts us in a niche market or specialty contractor status that produces gross margins much higher than just contractor only organizations..

So the margin profile of the Company, would you estimate to be similar to the current core business?.

A two-part answer to that. New business they bring and the synergies of increased revenue, they would produce roughly the same margins we would. If they are working on a project together, this new entity, we would expand on the service component that would be a few percentage points less than a product..

Thank you very much..

Thank you..

[Operator Instructions] The next question is from Scott Graham of Jeffreys. Your line is open..

Hi, so I was the first caller, questioner. Let's make sure we have a good understanding here. The previous caller was correct because I was not contemplating your larger FX hit assumption. It seems to me that as I go back through last quarter's conference call, you were expecting organic growth of essentially down one-ish.

Total sales up mid-single as in plus five. FX minus two and acquisitions plus eight. Push is a minus one. Now you are still expecting mid-single on the total line, but it sounds like a $50 million hit to FX and that's a 5% hit to sales. Acquisitions are now 15% and that pushes an organic of minus 5.

Jay, does that scan with what you guys are thinking?.

No..

Where am I wrong here?.

First off, the FX number of 15, we'll use that for math purposes only, okay? It is a guess. Our best guess. Acquisition revenue will be somewhere north of $30 million, $35 million, okay? So if I'm down hypothetically $15 million on FX, I have acquisition revenue, let's say $37 million. I am projecting mid-single digits or $15 million.

That would say organic revenues down $7 million or 2%-ish..

So the assumption here is that, since we have had, the acquisition revenue's number if I add up the press releases, I booked it higher than that. But, if I'm wrong, I'm wrong. If you thinking organic is minus two, I think that's the answer we were trying to get to and I thank you for that. I do have one other question.

You know, you talked about the pipeline and you talked about the 630 projects, Rodney. If we were to look at those projects in terms of their timing, I know you track this as carefully as you can.

You use an outside service, but what percentage of those do you think have either been, or let's say versus last quarter when maybe some were canceled and some were added.

Maybe what percentage were canceled and what percentage now look like they have pushed to the right?.

First of all of the CRM and Eric can chime in because he is closer than I am. But we have seen little cancellations of projects.

We have seen some shifting out to the right, but as far as detail is concerned, Eric, can you add to that?.

It all depends on the benchmark, Scott, and when we actually are trying to say what moved out or talking about the near term or the far term.

Earlier comments in the conference call we had that the near term say for example FY-2016, the remaining three quarters we have for this current FY, we are seeing a number of projects building on the downstream side on the western and eastern hemisphere combined.

The upstream projects have been pushed out to the right to the calendar year 2016 and 2017, but they are stacking up to be very large projects and opportunities as the global and economic situation about oil prices that will dictate moving forward. The upstream side of the business primarily in Canada has been moved out to calendar 2016, 2017.

The downstream side of the business on a global basis is building the profile for FY-2016 and FY-2017..

Scott, if those projects, for clarity, if they have been lost, sold or canceled, they are off the list. They are not in the 1.1. They are not in the 630 projects. I just want to clarify that..

So your optimism about spending on a go forward basis which I think a lot of people share by the way is that this is really a very real pipeline. There have been very few cancellations.

Some shifts to the right, but over time you will have dibs or you will have opportunities to book a lot of this business?.

Yes, that's correct..

Do the acquisitions that you've made provide you more of an enabler to book the business?.

Yes..

Why?.

Would you repeat the question again?.

I just wanted to make sure that the acquisitions are being built here to in part add to the business and the accretion to earnings and all of that good stuff. This pipeline is something we've been talking about for quite some time and is sort of this carrot that is out there.

Are these acquisitions in part a function of monetizing some of that pipeline?.

My answer to the question is still yes. And for clarity purposes the main one of the three is the last one, IPI, and that extends our capability and our reach in turn key eTracing systems. Which, again, the part of that part of our story since we have become public and that drives the install base increase for us which relieves some MRO/UE.

So, the acquisition of industrial process insulators gives us additional capability and additional coverage and reach that we have not had prior to the acquisition..

Very good. Thanks for your guys' time..

Thanks, Scott..

Thank you. There are no further questions in queue at this time. I will turn the call back over for closing remarks..

Again, thank everybody for the attending and their interest in Thermon. We look forward to seeing you in the next earnings call. Thank you..

Ladies and gentlemen, this concludes today's conference you may now disconnect. Good day..