SEC Filing | Mistras Group, Inc.

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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


☐			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 class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

New 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

Accelerated filer

Non-accelerated filer

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

PART I—FINANCIAL INFORMATION

ITEM 1.

Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2020 (unaud ited) and December 31, 2019

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 Comprehensive 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

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and June 30, 2019

Notes to Unaudited Condensed Consolidated Financial Statements

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

ITEM 4

Controls and Procedures

PART II—OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

ITEM 3.

Defaults Upon Senior Securities

ITEM 4.

Mine Safety Disclosures

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, 2020		December 31, 2019
ASSETS	(unaudited)
Current Assets
Cash and cash equivalents	$	22,588	$	15,016
Accounts receivable, net	103,698		135,997
Inventories	14,267		13,413
Prepaid expenses and other current assets	13,045		14,729
Total current assets	153,598		179,155
Property, plant and equipment, net	93,238		98,607
Intangible assets, net	70,848		109,537
Goodwill	199,277		282,410
Deferred income taxes	1,781		1,786
Other assets	48,936		48,383
Total assets	$	567,678	$	719,878
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	8,239	$	15,033
Accrued expenses and other current liabilities	77,308		81,389
Current portion of long-term debt	8,735		6,593
Current portion of finance lease obligations	3,642		4,131
Income taxes payable	2,569		2,094
Total current liabilities	100,493		109,240
Long-term debt, net of current portion	230,661		248,120
Obligations under finance leases, net of current portion	11,964		13,043
Deferred income taxes	6,574		21,290
Other long-term liabilities	41,523		42,163
Total liabilities	391,215		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 capital	231,724		229,205
Retained earnings (deficit)	(23,552)		77,613
Accumulated other comprehensive loss	(32,172)		(21,285)
Total Mistras Group, Inc. stockholders’ equity	176,291		285,822
Non-controlling interests	172		200
Total equity	176,463		286,022
Total liabilities and equity	$	567,678	$	719,878

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

Table of Contents

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,
	2020		2019		2020		2019

Revenue	$	124,435	$	200,616	$	283,900	$	377,403
Cost of revenue	77,954		135,063		191,278		257,480
Depreciation	5,323		5,482		10,820		10,978
Gross profit	41,158		60,071		81,802		108,945
Selling, general and administrative expenses	37,607		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 engineering	708		754		1,532		1,611
Depreciation and amortization	3,207		4,119		7,177		8,291
Acquisition-related expense (benefit), net	19		549		(523)		1,002
Income (loss) from operations	(383)		15,419		(111,611)		11,023
Interest expense	2,976		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:
Basic	29,085		28,657		29,024		28,616
Diluted	29,085		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,
	2020		2019		2020		2019

Net income (loss)	$	(2,665)	$	7,443	$	(101,187)	$	2,157
Other comprehensive income (loss):
Foreign currency translation adjustments	6,122		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 Stock					Additional paid-in capital		Retained earnings (deficit)		Accumulated other comprehensive income (loss)		Total Mistras Group, Inc. Stockholders’ Equity		Noncontrolling Interest
	Shares	Amount														Total Equity

Balance at March 31, 2020	29,042	$	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 units	68	1		(121)		—		—		(120)		—		(120)

Balance at June 30, 2020	29,110	$	291	$	231,724	$	(23,552)	$	(32,172)	$	176,291	$	172	$	176,463

Balance at March 31, 2019	28,627	$	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 payments	58	—		1,490		—		—		1,490		—		1,490
Net settlement of restricted stock units	—	—		(397)		—		—		(397)		—		(397)


Balance at June 30, 2019	28,685	$	286	$	228,883	$	73,691	$	(21,777)	$	281,083	$	196	$	281,279


	Six months ended
	Common Stock					Additional paid-in capital		Retained earnings (deficit)		Accumulated other comprehensive income (loss)		Total Mistras Group, Inc. Stockholders’ Equity		Noncontrolling Interest
	Shares	Amount														Total Equity

Balance at December 31, 2019	28,945	$	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 units	165	2		(279)		—		—		(277)		—		(277)


Balance at June 30, 2020	29,110	$	291	$	231,724	$	(23,552)	$	(32,172)	$	176,291	$	172	$	176,463

Balance at December 31, 2018	28,563	$	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 payments	119	1		2,916		—		—		2,917		—		2,917
Net settlement of restricted stock units	—	—		(681)		—		—		(681)		—		(681)

Exercise of stock options	3	—		32		—		—		32		—		32
Balance at June 30, 2019	28,685	$	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,
	2020		2019

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 amortization	17,997		19,269
Impairment charges	106,062		—
Deferred income taxes	(14,327)		420
Share-based compensation expense	2,740		2,867
Bad debt provision for troubled customers, net of recoveries	—		2,798
Fair value adjustments to contingent consideration	(523)		672
Foreign currency (gain) loss	1,067		(1,218)

Other	1,179		(395)
Changes in operating assets and liabilities, net of effect of acquisitions and dispositions
Accounts receivable	30,228		(8,792)
Inventories	(1,300)		(594)