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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020
 
Or
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 001-34481

Mistras Group, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware 22-3341267
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
   
195 Clarksville Road
Princeton Junction,New Jersey 08550
(Address of principal executive offices) (Zip Code)
 
(609) 716-4000

(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, $0.01 par valueMGNew 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.
ý Yes  o No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
ý 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 filer
o 
Accelerated filer
x
Non-accelerated filer
o 
Smaller reporting company
 Emerging Growth Company
 
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).
 Yes  ý No


As of July 31, 2020, the registrant had 29,110,362 shares of common stock outstanding.



Table of Contents
TABLE OF CONTENTS
 
 PAGE
 
  
 
    
  
    
  
Unaudited Condensed Consolidated Statements of Income (Loss) for the three and six months ended June 30, 2020 and June 30, 2019
    
  
    
Unaudited Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2020 and June 30, 2019
  
    
  
    
 
    
 
    
 
  
 
  
 
    
 
    
 
    
 
    
 
    
 
    
 
  
 
i

Table of Contents
PART I—FINANCIAL INFORMATION
 
ITEM 1. Financial Statements
 


Mistras Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

June 30, 2020December 31, 2019
ASSETS(unaudited) 
Current Assets  
Cash and cash equivalents$22,588  $15,016  
Accounts receivable, net103,698  135,997  
Inventories14,267  13,413  
Prepaid expenses and other current assets13,045  14,729  
Total current assets153,598  179,155  
Property, plant and equipment, net93,238  98,607  
Intangible assets, net70,848  109,537  
Goodwill199,277  282,410  
Deferred income taxes1,781  1,786  
Other assets48,936  48,383  
Total assets$567,678  $719,878  
LIABILITIES AND EQUITY  
Current Liabilities  
Accounts payable$8,239  $15,033  
Accrued expenses and other current liabilities77,308  81,389  
Current portion of long-term debt8,735  6,593  
Current portion of finance lease obligations3,642  4,131  
Income taxes payable2,569  2,094  
Total current liabilities100,493  109,240  
Long-term debt, net of current portion230,661  248,120  
Obligations under finance leases, net of current portion11,964  13,043  
Deferred income taxes6,574  21,290  
Other long-term liabilities41,523  42,163  
Total liabilities391,215  433,856  
Commitments and contingencies
Equity  
Preferred stock, 10,000,000 shares authorized
    
Common stock, $0.01 par value, 200,000,000 shares authorized, 29,110,362 and 28,945,472 shares issued
291  289  
Additional paid-in capital231,724  229,205  
Retained earnings (deficit)(23,552) 77,613  
Accumulated other comprehensive loss(32,172) (21,285) 
Total Mistras Group, Inc. stockholders’ equity176,291  285,822  
Non-controlling interests172  200  
Total equity176,463  286,022  
Total liabilities and equity$567,678  $719,878  
 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income (Loss)
(in thousands, except per share data)

 Three months ended June 30,Six months ended June 30,
 2020201920202019
  
Revenue$124,435  $200,616  $283,900  $377,403  
Cost of revenue77,954  135,063  191,278  257,480  
Depreciation5,323  5,482  10,820  10,978  
Gross profit41,158  60,071  81,802  108,945  
Selling, general and administrative expenses37,607  41,923  79,165  83,686  
Bad debt provision (benefit) for troubled customers, net of recoveries  (2,693)   2,798  
Impairment charges    106,062    
Pension withdrawal expense      534  
Research and engineering708  754  1,532  1,611  
Depreciation and amortization3,207  4,119  7,177  8,291  
Acquisition-related expense (benefit), net19  549  (523) 1,002  
Income (loss) from operations(383) 15,419  (111,611) 11,023  
Interest expense2,976  3,579  5,765  7,106  
Income (loss) before provision (benefit) for income taxes(3,359) 11,840  (117,376) 3,917  
Provision (benefit) for income taxes(694) 4,397  (16,189) 1,760  
Net income (loss)(2,665) 7,443  (101,187) 2,157  
Less: Net income (loss) attributable to non-controlling interests, net of taxes(9) 12  (22) 19  
Net income (loss) attributable to Mistras Group, Inc.$(2,656) $7,431  $(101,165) $2,138  
Earnings (loss) per common share:  
Basic$(0.09) $0.26  $(3.49) $0.07  
Diluted$(0.09) $0.26  $(3.49) $0.07  
Weighted-average common shares outstanding:  
Basic29,085  28,657  29,024  28,616  
Diluted29,085  28,862  29,024  28,918  
 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
 
 Three months ended June 30,Six months ended June 30,
 2020201920202019
Net income (loss)$(2,665) $7,443  $(101,187) $2,157  
Other comprehensive income (loss):  
Foreign currency translation adjustments6,122  3,649  (10,887) 5,780  
Comprehensive income (loss)3,457  11,092  (112,074) 7,937  
Less: comprehensive income (loss) attributable to non-controlling interest(9) 10  (28) 19  
Comprehensive income (loss) attributable to Mistras Group, Inc.$3,466  $11,082  $(112,046) $7,918  
 
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Equity
(in thousands)
Three months ended
Common StockAdditional
paid-in capital
Retained
earnings
(deficit)
Accumulated
other
comprehensive income (loss)
Total
Mistras Group,
Inc.
Stockholders’ Equity
Noncontrolling Interest 
SharesAmountTotal Equity
Balance at March 31, 202029,042  $290  $230,472  $(20,896) $(38,294) $171,572  $181  $171,753  
Net loss—  —  —  (2,656) —  (2,656) (9) (2,665) 
Other comprehensive income, net of tax—  —  —  —  6,122  6,122  —  6,122  
Share-based payments—  —  1,373  —  —  1,373  —  1,373  
Net settlement of restricted stock units68  1  (121) —  —  (120) —  (120) 
Balance at June 30, 202029,110  $291  $231,724  $(23,552) $(32,172) $176,291  $172  $176,463  
Balance at March 31, 201928,627  $286  $227,790  $66,260  $(25,426) $268,910  $186  $269,096  
Net income—  —  —  7,431  —  7,431  12  7,443  
Other comprehensive income, net of tax—  —  —  —  3,649  3,649  (2) 3,647  
Share-based payments58  —  1,490  —  —  1,490  —  1,490  
Net settlement of restricted stock units—  —  (397) —  —  (397) —  (397) 
Balance at June 30, 201928,685  $286  $228,883  $73,691  $(21,777) $281,083  $196  $281,279  



Six months ended
Common StockAdditional paid-in capitalRetained earnings (deficit)Accumulated other comprehensive income (loss)Total Mistras Group, Inc. Stockholders’ EquityNoncontrolling Interest
SharesAmountTotal Equity
Balance at December 31, 201928,945  $289  $229,205  $77,613  $(21,285) $285,822  $200  $286,022  
Net loss—  —  —  (101,165) —  (101,165) (22) (101,187) 
Other comprehensive income, net of tax—  —  —  —  (10,887) (10,887) (6) (10,893) 
Share-based payments—  —  2,798  —  —  2,798  —  2,798  
Net settlement of restricted stock units165  2  (279) —  —  (277) —  (277) 
Balance at June 30, 202029,110  $291  $231,724  $(23,552) $(32,172) $176,291  $172  $176,463  
Balance at December 31, 201828,563  $285  $226,616  $71,553  $(27,557) $270,897  $177  $271,074  
Net income—  —  —  2,138  —  2,138  19  2,157  
Other comprehensive income, net of tax—  —  —  —  5,780  5,780  —  5,780  
Share-based payments119  1  2,916  —  —  2,917  —  2,917  
Net settlement of restricted stock units—  —  (681) —  —  (681) —  (681) 
Exercise of stock options3  —  32  —  —  32  —  32  
Balance at June 30, 201928,685  $286  $228,883  $73,691  $(21,777) $281,083  $196  $281,279  

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands
 Six months ended June 30,
 20202019
Cash flows from operating activities  
Net income (loss)$(101,187) $2,157  
Adjustments to reconcile net loss to net cash provided by operating activities  
Depreciation and amortization17,997  19,269  
Impairment charges106,062    
Deferred income taxes(14,327) 420  
Share-based compensation expense2,740  2,867  
Bad debt provision for troubled customers, net of recoveries  2,798  
Fair value adjustments to contingent consideration (523) 672  
Foreign currency (gain) loss1,067  (1,218) 
Other1,179  (395) 
Changes in operating assets and liabilities, net of effect of acquisitions and dispositions 
Accounts receivable30,228  (8,792) 
Inventories(1,300) (594)