UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  January 9, 2012

 

Mistras Group, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

001- 34481

 

22-3341267

(State or other jurisdiction

 

(Commission

 

(IRS Employer

of incorporation)

 

File Number)

 

Identification No.)

 

195 Clarksville Road

 

 

Princeton Junction, New Jersey

 

08550

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (609) 716-4000

 

Not Applicable
(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

 

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d 2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02.  Results of Operations and Financial Condition

 

On January 9, 2012, Mistras Group, Inc. (the “Company,” “we” or “us”) issued a press release announcing the financial results for its second quarter of fiscal year 2012, which ended November 30, 2011.  A copy of the press release is attached as Exhibit 99.1 to this report.

 

Disclosure of Non-GAAP Financial Measures

 

In the press release attached, the Company uses the term “Adjusted EBITDA,” which is not a measurement of financial performance under U.S. generally accepted accounting principles (“GAAP”).  “Adjusted EBITDA” is defined as net income plus: interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, and, as applicable, certain acquisition related costs and certain one-time and generally non-recurring items (which items are described or listed in the reconciliation table included in the press release).

 

Our management uses Adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis, as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations.  Adjusted EBITDA is also a performance evaluation metric used to determine incentive compensation for executives and employees.

 

We believe investors and other users of our financial statements benefit from the presentation of Adjusted EBITDA in evaluating our operating performance because it provides an additional tool to compare our operating performance on a consistent basis and measure underlying trends and results in our business.  Adjusted EBITDA removes the impact of certain items that management believes do not directly reflect our core operations.  For instance, Adjusted EBITDA generally excludes interest expense, taxes and depreciation and amortization, each of which can vary substantially from company to company depending upon accounting methods and the book value and age of assets, capital structure, capital investment cycles and the method by which assets were acquired.  It also eliminates stock-based compensation, which is a non-cash expense and is excluded by management when evaluating the underlying performance of our business operations.

 

While Adjusted EBITDA is a term and financial measurement commonly used by investors and securities analysts, it has limitations.  As a non-GAAP measurement, Adjusted EBITDA has no standard meaning and, therefore, may not be comparable with similar measurements for other companies.  Adjusted EBITDA is generally limited as an analytical tool because it excludes charges and expenses we do incur as part of our operations.  For example, Adjusted EBITDA excludes income taxes, but we generally incur significant U.S. federal, state and foreign income taxes each year and the provision for income taxes is a necessary cost.  Adjusted EBITDA should not be considered in isolation or as a substitute for analyzing our results as reported under U.S. generally accepted accounting principles.

 

Item 9.01.  Financial Statement and Exhibits

 

(d)  Exhibits

 

99.1                           Press release issued by Mistras Group, Inc. dated January 9, 2012.

 

2



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

MISTRAS GROUP, INC.

 

 

 

 

 Date: January 9, 2012

By:

/s/ Michael C. Keefe

 

 

Name:

Michael C. Keefe

 

 

Title:

Executive Vice President, General Counsel and Secretary

 

 

Exhibit No.

 

Description

99.1

 

Press release issued by Mistras Group, Inc. dated January 9, 2012

 

3


 

Exhibit 99.1

 

Mistras Group’s Second Quarter Results Demonstrate Continued Strong Growth in Revenue and Profit.

 

Revenue and Adjusted EBITDA* increase 29%, EPS increases 33%; Company raises guidance

 

PRINCETON JUNCTION, N.J., Jan. 9, 2012 (GLOBE NEWSWIRE) — Mistras Group, Inc. (NYSE:MG - News), a leading “one source” global provider of technology-enabled asset protection solutions, today reported financial results for the fiscal 2012 second quarter ending November 30, 2011. Revenue for the second quarter was $114.2 million, an increase of 29%, over the $88.8 million reported in the second quarter of fiscal 2011. Adjusted EBITDA*, a non-GAAP measure detailed later in this release, increased 29% to $20.6 million in the second quarter of fiscal 2012 versus $15.9 million in the second quarter of fiscal 2011. Net income for the second quarter of fiscal 2012 grew by 40% to $8.0 million, or $0.28 per diluted share, versus $5.7 million, or $0.21 per diluted share, in the second quarter of fiscal 2011. During the quarter the Company recorded a $0.3 million pre-tax benefit from acquisition related activities which increased diluted earnings per share by approximately $0.01.

 

Consistent with prior quarters, organic growth contributed the bulk of the revenue gain. In the second quarter of fiscal 2012 the organic growth rate was 19%, followed by acquisition growth of 9% and the balance due to foreign currency fluctuations.  Also consistent with prior quarters, the second quarter revenue gain was achieved across a broad range of target markets.

 

Additional Financial Highlights for the Fiscal 2012 second quarter and 6 month period:

 

·                  In the first six months of fiscal 2012, revenues grew by 31% to $205.7 million, adjusted EBITDA grew by 33% to $32.5 million, and net income grew by 54% to $11.2 million, or $0.39 per diluted share.

·                  Operating income margins rose in both the second quarter and the first six months of fiscal 2012, increasing to 9.7% of revenues in the first six months of fiscal 2012, versus 8.6% in the prior year.

·                  SG&A as a percent of revenues declined in both the second quarter and first six months of fiscal 2012, declining to 18.8% of revenues in the first six months of fiscal 2012, versus 19.8 % in the prior year.

·                  After the quarter close, the Company replaced its existing revolving credit facility with a new five-year, $125.0 million facility which matures in December 2016.

 



 

Chairman and Chief Executive Officer Dr. Sotirios J. Vahaviolos stated that “I am pleased with the momentum of our business in the second quarter, as we achieved new highs in Revenue, Adjusted EBITDA, Net Income and EPS.  Once again, our 19% organic revenue growth rate was a significant driver behind our results”.

 

Business Outlook/Guidance for Fiscal Year 2012

 

The Company’s outlook is for continued double digit growth in revenue and Adjusted EDITDA*. Based on the results of the first six months of fiscal 2012, the Company is raising its previously issued guidance and now projects its fiscal 2012 revenues to be in the range of $400 million to $415 million, up from the previous range of $375 million to $390 million, and Adjusted EBITDA* to be in the range of $64 million to $68 million, up from the previous range of $59 million to $64 million. Mistras does not provide specific guidance for individual quarters, but will reaffirm or update its annual guidance at least quarterly.

 

Dr. Vahaviolos concluded “We are pleased with the positive developments that we have seen in many of our end markets thus far in the year and we expect that our unique approach of providing ‘One Source Asset Protection Solutions’ to our customers will continue to receive broad acceptance worldwide for the remainder of this year and beyond.”

 

Earnings Conference Call

 

In connection with this earnings release, Mistras will hold its quarterly conference call on Monday, January 9, 2012 at 9:00 a.m. (Eastern). The call will be broadcast over the Web and can be accessed on Mistras’ Website, www.mistrasgroup.com. Individuals in the U.S. wishing to participate in the conference call by phone may call 1-866-730-5762 and use confirmation code 47865317 when prompted. The International dial-in number is 1-857-350-1586.

 

About Mistras Group, Inc.

 

Mistras offers one of the broadest “one source” services and technology-enabled asset protection solution portfolios in the industry used to evaluate the structural integrity of energy, industrial and public infrastructure. Mission critical services and solutions are delivered globally and provide customers with the ability to extend the useful life of their assets, improve productivity and profitability, comply with government safety and environmental regulations and enhance risk management operational decisions.

 

Mistras uniquely combines its industry leading products and technologies - 24/7 on-line monitoring of critical assets; mechanical integrity (“MI”) and non-destructive testing (“NDT”) services; and its proprietary world class data warehousing and analysis software - to provide comprehensive and competitive products, systems and services solutions from a single source provider.

 



 

For more information, please visit the company’s website at www.mistrasgroup.com or contact Frank Joyce, Chief Financial Officer at 609-716-4103.

 

Forward-Looking and Cautionary Statements

 

Certain statements made in this press release are “forward-looking statements” about Mistras’ financial results and estimates, products and services, business model, strategy, growth opportunities, profitability and competitive position. These forward-looking statements generally use words such as “future,” “possible,” “potential,” “targeted,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict,” “project,” “will,” “may,” “should,” “could,” “would” and other similar words and phrases.  Such statements are not guarantees of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved, if at all.  These statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in these statements.  A list, description and discussion of these and other risks and uncertainties can be found in the “Risk Factors” section of the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on August 12, 2011, as updated by the Company’s reports on Form 10-Q and Form 8-K. The forward-looking statements are made as of the date hereof, and Mistras undertakes no obligation to update such statements as a result of new information, future events or otherwise.

 


* Use of Non-GAAP Measures

 

The term “Adjusted EBITDA” is a financial measurement not calculated in accordance with U.S. generally accepted accounting principles.  The Company believes that investors and other users of the financial statements benefit from the presentation of Adjusted EBITDA because it provides an additional metric to compare the Company’s operating performance on a consistent basis and measure underlying trends and results of the Company’s business.  A reconciliation of Adjusted EBITDA to a financial measurement under GAAP is set forth in a table attached to this press release.

 



 

Mistras Group, Inc.

Unaudited Consolidated Balance Sheets

(in thousands, except share data)

 

 

 

November 30, 2011

 

May 31, 2011

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

 

$

5,319

 

$

10,879

 

Restricted cash

 

3,700

 

 

Accounts receivable, net

 

102,782

 

78,031

 

Inventories, net

 

10,997

 

9,830

 

Deferred income taxes

 

1,280

 

1,278

 

Prepaid expenses and other current assets

 

8,305

 

6,761

 

Total current assets

 

132,383

 

106,779

 

Property, plant and equipment, net

 

54,216

 

49,168

 

Intangible assets, net

 

27,826

 

27,304

 

Goodwill

 

71,814

 

64,146

 

Other assets

 

1,323

 

1,240

 

Total assets

 

$

287,562

 

$

248,637

 

 

 

 

 

 

 

LIABILITIES, PREFERRED STOCK AND EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Current portion of long-term debt

 

$

5,733

 

$

7,226

 

Current portion of capital lease obligations

 

6,339

 

5,853

 

Accounts payable

 

6,171

 

6,656

 

Accrued expenses and other current liabilities

 

33,118

 

28,028

 

Income taxes payable

 

1,925

 

2,825

 

Total current liabilities

 

53,286

 

50,588

 

Long-term debt, net of current portion

 

34,191

 

14,625

 

Obligations under capital leases, net of current portion

 

12,283

 

9,623

 

Deferred income taxes

 

2,916

 

2,863

 

Other long-term liabilities

 

3,702

 

3,452

 

Total liabilities

 

106,378

 

81,151

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

Preferred stock, 10,000,000 shares authorized

 

 

 

Equity

 

 

 

 

 

Common stock, $0.01 par value, 200,000,000 shares authorized, 27,916,036 and 27,667,122 shares issued and outstanding as of November 30, 2011 and May 31, 2011, respectively

 

279

 

277

 

Additional paid-in capital

 

184,553

 

180,594

 

Accumulated deficit

 

(2,833

)

(14,017

)

Accumulated other comprehensive (loss) income

 

(1,065

)

303

 

Total Mistras Group, Inc. stockholders’ equity

 

180,934

 

167,157

 

Noncontrolling interest

 

250

 

329

 

Total equity

 

181,184

 

167,486

 

Total liabilities, preferred stock and equity

 

$

287,562

 

$

248,637

 

 



 

Mistras Group, Inc.

Unaudited Consolidated Statement of Operations

(in thousands, except per share data)

 

 

 

Three months ended November 30,

 

Six months ended November 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Revenues:

 

 

 

 

 

 

 

 

 

Services

 

$

103,942

 

$

82,953

 

$

186,844

 

$

144,205

 

Products

 

10,278

 

5,884

 

18,823

 

13,042

 

Total revenues

 

114,220

 

88,837

 

205,667

 

157,247

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

Cost of services

 

71,047

 

55,667

 

127,934

 

97,058

 

Cost of products sold

 

4,216

 

2,067

 

7,856

 

5,344

 

Depreciation related to services

 

3,556

 

3,136

 

6,879

 

5,945

 

Depreciation related to products

 

186

 

159

 

363

 

314

 

Total cost of revenues

 

79,005

 

61,029

 

143,032

 

108,661

 

Gross profit

 

35,215

 

27,808

 

62,635

 

48,586

 

Selling, general and administrative expenses

 

19,378

 

15,615

 

38,759

 

31,094

 

Research and engineering

 

602

 

569

 

1,191

 

1,124

 

Depreciation and amortization

 

1,503

 

1,326

 

2,982

 

2,504

 

Acquisition-related costs

 

(339

)

 

(339

)

 

Legal reserve

 

 

101

 

 

351

 

Income from operations

 

14,071

 

10,197

 

20,042

 

13,513

 

Other expenses

 

 

 

 

 

 

 

 

 

Interest expense

 

1,145

 

671

 

1,806

 

1,361

 

Income before provision for income taxes

 

12,926

 

9,526

 

18,236

 

12,152

 

Provision for income taxes

 

5,008

 

3,818

 

7,124

 

4,872

 

Net income

 

7,918

 

5,708

 

11,112

 

7,280

 

Net loss (income) attributable to noncontrolling interests, net of taxes

 

38

 

(30

)

72

 

(10

)

Net income attributable to Mistras Group, Inc.

 

$

7,956

 

$

5,678

 

$

11,184

 

$

7,270

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

$

0.21

 

$

0.40

 

$

0.27

 

Diluted

 

$

0.28

 

$

0.21

 

$

0.39

 

$

0.27

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

27,786

 

26,665

 

27,731

 

26,664

 

Diluted

 

28,600

 

26,816

 

28,417

 

26,795

 

 



 

Mistras Group, Inc.

Unaudited Operating Data by Segment

(in thousands)

 

 

 

Three months ended November 30,

 

Six months ended November 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

Services

 

$

96,909

 

$

76,108

 

$

172,598

 

$

131,390

 

Products and Systems

 

9,092

 

5,228

 

16,605

 

10,538

 

International

 

11,857

 

9,350

 

21,630

 

18,390

 

Corporate and eliminations

 

(3,638

)

(1,849

)

(5,166

)

(3,071

)

 

 

$

114,220

 

$

88,837

 

$

205,667

 

$

157,247

 

 

 

 

Three months ended November 30,

 

Six months ended November 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

 

 

Services

 

$

27,053

 

$

21,753

 

$

47,361

 

$

36,754

 

Products and Systems

 

4,263

 

2,821

 

8,014

 

5,390

 

International

 

4,246

 

3,260

 

7,677

 

6,531

 

Corporate and eliminations

 

(347

)

(26

)

(417

)

(89

)

 

 

$

35,215

 

$

27,808

 

$

62,635

 

$

48,586

 

 



 

Mistras Group, Inc.

Unaudited Reconciliation of

Net Income Attributable to Mistras Group, Inc. to EBITDA and Adjusted EBITDA

(in thousands)

 

 

 

Three months ended November 30,

 

Six months ended November 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

EBITDA and Adjusted EBITDA data

 

 

 

 

 

 

 

 

 

Net income attributable to Mistras Group, Inc.

 

$

7,956

 

$

5,678

 

$

11,184

 

$

7,270

 

Interest expense

 

1,145

 

671

 

1,806

 

1,361

 

Provision for income taxes

 

5,008

 

3,818

 

7,124

 

4,872

 

Depreciation and amortization

 

5,245

 

4,621

 

10,224

 

8,763

 

EBITDA

 

$

19,354

 

$

14,788

 

$

30,338

 

$

22,266

 

Stock Compensation

 

1,545

 

1,047

 

2,547

 

1,776

 

Acquisition-related costs

 

(339

)

 

(339

)

 

Legal reserve

 

 

101

 

 

351

 

Adjusted EBITDA

 

$

20,560

 

$

15,936

 

$

32,546

 

$

24,393