Mistras (US:MG)2020-08-08 01:00PART I—FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Mistras Group, Inc. ITEM 1. Financial Statements This section presents unaudited condensed consolidated financial statements, reflecting significant impacts from COVID-19 and oil price volatility Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at June 30, 2020, and December 31, 2019 | Metric | June 30, 2020 ($k) | December 31, 2019 ($k) | | :------------------------ | :------------------- | :--------------------- | | Total Assets | 567,678 | 719,878 | | Total Liabilities | 391,215 | 433,856 | | Total Equity | 176,463 | 286,022 | Unaudited Condensed Consolidated Statements of Income (Loss) This section presents the company's revenue and net income (loss) for the three and six months ended June 30, 2020 and 2019 Three Months Ended June 30 | Metric | Three months ended June 30, 2020 ($k) | Three months ended June 30, 2019 ($k) | | :--------------------------------------- | :------------------------------------ | :------------------------------------ | | Revenue | 124,435 | 200,616 | | Net income (loss) | (2,665) | 7,443 | | Basic EPS | (0.09) | 0.26 | | Diluted EPS | (0.09) | 0.26 | Six Months Ended June 30 | Metric | Six months ended June 30, 2020 ($k) | Six months ended June 30, 2019 ($k) | | :--------------------------------------- | :---------------------------------- | :---------------------------------- | | Revenue | 283,900 | 377,403 | | Net income (loss) | (101,187) | 2,157 | | Basic EPS | (3.49) | 0.07 | | Diluted EPS | (3.49) | 0.07 | | Impairment charges | 106,062 | — | Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the company's comprehensive income (loss) for the three and six months ended June 30, 2020 and 2019 Three Months Ended June 30 | Metric | Three months ended June 30, 2020 ($k) | Three months ended June 30, 2019 ($k) | | :--------------------------------------- | :------------------------------------ | :------------------------------------ | | Net income (loss) | (2,665) | 7,443 | | Comprehensive income (loss) | 3,457 | 11,092 | Six Months Ended June 30 | Metric | Six months ended June 30, 2020 ($k) | Six months ended June 30, 2019 ($k) | | :--------------------------------------- | :---------------------------------- | :---------------------------------- |\ | Net income (loss) | (101,187) | 2,157 | | Comprehensive income (loss) | (112,074) | 7,937 | Unaudited Condensed Consolidated Statements of Equity This section outlines changes in the company's total equity for the six months ended June 30, 2020 and 2019 Total Equity | Metric | June 30, 2020 ($k) | June 30, 2019 ($k) | | :-------------------- | :----------------- | :----------------- | | Total Equity | 176,463 | 281,279 | - Net loss attributable to Mistras Group, Inc. for the six months ended June 30, 2020, was $(101,165)k, compared to net income of $2,138k for the same period in 201920 Unaudited Condensed Consolidated Statements of Cash Flows This section details the company's cash flows from operating, investing, and financing activities for the six months ended June 30, 2020 and 2019 Cash Flow Activities | Cash Flow Activity | Six months ended June 30, 2020 ($k) | Six months ended June 30, 2019 ($k) | | :--------------------------------------- | :---------------------------------- | :---------------------------------- | | Net cash provided by operating activities | 34,862 | 21,105 | | Net cash used in investing activities | (7,248) | (11,048) | | Net cash used in financing activities | (20,337) | (23,139) | | Net change in cash and cash equivalents | 7,572 | (13,043) | | Cash and cash equivalents at end of period | 22,588 | 12,501 | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed disclosures for the financial statements, covering business, COVID-19 impacts, impairment charges, accounting policies, and segment information 1. Description of Business and Basis of Presentation This note describes Mistras Group's business, the impact of COVID-19 and oil price volatility, and related impairment charges and cost reduction programs - Mistras Group, Inc. is a leading global provider of technology-enabled asset protection solutions for critical energy, industrial, public infrastructure, and commercial aerospace components24 - The COVID-19 pandemic, significant oil price volatility, and decreased aerospace traffic adversely affected the company's workforce and operations, leading to customer spending cuts and potential contract reductions2526 - The company recorded impairment charges in Q1 2020: approximately $77.1 million for goodwill, $28.8 million for intangible assets, and $0.2 million for a right-of-use asset, driven by market volatility27 - A cost reduction and efficiency program was initiated in March 2020, including temporary salary reductions for executives (25-45%) and other salaried employees, suspension of company match for savings plans, and director payment reductions29 Effective Income Tax Rate | Metric | Q2 2020 | Q2 2019 | YTD 2020 | YTD 2019 | | :---------------------- | :------ | :------ | :------- | :------- | | Effective Income Tax Rate | 21% | 37% | 14% | 45% | - The CARES Act provides a five-year carryback of net operating losses (2018-2020), offering a tax benefit in excess of the current federal statutory rate (35% vs. 21%) and is projected to result in additional income tax benefit in 2020 and a cash refund in 202140 2. Revenue This note details the company's revenue recognition policies and provides a breakdown of revenue by industry and geographic region - The majority of the company's revenue is derived from providing services on a time and material basis, recognized over time as work progresses444748 - Product sales are recognized at the point in time when the customer obtains control, generally upon shipment48 Revenue by Industry (Q2) | Industry | Q2 2020 ($k) | Q2 2019 ($k) | Change ($k) | Change (%) | | :-------------------------------- | :----------- | :----------- | :---------- | :--------- | | Oil & Gas | 66,686 | 121,335 | (54,649) | -45.0% | | Aerospace & Defense | 17,994 | 24,330 | (6,336) | -26.0% | | Industrials | 14,534 | 25,744 | (11,210) | -43.5% | | Power generation & Transmission | 9,503 | 11,470 | (1,967) | -17.1% | | Other Process Industries | 7,683 | 8,956 | (1,273) | -14.2% | | Infrastructure, Research & Engineering | 6,914 | 6,382 | 532 | 8.3% | | Other | 1,121 | 2,399 | (1,278) | -53.3% | | Total | 124,435 | 200,616 | (76,181) | -38.0% | Revenue by Industry (YTD) | Industry | YTD 2