##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended August 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period            to
 Commission file number 001- 34481
 
 Mistras Group, Inc.
  
 Delaware
    
    22-3341267(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 195 Clarksville RoadPrinceton Junction, New Jersey
    
    08550(Address of principal executive offices)
    
    (Zip Code)
 (609) 716-4000
 
 o þ
 o  o
  Large accelerated filero
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting companyo(Do not check if a smaller reporting company)
 o þ




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##### 



PAGEPART IFINANCIAL INFORMATIONITEM 1. Financial Statements
    
    
    1Consolidated Balance Sheets August 31, 2009 and May 31, 2009 Unaudited
    
    
    1Consolidated Statements of Operations Unaudited
    
    
    2Consolidated Statements of Equity (Deficit) Unaudited
    
    
    3Consolidated Statements of Cash Flows For the Three Months Ended
August 31, 2009 and 2008 Unaudited
    
    
    4Notes to Consolidated Financial Statements Unaudited August 31, 2009
and 2008
    
    
    5ITEM 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    18ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    26ITEM 4. Controls and Procedures
    
    
    27PART IIOTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    29ITEM 1.A. Risk Factors
    
    
    29ITEM 2. Unregistered Sale of Equity Securities and Use of Proceeds
    
    
    29ITEM 3. Defaults Upon Senior Securities
    
    
    30ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    30ITEM 5. Other Information
    
    
    30ITEM 6. Exhibits
    
    
    30SIGNATURES
    
    
    31EXHIBIT INDEX
    
    
    32CERTIFICATION OF CEOCERTIFICATION OF CFOCERTIFICATION OF CEOCERTIFICATION OF CFO




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 ITEM 1.
    
    Financial Statements
 
 Mistras Group, Inc. and Subsidiaries
 Consolidated Balance Sheets
August 31, 2009 and May 31, 2009
Unaudited
 August 31, 2009
    
    
    May 31, 2009(In thousands, except for share and per share information)ASSETSCurrent assetsCash and cash equivalents
    
    $
    6,035
    
    
    $
    5,668Accounts receivable, net
    
    
    38,879
    
    
    
    39,509Inventories, net
    
    
    12,467
    
    
    
    11,509Deferred income taxes
    
    
    1,542
    
    
    
    1,593Prepaid expenses and other current assets
    
    
    5,999
    
    
    
    5,391Total current assets
    
    
    64,922
    
    
    
    63,670Property, plant and equipment, net
    
    
    37,907
    
    
    
    33,592Intangible assets, net
    
    
    19,548
    
    
    
    11,949Goodwill
    
    
    43,671
    
    
    
    38,642Other assets
    
    
    5,070
    
    
    
    3,421Total assets
    
    $
    171,118
    
    
    $
    151,274LIABILITIES, PREFERRED STOCK AND (DEFICIT) EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    14,154
    
    
    $
    14,390Current portion of capital lease obligations
    
    
    5,104
    
    
    
    4,981Accounts payable
    
    
    4,043
    
    
    
    2,797Accrued expenses and other current liabilities
    
    
    16,288
    
    
    
    18,340Income taxes payable
    
    
    4,096
    
    
    
    3,600Total current liabilities
    
    
    43,685
    
    
    
    44,108Long-term debt, net of current portion
    
    
    69,539
    
    
    
    51,861Obligations under capital leases, net of current portion
    
    
    9,670
    
    
    
    9,544Deferred income taxes
    
    
    1,434
    
    
    
    1,199Other long-term liabilities
    
    
    1,624
    
    
    
    1,246Total liabilities
    
    
    125,952
    
    
    
    107,958Commitments and contingencies (Note 10)Preferred stock, 1,000,000 shares authorized Class B Convertible
Redeemable Preferred Stock, $0.01 par value, 221,205 shares
issued and outstanding
    
    
    38,710
    
    
    
    38,710Class A Convertible Redeemable Preferred Stock, $0.01 par value,
298,701 shares issued and outstanding
    
    
    52,273
    
    
    
    52,273Total preferred stock
    
    
    90,983
    
    
    
    90,983(Deficit) equityCommon stock, $0.01 par value, 35,000,000 shares
authorized, 13,000,000 shares issued and outstanding
    
    
    130
    
    
    
    130Additional paid-in capital
    
    
    1,167
    
    
    
    917(Accumulated deficit)
    
    
    (46,561
    )
    
    
    (47,376
    )Accumulated other comprehensive (loss) income
    
    
    (842
    )
    
    
    (1,583
    )Total Mistras Group, Inc. stockholders (deficit)
equity
    
    
    (46,106
    )
    
    
    (47,912
    )Noncontrolling interest
    
    
    289
    
    
    
    245Total (deficit) equity
    
    
    (45,817
    )
    
    
    (47,667
    )Total liabilities, preferred stock and (deficit) equity
    
    $
    171,118
    
    
    $
    151,274
  1




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Consolidated Statements of Operations
Unaudited
 Three months ended August 31,2009
    
    
    2008(In thousands, except for shareand per share information)Revenues:Services
    
    $
    51,656
    
    
    $
    42,530Products
    
    
    4,433
    
    
    
    4,467Total revenues
    
    
    56,089
    
    
    
    46,997Cost of Revenues:Cost of services
    
    
    34,369
    
    
    
    26,593Cost of goods sold
    
    
    2,099
    
    
    
    1,933Depreciation of services
    
    
    2,280
    
    
    
    1,682Depreciation of products
    
    
    191
    
    
    
    177Total cost of revenues
    
    
    38,939
    
    
    
    30,385Gross profit
    
    
    17,150
    
    
    
    16,612Selling, general and administrative expenses
    
    
    13,133
    
    
    
    10,895Research and engineering
    
    
    483
    
    
    
    464Depreciation and amortization
    
    
    1,045
    
    
    
    1,428Legal settlement
    
    
    (297
    )
    
    
    136Income from operations
    
    
    2,786
    
    
    
    3,689Other expensesInterest expense
    
    
    1,064
    
    
    
    1,011Loss on extinguishment of long-term debt
    
    
    169
    
    
    
    Income before provision for income taxes and
    
    
    1,553
    
    
    
    2,678noncontrolling interestProvision for income taxes
    
    
    694
    
    
    
    1,060Net Income
    
    
    859
    
    
    
    1,618Net Income attributable to noncontrolling interests
    
    
    (44
    )
    
    
    (101
    )Net income attributable to Mistras Group, Inc.
    
    
    815
    
    
    
    1,517Accretion of preferred stock
    
    
    
    
    
    
    (424
    )Net income available to common stockholders
    
    $
    815
    
    
    $
    1,093Earnings per common share:Basic
    
    $
    0.06
    
    
    $
    0.08Diluted
    
    $
    0.04
    
    
    $
    0.06Weighted average common shares outstanding:Basic
    
    
    13,000,000
    
    
    
    13,000,000Diluted
    
    
    20,434,760
    
    
    
    17,294,078
  2




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Consolidated Statements of Equity (Deficit)
Unaudited
 Retained
    
    
    AccumulatedAdditional
    
    
    Earnings
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    (Accumulated
    
    
    Comprehensive
    
    
    Noncontrolling
    
    
    
    
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit)
    
    
    Income (Loss)
    
    
    Interests
    
    
    Total
    
    
    Income (Loss)(In thousands, except for share and per share information)Balance at May 31, 2009
    
    
    13,000,000
    
    
    $
    130
    
    
    $
    917
    
    
    $
    (47,376
    )
    
    $
    (1,583
    )
    
    $
    245
    
    
    $
    (47,667
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    815
    
    
    
    
    
    
    
    44
    
    
    
    859
    
    
    $
    859Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    741
    
    
    
    
    
    
    
    741
    
    
    
    741Stock compensation
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250Balance at August 31, 2009
    
    
    13,000,000
    
    
    $
    130
    
    
    $
    1,167
    
    
    $
    (46,561
    )
    
    $
    (842
    )
    
    $
    289
    
    
    $
    (45,817
    )
    
    $
    1,600
  3




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Consolidated Statements of Cash Flows
For the Three Months Ended August 31, 2009 and 2008
Unaudited
 Three months ended August 31,2009
    
    
    2008(In thousands, except share data)Cash flows from operating activitiesNet income attributable to Mistras Group, Inc.
    
    $
    815
    
    
    $
    1,517Adjustments to reconcile net income to net cash
provided by operating activitiesDepreciation and amortization
    
    
    3,516
    
    
    
    3,287Deferred income taxes
    
    
    
    
    
    
    (30
    )Provision for doubtful accounts
    
    
    897
    
    
    
    95Loss on extinguishment of long-term debt
    
    
    169
    
    
    
    Gain on sale of assets disposed
    
    
    (29
    )
    
    
    (3
    )Amortization of deferred financing costs
    
    
    69
    
    
    
    45Stock compensation expense
    
    
    250
    
    
    
    Non cash interest rate swap
    
    
    124
    
    
    
    (3
    )Noncontrolling interest
    
    
    44
    
    
    
    101Unrealized foreign currency loss (gain)
    
    
    210
    
    
    
    (147
    )Changes in operating assets and liabilities, net
of effect of acquisitionsAccounts receivable
    
    
    214
    
    
    
    (305
    )Inventories
    
    
    (6
    )
    
    
    (710
    )Prepaid expenses and other current assets
    
    
    (436
    )
    
    
    (185
    )Other assets
    
    
    (575
    )
    
    
    661Accounts payable
    
    
    1,154
    
    
    
    (947
    )Income taxes payable
    
    
    452
    
    
    
    (889
    )Accrued expenses and other current liabilities
    
    
    (2,356
    )
    
    
    246Net cash provided by operating activities
    
    
    4,512
    
    
    
    2,733Cash flows from investing activitiesPurchase of property, plant and equipment
    
    
    (404
    )
    
    
    (1,470
    )Purchase of intangible asset
    
    
    (85
    )
    
    
    (98
    )Acquisition of businesses
    
    
    (14,000
    )
    
    
    (5,200
    )Proceeds from sale of equipment
    
    
    102
    
    
    
    61Net cash used in investing activities
    
    
    (14,387
    )
    
    
    (6,707
    )Cash flows from financing activitiesRepayment of capital lease obligations
    
    
    (1,425
    )
    
    
    (863
    )Repayments of long-term debt
    
    
    (38,009
    )
    
    
    (2,915
    )Net borrowings from (payments) against revolver
    
    
    25,335
    
    
    
    (9,605
    )Borrowings from long-term debt
    
    
    25,000
    
    
    
    20,000Debt issuance costs
    
    
    (500
    )
    
    
    (291
    )Net cash provided by financing activities
    
    
    10,401
    
    
    
    6,326Effect of exchange rate changes on cash
    
    
    (159
    )
    
    
    (75
    )Net change in cash and cash equivalents
    
    
    367
    
    
    
    2,277Cash and cash equivalentsBeginning of period
    
    
    5,668
    
    
    
    3,555End of period
    
    $
    6,035
    
    
    $
    5,832Supplemental disclosure of cash paidInterest
    
    
    1,035
    
    
    
    1,019Income taxes
    
    
    185
    
    
    
    2,238Noncash investing and financingEquipment acquired through capital lease obligations
    
    
    1,598
    
    
    
    1,274Issuance of notes payable and other debt obligations
primarily related to acquisitions
    
    
    4,412
    
    
    
    5,893
  4




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
 Unaudited
 August 31, 2009 and 2008
 (in thousands, except per share data)
 1. Description of Business & Basis of Presentation
 Description of Business
   Principles of Consolidation
   Reclassification
  2. Summary of Significant Accounting Policies
 Use of Estimates
  5




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
  Inventories
  Revenue Recognition
  Services
  Software
  Products
  Multiple-Element Arrangements
   Accounts Receivable
  6




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
 Software Costs
   Goodwill and Intangible Assets
   Derivative Financial Instruments
  Concentration of Credit Risk
    Self Insurance
  7




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
 Stock-Based Compensation
 Share-Based Payment
 Income Taxes
  Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement No. 109
  Comprehensive Income
  Earnings per Share
  Preferred Stock Accretion
  Recently Issued Accounting Standards
 SFAS No. 141R Business
Combinations Business Combinations
 8




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
  
    
    In-process research and development (IPR&D) will be accounted for as an asset,
with the cost recognized as research and development is realized or abandoned. IPR&D
was previously expensed at the time of the acquisition.
    
    Assets acquired or liabilities assumed in a business combination that arise from a
contingency will be measured at fair value at acquisition date if the fair value can be
determined during the measurement period.
    
    Decreases in valuation allowances on acquired deferred tax assets will be recognized
in operations. Such changes were considered to be subsequent changes in consideration
and were recorded as decreases in goodwill.
    
    Transaction costs will generally be expensed. Such costs were previously treated as
costs of the acquisition.
  SFAS No. 160 Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB 51
 SFAS No. 165 Subsequent Events
 FSP No. 107-1 and APB No. 28-1 Interim
Disclosures about Fair Value of Financial Instruments
 EITF 08-1 Revenue Recognition with Multiple Deliverables Certain Revenue Arrangements that Include Software Elements
 3. Acquisitions
  9




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
   Total cost:Cash paid
    
    $
    14,000Subordinated notes issued, net of discount
    
    
    2,836Other consideration, net of discount
    
    
    2,262$
    19,098Current assets acquired
    
    $
    1,950Property, plant and equipment
    
    
    4,861Intangibles, primarily customer lists
    
    
    8,054Goodwill
    
    
    4,920Contingent purchase price accrued
    
    
    (687
    )$
    19,098
   10




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
 4. Property, plant and equipment, net
  UsefulLife in
    
    
    As of
    
    
    As ofYears
    
    
    August 31, 2009
    
    
    May 31, 2009Land
    
    
    
    
    
    $
    1,295
    
    
    $
    1,295Buildings and improvement
    
    
    30-40
    
    
    
    10,160
    
    
    
    10,187Office furniture and equipment
    
    
    5-8
    
    
    
    1,556
    
    
    
    1,450Machinery and equipment
    
    
    5-7
    
    
    
    58,951
    
    
    
    51,90371,962
    
    
    
    64,835Accumulated depreciation and amortization
    
    
    
    
    
    
    34,055
    
    
    
    31,243$
    37,907
    
    
    $
    33,592
 5. Accounts Receivable and Allowance for Doubtful Accounts
  Balance, May 31,2009
    
    $
    3,303Provision for doubtful accounts
    
    
    897Write-offs, net of recoveries
    
    
    (116
    )Foreign exchange valuation
    
    
    32Balance, August 31, 2009
    
    $
    4,116
  6. Inventories
  As of
    
    
    As ofAugust 31, 2009
    
    
    May 31, 2009Raw materials
    
    $
    2,588
    
    
    $
    2,832Work in process
    
    
    1,782
    
    
    
    1,782Finished goods
    
    
    2,724
    
    
    
    2,635Supplies
    
    
    5,373
    
    
    
    4,260$
    12,467
    
    
    $
    11,509
  11




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
 7. Accrued expenses and other current liabilities
  As of
    
    
    As ofAugust 31, 2009
    
    
    May 31, 2009Accrued salaries, wages and related employee benefits
    
    $
    6,700
    
    
    $
    5,992Other accrued expenses
    
    
    4,022
    
    
    
    6,111Accrued worker compensation and health benefits
    
    
    4,869
    
    
    
    4,823Deferred revenues
    
    
    697
    
    
    
    1,414Total
    
    $
    16,288
    
    
    $
    18,340
 8. Long-Term Debt
  As of
    
    
    As ofAugust 31, 2009
    
    
    May 31, 2009Senior credit facilityRevolver
    
    $
    40,840
    
    
    $
    15,505Term loans
    
    
    25,000
    
    
    
    36,319Notes payable
    
    
    13,731
    
    
    
    12,113Other
    
    
    4,122
    
    
    
    2,31483,693
    
    
    
    66,251Less: Current maturities
    
    
    14,154
    
    
    
    14,390Long-term debt, net of current maturities
    
    $
    69,539
    
    
    $
    51,861
 Senior Credit Facility
   12




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
  
    
    a minimum EBITDA, as defined in the credit agreement, of $37.5 million in fiscal 2010, $40
million in fiscal 2011 and $45 million in fiscal 2012;
 
    
    a minimum debt service coverage ratio, or the ratio of: (A) EBITDA, as defined in the
credit agreement, less cash taxes, dividends, cash distributions, withdrawals and other
distributions paid or made, to (B) the sum of: (i) the current portion of long-term
liabilities, including any conditional payments due under any earn-out agreements deemed due
and owing, (ii) the current portion of capitalized lease obligations, and (iii) interest
expense on all obligations repaid, in each case, during the preceding 12 months, of at least
1.10 to 1.0 in fiscal 2010, at least 1.15 to 1.0 in fiscal 2011, at least 1.20 to 1.0 in
fiscal 2012; and,
 
    
    a funded debt leverage ratio, or the ratio of: (A) all outstanding liabilities for borrowed
money and other interest-bearing liabilities, including current and long term liabilities,
other than the capitalized lease on the Companys headquarters, to (B) EBITDA, as defined in
the credit agreement, not exceeding: 3.0 to 1.0 during the first and second quarters of fiscal
2010, 2.5 to 1.0 in the third and fourth quarters of fiscal 2010 and in the first quarter of
fiscal 2011, or 2.25 to 1.0 in the second quarter of fiscal 2011 and thereafter.
   Notes Payable and Other
  9. Fair Value Measurements
 Fair Value Measurements
 Fair Value of Financial Instruments
 13




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
  10. Commitments and Contingencies
 Accounting for Contingencies
  11. Stock Options
  14




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
   WeightedAverageExerciseOptions
    
    
    Options Exercisable
    
    
    PriceOutstanding, May 31, 2009
    
    
    939,900
    
    
    
    333,944
    
    
    $
    6.81Granted
    
    
    234,000
    
    
    
    
    
    
    
    13.46Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    Outstanding, August 31, 2009
    
    
    1,173,900
    
    
    
    346,125
    
    
    $
    8.14
 12. Segment Disclosure
  Services
 Products and Systems
 International
   15




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
   Three Months EndedAugust 31, 2009
    
    
    August 31, 2008RevenuesServices
    
    $
    45,702
    
    
    $
    35,788Products and Systems
    
    
    3,625
    
    
    
    4,035International
    
    
    7,751
    
    
    
    8,421Corporate and eliminations
    
    
    (989
    )
    
    
    (1,247
    )$
    56,089
    
    
    $
    46,997
  Three Months EndedAugust 31, 2009
    
    
    August 31, 2008Income from OperationsServices
    
    $
    3,232
    
    
    $
    2,822Products and Systems
    
    
    (70
    )
    
    
    324International
    
    
    1,262
    
    
    
    1,975Corporate and eliminations
    
    
    (1,638
    )
    
    
    (1,432
    )$
    2,786
    
    
    $
    3,689
 Three Months EndedAugust 31, 2009
    
    
    August 31, 2008Depreciation and AmortizationServices
    
    $
    2,874
    
    
    $
    2,783Products and Systems
    
    
    246
    
    
    
    262International
    
    
    365
    
    
    
    229Corporate and eliminations
    
    
    31
    
    
    
    13$
    3,516
    
    
    $
    3,287
 As ofAugust 31, 2009
    
    
    May 31, 2008Intangible assets, netServices
    
    $
    16,861
    
    
    $
    9,686Products and Systems
    
    
    1,127
    
    
    
    1,127International
    
    
    719
    
    
    
    710Corporate and eliminations
    
    
    841
    
    
    
    426$
    19,548
    
    
    $
    11,949
 16




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##### Table of Contents



Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
 As ofAugust 31, 2009
    
    
    May 31, 2008GoodwillServices
    
    $
    42,269
    
    
    $
    37,355Products and Systems
    
    
    
    
    
    
    International
    
    
    1,616
    
    
    
    1,501Corporate and eliminations
    
    
    (214
    )
    
    
    (214
    )$
    43,671
    
    
    $
    38,642
 As ofAugust 31, 2009
    
    
    May 31, 2008Long-lived AssetsServices
    
    $
    92,883
    
    
    $
    75,197Products and Systems
    
    
    4,461
    
    
    
    4,553International
    
    
    5,331
    
    
    
    5,137Corporate and eliminations
    
    
    3,521
    
    
    
    2,717$
    106,196
    
    
    $
    87,604
  13. Subsequent Events
  Stock Split
  Executive Compensation
  Initial Public Offering of Stock
   17




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Mistras Group, Inc. and Subsidiaries
 Notes to Consolidated Financial Statements-continued
 Unaudited
 Long-Term Incentive Plan
  Acquisitions
  18




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
   19




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Consolidated Results of Operations
 First quarter of fiscal 2010 Compared to first quarter of fiscal 2009
  Three Months Ended August 31,2009
    
    
    2008Revenues
    
    $
    56,089
    
    
    $
    46,997Gross profit
    
    
    17,150
    
    
    
    16,612Income from operations
    
    
    2,786
    
    
    
    3,689Interest expense
    
    
    1,064
    
    
    
    1,011Loss on extinguishment of debt
    
    
    169
    
    
    
    Income before provision for income taxes and
noncontrolling interests
    
    
    1,553
    
    
    
    2,678Provision for income taxes
    
    
    694
    
    
    
    1,060Net income
    
    
    859
    
    
    
    1,618Net income attributable to noncontrolling interests
    
    
    (44
    )
    
    
    (101
    )Net income attributable to Mistras Group, Inc.
    
    $
    815
    
    
    $
    1,517
 Revenues
  20




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##### Table of Contents



Gross profit
 Income from operations
 Interest expense
 Loss on Extinguishment of debt
 Income taxes
 Net income
 21




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##### Table of Contents



Segment Data
 Three Months EndedAugust 31, 2009
    
    
    August 31, 2008(In thousands)Revenues1Services
    
    $
    45,702
    
    
    $
    35,788Products and Systems
    
    
    3,625
    
    
    
    4,035International
    
    
    7,751
    
    
    
    8,421Corporate and eliminations
    
    
    (989
    )
    
    
    (1,247
    )$
    56,089
    
    
    $
    46,997
 
 (1)
    
    Revenues by operating segment includes intercompany transactions, which are eliminated in
corporate and eliminations. Three Months EndedAugust 31, 2009
    
    
    August 31, 2008(In thousands)Gross Profit:Services
    
    $
    12,528
    
    
    $
    10,630Products and Systems
    
    
    1,688
    
    
    
    1,962International
    
    
    3,046
    
    
    
    4,102Corporate and eliminations
    
    
    (112
    )
    
    
    (82
    )$
    17,150
    
    
    $
    16,612
 Three Months EndedAugust 31, 2009
    
    
    August 31, 2008(In thousands)Income from OperationsServices
    
    $
    3,232
    
    
    $
    2,822Products and Systems
    
    
    (70
    )
    
    
    324International
    
    
    1,262
    
    
    
    1,975Corporate and eliminations
    
    
    (1,638
    )
    
    
    (1,432
    )$
    2,786
    
    
    $
    3,689
 Three Months EndedAugust 31, 2009
    
    
    August 31, 2008(In thousands)Depreciation and AmortizationServices
    
    $
    2,874
    
    
    $
    2,783Products and Systems
    
    
    246
    
    
    
    262International
    
    
    365
    
    
    
    229Corporate and eliminations
    
    
    31
    
    
    
    13$
    3,516
    
    
    $
    3,287
 Segment Results for First quarter of Fiscal 2010 and 2009
  22




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Services
 Revenues
 Gross profit
 Income from operations
 Products and Systems
 Revenues
 23




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##### Table of Contents



Gross profit
 Income from operations
 International
 Basis of Reporting.
 Revenues
  Gross profit
 Income from operations
 24




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##### Table of Contents



Corporate and Eliminations
  Liquidity and Capital Resources
 Overview
  Cash Flows from Operating Activities
  Cash Flows from Investing Activities
   Cash Flows from Financing Activities
  25




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##### Table of Contents



Effect of Exchange Rate on Changes in Cash
  Cash balance and credit facility borrowings
    
    
    a minimum EBITDA, as defined in our credit agreement, of $37.5 million in fiscal
2010, $40 million in fiscal 2011 and $45 million in fiscal 2012;
    
    a minimum debt service coverage ratio, or the ratio of: (A) EBITDA, as defined
in our credit agreement, less cash taxes, dividends, cash distributions,
withdrawals and other distributions paid or made, to (B) the sum of: (i) the
current portion of long-term liabilities, including any conditional payments due
under any earn-out agreements deemed due and owing, (ii) the current portion of
capitalized lease obligations, and (iii) interest expense on all obligations
repaid, in each case, during the preceding 12 months, of at least 1.10 to 1.0 in
fiscal 2010, at least 1.15 to 1.0 in fiscal 2011, at least 1.20 to 1.0 in fiscal
2012; and,
    
    a funded debt leverage ratio, or the ratio of: (A) all outstanding liabilities
for borrowed money and other interest-bearing liabilities, including current and
long term liabilities, other than the capitalized lease on our headquarters, to (B)
EBITDA, as defined in our credit agreement, not exceeding: 3.0 to 1.0 during the
first and second quarters of fiscal 2010, 2.5 to 1.0 in the third and fourth
quarters of fiscal 2010 and in the first quarter of fiscal 2011, or 2.25 to 1.0 in
the second quarter of fiscal 2011 and thereafter.
 26




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##### Table of Contents



Off-balance sheet arrangements
  
 Item
3. Quantitative and Qualitative Disclosures about Market Risk
 Foreign Currency Risk
  Interest Rate Sensitivity
    Fair Value of Financial Instruments
  27




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##### Table of Contents



ITEM 4. Controls and Procedures
 Limitations on Effectiveness of Control
  Evaluation of Disclosure Controls and Procedures
    Changes in Internal Control Over Financial Reporting
  28




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##### Table of Contents



PART IIOTHER INFORMATION
 
 ITEM 1. Legal Proceedings
  
 ITEM 1.A. Risk Factors
  Our actual operating results may differ significantly from our guidance.
     
 ITEM 2. Unregistered Sale of Equity Securities and Use of Proceeds
 (a) Sales of Unregistered Securities
  29




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(b) Use of Proceeds from Public Offering of Common Stock
   
 ITEM 3. Defaults Upon Senior Securities
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  
 ITEM 5. Other Information
  
 ITEM 6. Exhibits
 ExhibitNo.
    
    Description31.1 *
    
    Certification of CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.31.2 *
    
    Certification of CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.32.1 *
    
    Certification of CEO pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2 *
    
    Certification of CFO pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
 
 *
    
    Filed herewith. 30




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##### Table of Contents



Signatures
  MISTRAS GROUP, INC.By:
    /s/ paul peterikPaul PeterikChief Financial Officer

(Principal financial officer and duly

authorized to sign on behalf of the registrant)  31




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1 *
    
    Certification of CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.31.2 *
    
    Certification of CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934.32.1 *
    
    Certification of CEO pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.32.2 *
    
    Certification of CFO pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
 
 *
    
    Filed herewith. 32