28 unchanged sentences
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
−Removed: Table o f Contents
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
−Removed: Critical Audit Matters
−Removed: The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:
−Removed: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
−Removed: The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
+Added: Critical Audit Matter
+Added: The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:
+Added: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
+Added: The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of goodwill for the services and European reporting units
2 unchanged sentences
As of December 31, 2021, the Company had goodwill of $205.4 million, of which a portion related to the services and European reporting units.
−Removed: During the year ended December 31, 2020, the Company recognized goodwill impairment charges of $77.1 million, of which $57.2 million pertained to the services reporting unit and $19.3 million pertained to the European reporting unit.
+Added: There were no impairment charges recorded during the year ended December 31, 2021.
We identified the evaluation of goodwill impairment for the services and European reporting units as a critical audit matter.
−Removed: Auditor judgment was required to evaluate the selection of discount rates, revenue growth rates, gross margins, and selling, general, and administrative expense used in the income approach as they represented subjective determinations of future market or economic conditions.
+Added: Auditor judgment was required to evaluate the selection of discount rates and forecasted revenue growth rates, gross margins, and selling, general, and administrative expense used in the income approach as they represented subjective determinations of future market or economic conditions.
Additionally, the audit effort associated with the evaluation of goodwill for impairment for the services and European reporting units required specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter.
−Removed: We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s goodwill impairment evaluation process, including controls related to management’s selection of discount rates, revenue growth rates, gross margins, and selling, general, and administrative expense.
+Added: We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s goodwill impairment evaluation process, including controls related to management’s selection of discount rates and forecasted revenue growth rates, gross margins, and selling, general, and administrative expense.
We evaluated the reasonableness of management’s forecasted revenue growth rates, gross margins, and selling, general, and administrative expense by comparing the forecasts to historical revenue growth rates, gross margins, and selling, general, and administrative expense and relevant industry reports.
2 unchanged sentences
• evaluating the Company’s methodology used to estimate the discount rates
−Removed: • evaluating the Company’s discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities
−Removed: • testing the estimate of fair value of the services and European reporting units by using the Company’s projected cash flows as well as our discount rate range and comparing the results to the Company’s fair values.
−Removed: Assessment of impairment of a certain asset group within the services segment
−Removed: As discussed in Note 1 to the consolidated financial statements, the company reviews the recoverability of its long-lived asset groups whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset group might not be recoverable.
−Removed: The assessment for potential impairment is based on the Company’s ability to recover the carrying value of its long-lived assets from expected future undiscounted cash flows.
−Removed: If the total expected future undiscounted cash flows are less than the carrying amount of the assets, an impairment loss is recognized for the amount by which the carrying amount of the asset group exceeds its fair value.
−Removed: The company considers the income and market approaches to estimate the fair value of its asset groups.
−Removed: During the year ended December 31, 2020, the Company recognized long-lived asset impairment charges of $28.8 million of which $28.5 million related to a certain asset group within the services segment.
−Removed: We identified the assessment of impairment of a certain asset group as a critical audit matter.
−Removed: Auditor judgment was required to evaluate the selection of the discount rate, revenue growth rates, gross margins, and selling, general, and administrative expense used in the income approach as they represented subjective determinations of future market or
−Removed: Table o f Contents
−Removed: economic conditions.
−Removed: Additionally, the audit effort associated with the evaluation of the asset group for impairment required specialized skills and knowledge.
−Removed: The following are the primary procedures we performed to address this critical audit matter.
−Removed: We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s long-lived asset impairment evaluation process, including controls related to management’s selection of the discount rate, revenue growth rates, gross margins, and selling, general, and administrative expense.
−Removed: We evaluated management’s forecasted revenue growth rates, gross margins, and selling, general, and administrative expense by comparing them to historical revenue growth rates, gross margins, and selling, general, and administrative expense and relevant industry reports.
−Removed: We evaluated the Company’s ability to accurately estimate future revenue growth rates, gross margins, and selling, general, and administrative expense by comparing the historical projected revenue growth rates, gross margins, and selling, general, and administrative expense to actual results for the same period.
−Removed: In addition, we involved valuation professionals with specialized skills and knowledge who assisted in:
−Removed: • evaluating the Company’s methodology used to estimate the discount rate
−Removed: • evaluating the Company’s discount rate by comparing it against a discount rate range that was independently developed using publicly available market data for comparable entities
−Removed: • testing the estimate of fair value of the asset group by using the Company’s projected cash flows as well as our discount rate range and comparing the results to the Company’s fair value.
+Added: • evaluating the Company’s discount rates by comparing them against discount rate ranges that were independently developed using publicly available market data for comparable entities
+Added: • testing the estimate of fair values of the services and European reporting units by using the Company’s projected cash flows as well as our independently developed discount rate ranges and comparing the results to the Company’s fair values.
We have served as the Company’s auditor since 2013
1 unchanged sentence
March 14, 2022
−Removed: Table o f Contents
Mistras Group, Inc.
31 unchanged sentences
Additional paid-in capital 238,687 234,638
−Removed: Retained earnings (deficit) ( 21,848 ) 77,613
+Added: Accumulated Deficit ( 17,988 ) ( 21,848 )
Accumulated other comprehensive loss ( 20,311 ) ( 16,061 )
5 unchanged sentences
The accompanying notes are an integral part of these consolidated financial statements.
−Removed: Table o f Contents
Mistras Group, Inc.
11 unchanged sentences
Impairment charges — 106,062 —
+Added: Legal settlement and litigation charges (benefit), net 2,042 ( 220 ) —
Pension withdrawal expense — — 848
−Removed: Gain on sale of subsidiary — — ( 2,384 )
Research and engineering 2,518 2,892 3,045
16 unchanged sentences
The accompanying notes are an integral part of these consolidated financial statements.
−Removed: Table o f Contents
Mistras Group, Inc.
8 unchanged sentences
Comprehensive income (loss) ( 359 ) ( 94,239 ) 12,355
−Removed: net income (loss) attributable to noncontrolling interests ( 5 ) 20 9
+Added: net income (loss) attributable to noncontrolling interests, net of taxes 33 ( 5 ) 20
Foreign currency translation adjustments attributable to noncontrolling interests ( 2 ) 3 3
2 unchanged sentences
The accompanying notes are an integral part of these consolidated financial statements.
−Removed: Table o f Contents
Mistras Group, Inc.
11 unchanged sentences
Net income — — — 6,060 — 6,060 20 6,080
−Removed: Other comprehensive loss, net of tax — — — — ( 10,752 ) ( 10,752 ) ( 5 ) ( 10,757 )
+Added: Other comprehensive income, net of tax — — — — 6,272 6,272 3 6,275
Share-based payments 30 — 5,759 — — 5,759 — 5,759
2 unchanged sentences
Balance at December 31, 2019 28,945 $ 289 $ 229,205 $ 77,613 $ ( 21,285 ) $ 285,822 $ 200 $ 286,022
−Removed: Net income — — — 6,060 — 6,060 20 6,080
+Added: Net loss — — — ( 99,461 ) — ( 99,461 ) ( 5 ) ( 99,466 )
Other comprehensive income, net of tax — — — — 5,224 5,224 3 5,227
Share-based payments — — 5,930 — — 5,930 — 5,930
−Removed: Net settlement on vesting of restricted stock units 349 4 ( 3,202 ) — — ( 3,198 ) — ( 3,198 )
−Removed: Exercise of stock options 3 — 32 — — 32 — 32
+Added: Net settlement of restricted stock units 289 3 ( 497 ) — — ( 494 ) — ( 494 )
Balance at December 31, 2020 29,234 $ 292 $ 234,638 $ ( 21,848 ) $ ( 16,061 ) $ 197,021 $ 198 $ 197,219
−Removed: Net loss — — — ( 99,461 ) — ( 99,461 ) ( 5 ) ( 99,466 )
+Added: Net income — — — 3,860 — 3,860 33 3,893
Other comprehensive income, net of tax — — — — ( 4,250 ) ( 4,250 ) ( 2 ) ( 4,252 )
3 unchanged sentences
The accompanying notes are an integral part of these consolidated financial statements.
−Removed: Table o f Contents
Mistras Group, Inc.
13 unchanged sentences
Foreign currency (gain) loss 417 3,010 ( 535 )
−Removed: Gain on sale of subsidiary — — ( 2,384 )
Fair value adjustments to contingent consideration 949 337 511
11 unchanged sentences
Purchase of intangible assets ( 1,115 ) ( 376 ) ( 873 )
−Removed: Disposition of business — — 4,239
Acquisition of businesses, net of cash acquired ( 440 ) — ( 4,228 )
11 unchanged sentences
Proceeds from the exercise of stock options — — 32
−Removed: Net cash provided by (used in) financing activities ( 44,169 ) ( 44,137 ) 113,969
+Added: Net cash used in financing activities ( 23,245 ) ( 44,169 ) ( 44,137 )
Effect of exchange rate changes on cash and cash equivalents ( 2,115 ) 2,080 ( 221 )
9 unchanged sentences
The accompanying notes are an integral part of these consolidated financial statements.
−Removed: Table o f Contents
Mistras Group, Inc.
6 unchanged sentences
and subsidiaries (the Company) is a leading “OneSource” multinational provider of integrated technology-enabled asset protection solutions helping to maximize the safety and operational uptime for civilization's most critical industrial and civil assets.
−Removed: Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, and decades-long legacy of industry leadership, the Company helps clients in the oil and gas, aerospace and defense, power generation, infrastructure, and manufacturing industries towards achieving and maintaining operational excellence.
+Added: Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, and decades-long legacy of industry leadership, the Company helps clients with asset-intensive infrastructure in the oil and gas, aerospace and defense, industrials, power generation and transmission (including alternative and renewable energy), other process industries and infrastructure, research and engineering and other industries towards achieving and maintaining operational excellence.
By supporting these organizations that help fuel our vehicles and power our society;
1 unchanged sentence
and building real-time monitoring equipment to enable safe travel across bridges, the Company helps the world at large.
−Removed: The Company enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial IoT-connected digital software and monitoring solutions.
−Removed: The company's core capabilities also include non-destructive testing (“NDT”) field inspections enhanced by advanced robotics, laboratory quality control and assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.
−Removed: The Company serves a global customer base of companies with asset-intensive infrastructure, including companies in the oil and gas, commercial aerospace and defense, fossil and nuclear power, alternative and renewable energy, public infrastructure, chemicals, transportation, primary metals and metalworking, pharmaceutical/biotechnology and food processing industries, and research and engineering institutions.
+Added: The Company enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial IoT-connected digital software and monitoring solutions, including OneSuite, which serves as an ecosystem platform, pulling together all of the Company’s software and data services capabilities, for the benefit of its customers.
+Added: The Company's core capabilities also include non-destructive testing field inspections enhanced by advanced robotics, laboratory quality control and assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.
+Added: Recent Developments
+Added: The COVID-19 coronavirus (COVID-19) pandemic has continued to cause disruption and volatility in domestic and international markets however conditions continued to improve throughout 2021 as compared to 2020.
+Added: The Company's businesses have been classified as non-healthcare critical infrastructure as defined by the U.S.
+Added: Centers for Disease Control and Prevention (CDC).
+Added: Our facilities, and the Company's customers' facilities as well, have remained open with staffing modifications and precautionary procedures taken as necessary.
+Added: Overall, the Company has taken actions to help ensure the health and safety of Company employees and those of its customers and suppliers;
+Added: maintain business continuity and financial strength and stability;
+Added: and serve customers as they provide essential products and services to the world.
+Added: The COVID-19 pandemic uncertainty, significant volatility in oil prices, and decreased traffic in the aerospace industry have adversely affected the operations of the Company's customers, suppliers and contractors beginning in the first quarter of 2020, and as a consequence, the Company's results of operations were adversely impacted.
+Added: These negative factors continue to cause volatility and uncertainty in the markets in which the Company operates, although the Company in 2021 has nevertheless begun approaching pre-pandemic levels of activity in certain end markets, particularly oil and gas where crude oil prices have exceeded pre-pandemic levels.
+Added: While the Company cannot fully assess the impact that the factors discussed above will have on its operations at this time, there were certain impacts that the Company identified resulting in impairment charges in 2020.
+Added: See Note 8 - Goodwill , Note 9-Intangible Assets and Note 17 - Leases for additional information.
+Added: The Company has eliminated substantially all of the temporary cost reduction initiatives undertaken in 2020, including re-installment of the savings plan employer match and increasing wages back to pre-pandemic amounts.
+Added: The Company is currently unable to predict with certainty the overall impact that the factors discussed above and the effect of the Russian-Ukrainian conflict may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine.
+Added: The Company will continue to monitor market conditions and respond accordingly.
+Added: As of December 31, 2021, the cash balance was approximately $ 24.1 million.
Principles of Consolidation
7 unchanged sentences
The Company consolidated the financial statements of the VIE with the financial statements of the Company.
−Removed: As of and the for the year ended December 31, 2020, the VIE had immaterial assets and had no revenue.
+Added: As of and for the year ended December 31, 2021, the VIE had immaterial assets and had approximately $ 2.1 million revenue.
The Company is the primary sub-contractor of the VIE.
2 unchanged sentences
For subsidiaries in which the Company’s ownership interest is less than 100%, the non-controlling interests are reported in stockholders’ equity in the accompanying consolidated balance sheets.
−Removed: The non-controlling interests in net results, net of tax, is classified separately in the accompanying consolidated
−Removed: Table o f Contents
−Removed: statements of income (loss).
+Added: The non-controlling interests in net results, net of tax, is classified separately in the accompanying consolidated statements of income (loss).
All significant intercompany accounts and transactions have been eliminated in consolidation.
12 unchanged sentences
The Company maintains an allowance for credit losses on its accounts receivable balances, which represents its best estimate of current expected credit losses over the contractual life of the accounts receivable.
−Removed: Beginning January 1, 2020, when evaluating the adequacy of its allowance for credit losses each reporting period, the Company analyzes accounts receivable balances with similar risk characteristics on a collective basis, considering factors such as the aging of receivable balances, payment terms (primarily with 30 day terms), geographic location, historical loss experience, current information, and future expectations (generally considered one year which is consistent with expected collectability of the Company's trade receivables).
+Added: Beginning January 1, 2020, when evaluating the adequacy of its allowance for credit losses each reporting period, the Company analyzes accounts receivable balances with similar risk characteristics on a collective basis, considering factors such as the aging of receivable balances, payment terms
+Added: (primarily with 30 day terms), geographic location, historical loss experience, current information, and future expectations (generally considered one year which is consistent with expected collectability of the Company's trade receivables).
The Company monitors and considers whether historical loss rates are consistent with expectation of supportable forward-looking estimates for its trade receivables noting no current or future economic considerations that would require adjusting the Company’s historical loss experience.
Each reporting period, the Company reassesses whether any accounts receivable no longer share similar risk characteristics and should instead be evaluated as part of another pool or on an individual basis.
−Removed: Changes to the allowance for credit losses are adjusted through credit loss expense, which is presented within Selling, general and administrative expenses in the Consolidated statements of income.
−Removed: During the year ended December 31, 2020, the Company recorded a net provision for expected credit losses of $ 0.7 million.
+Added: Changes to the allowance for credit losses are adjusted through credit loss expense, which is presented within Selling, general and administrative expenses in the Consolidated Statements of Income (Loss).
Concentration of Credit Risk
8 unchanged sentences
Capitalized costs are amortized on a straight-line basis over three years , the estimated useful life of the software.
−Removed: Table o f Contents
Property, Plant and Equipment
13 unchanged sentences
2017-04, Intangibles-Goodwill and Other (Topic 350) , impairment will be recorded in the amount that fair value is less than carrying value, as the ASU eliminated step two of the goodwill impairment process.
−Removed: The Company considers the income and market approaches to estimating the fair value of our reporting units, which requires significant judgment in evaluation of economic and industry trends, estimated future cash flows, discount rates and other factors.
−Removed: See Note 8- Goodwill for additional information related to the Company's goodwill impairment tests during 2020.
+Added: The Company considers the income and market approaches to
+Added: estimating the fair value of our reporting units, which requires significant judgment in evaluation of economic and industry trends, estimated future cash flows, discount rates and other factors.
+Added: See Note 8- Goodwill for additional information related to the Company's goodwill impairment test during 2021.
Impairment of Long-lived Assets
9 unchanged sentences
Advertising, Promotions and Marketing
−Removed: Table o f Contents
The costs for advertising, promotion and marketing programs are expensed as incurred and are included in selling, general and administrative expenses.
20 unchanged sentences
Income taxes are accounted for under the asset and liability method.
−Removed: Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards.
−Removed: Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
−Removed: The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
+Added: We recognize deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of our assets and liabilities.
+Added: Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment.
+Added: Our net deferred tax assets primarily consist of net operating loss carry forwards, or NOLs.
A valuation allowance is provided if it is more likely than not that some or all of a deferred income tax asset will not be realized.
A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the current and prior years.
−Removed: US GAAP prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.
−Removed: US GAAP also provides guidance on de-recognition, measurement, and classification of amounts relating to uncertain tax positions, accounting for and disclosure of interest and penalties, accounting in interim periods and disclosures required.
−Removed: Interest and penalties related to unrecognized tax positions are recognized as incurred within “provision for income taxes” in the consolidated statements of income.
−Removed: Table o f Contents
−Removed: In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.
−Removed: The CARES Act, among other things, includes tax provisions relating to deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.
−Removed: The ultimate impact of the CARES Act may differ from the estimated impact the Company recorded during this period due to changes in interpretations and guidance that may be issued and actions the Company may take in response to the CARES Act.
−Removed: The Company will continue to assess the impact that various provisions of the CARES Act, and how they are interpreted and effected, will have on its business.
+Added: We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
+Added: The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.
Recent Accounting Pronouncements
−Removed: In December 2019, the FASB issued ASU No.
−Removed: 2019-12, Income Taxes (Topic 740):
−Removed: Simplifying the Accounting for Income Taxes (“ASU 2019-12”).
−Removed: ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities related to outside basis differences.
−Removed: The standard is effective for interim and annual periods beginning January 1, 2021, with certain amendments applied prospectively and others requiring retrospective application.
−Removed: Early adoption is permitted, with any adjustments reflected as of the beginning of the fiscal year of adoption.
−Removed: The Company did not elect early adoption and is currently evaluating the impact of this guidance on its consolidated financial position, results of operations, and cash flows.
−Removed: In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):
−Removed: Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance provides optional expedients and exceptions for applying U.S.
+Added: On January 1, 2021, the Company adopted new guidance to simplify the accounting for income taxes by, among other things, removing certain exceptions related to intra-period tax allocations, interim calculations and the recognition of deferred tax liabilities for outside basis differences.
+Added: The guidance did not have a material impact on the Company's consolidated financial statements.
+Added: In March 2020 and updated in January 2021, the FASB issued ASU 2020-04 and 2021-01, “ Reference Rate Reform (Topic 848):
+Added: Facilitation of the Effects of Reference Rate Reform on Financial Reporting .” The amendments provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.
+Added: The guidance provides optional expedients and exceptions for applying U.S.
GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued.
The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022.
−Removed: The Company is currently evaluating the impact of this guidance on its consolidated financial position, results of operations, and cash flows.
+Added: The Company is currently evaluating applicable contracts and the available expedients provided by the new guidance.
The Company derives the majority of its revenue by providing services on a time and material basis and are short-term in
1 unchanged sentence
Performance Obligations
−Removed: A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC Topic 606.
−Removed: A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
−Removed: The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct.
The Company provides highly integrated and bundled inspection services to its customers.
−Removed: Some of our contracts have multiple performance obligations, most commonly due to the contract providing both goods and services.
+Added: The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct.
For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company's best estimate of the standalone selling price of each distinct good or service in the contract.
4 unchanged sentences
The Company's performance obligations are satisfied over time as work progresses or at a point in time.
−Removed: The majority of the Company's revenue recognized over time as work progresses is related to the Company's service deliverables, which includes providing testing, inspection and mechanical services to our customers.
+Added: The majority of the Company's revenue is recognized over time as work progresses for the Company's service deliverables, which includes providing testing, inspection and mechanical services to our customers.
Revenue is recognized over time, based on time and material incurred to date which best portrays the transfer of control to the customer.
1 unchanged sentence
Fixed fee arrangements are determined based on expected labor, material, and overhead to be consumed on fulfillment of such services.
−Removed: Revenue is recognized on a cost-to-cost method tracked on an input basis.
−Removed: Table o f Contents
+Added: For these arrangements, revenue is recognized on a cost-to-cost method tracked on an input basis.
The majority of our revenue recognized at a point in time is related to product sales when the customer obtains control of the asset, which is generally upon shipment to the customer.
2 unchanged sentences
Contract Estimates
−Removed: The majority of the Company's revenues are short-term in nature.
−Removed: The Company has many master service agreements (MSAs) that specify an overall framework and contract terms when the Company and customers agree upon services or products to be provided.
+Added: The majority of the Company's customer contracts are short-term in nature.
+Added: The Company enters into master service agreements (MSAs) with customers that specify an overall framework and contract terms.
The actual contracting to provide services or furnish products are triggered by a work order, purchase order, or some similar document issued pursuant to a MSA which sets forth the scope of services and/or identifies the products to be provided.
−Removed: From time-to-time, the Company may enter into long-term contracts, which can range from several months to several years.
−Removed: Revenue on such long-term contracts is recognized as work is performed based on total costs incurred to date in relation to the total estimated costs for the performance of the contract at completion.
+Added: From time-to-time, the Company may enter into longer-term contracts, which can range from several months to several years.
+Added: Revenue on certain contracts is recognized as work is performed based on total costs incurred to date in relation to the total estimated costs for the performance of the contract at completion.
This includes contract estimates of costs to be incurred for the performance of the contract.
3 unchanged sentences
Revenue by Category
−Removed: The following series of tables present our disaggregated revenues by segment:
+Added: The following series of tables present the Company's disaggregated revenue:
Revenue by industry was as follows:
3 unchanged sentences
Industrials 41,873 24,000 1,842 — $ 67,715
−Removed: Power generation & Transmission 30,005 7,559 2,323 — $ 39,887
+Added: Power Generation and Transmission 39,966 9,927 2,853 — $ 52,746
Other Process Industries 38,742 12,593 64 — $ 51,399
Infrastructure, Research & Engineering 16,809 11,496 3,985 — $ 32,290
+Added: Petrochemical 19,378 227 — — $ 19,605
Other 16,146 7,257 3,993 ( 9,332 ) $ 18,064
4 unchanged sentences
Industrials 44,919 19,657 1,852 — $ 66,428
−Removed: Power generation & Transmission 30,300 10,289 2,726 — $ 43,315
+Added: Power Generation and Transmission 30,005 7,559 2,323 — $ 39,887
Other Process Industries 24,671 10,029 171 — $ 34,871
Infrastructure, Research & Engineering 17,070 10,353 6,364 — $ 33,787
+Added: Petrochemical 18,882 345 53 — 19,280
Other 10,081 2,064 4,017 ( 7,598 ) $ 8,564
Total $ 476,164 $ 107,556 $ 16,449 $ ( 7,598 ) $ 592,571
−Removed: Table o f Contents
Year ended December 31, 2019 Services International Products & Systems Corp/Elim Total
2 unchanged sentences
Industrials 64,622 21,405 3,187 — $ 89,214
−Removed: Power generation & Transmission 30,687 8,522 4,904 — 44,113
+Added: Power Generation and Transmission 30,300 10,289 2,726 — $ 43,315
Other Process Industries 28,495 10,196 418 — $ 39,109
Infrastructure, Research & Engineering 14,269 9,520 9,316 — $ 33,105
+Added: Petrochemical 25,985 592 — — 26,577
Other 15,239 7,190 943 ( 9,398 ) $ 13,974
20 unchanged sentences
Contract Balances
−Removed: The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the consolidated balance sheet.
+Added: The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets.
Amounts are generally billed as work progresses in accordance with agreed-upon contractual terms, generally at periodic intervals (e.g., weekly, bi-weekly or monthly).
1 unchanged sentence
However, the Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities.
−Removed: These assets and liabilities are aggregated on an individual contract basis and reported on the consolidated balance sheet at the end of each reporting period within accounts receivables or accrued expenses and other current liabilities.
+Added: These assets and liabilities are aggregated on an individual contract basis and reported on the Consolidated Balance Sheets at the end of each reporting period within accounts receivable, net or accrued expenses and other current liabilities.
Revenue recognized for 2021 and 2020, that was included in the contract liability balance at the beginning of the year was $ 4.6 million and $ 4.6 million, respectively.
Changes in the contract asset and liability balances during the years ended December 31, 2021 and 2020, were not impacted by any other factors.
−Removed: The Company applies the practical expedient to expense incremental
−Removed: Table o f Contents
−Removed: costs incurred related to obtaining a contract when the asset that the Company otherwise would have recognized is one year or less.
+Added: The Company applies the practical expedient to expense incremental costs incurred related to obtaining a contract when the asset that the Company otherwise would have recognized is one year or less.
Earnings per Share
−Removed: Basic earnings (loss) per share is computed by dividing net income by the weighted average number of shares outstanding during the period.
−Removed: Diluted earnings per share is computed by dividing net by the sum of (1) the weighted average number of shares of common stock outstanding during the period, and (2) the dilutive effect of assumed conversion of equity awards using the treasury stock method.
−Removed: With respect to the number of weighted average shares outstanding (denominator), diluted shares reflect:
+Added: Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares outstanding during the period.
+Added: Diluted earnings (loss) per share is computed by dividing net income (loss) by the sum of (1) the weighted average number of shares of common stock outstanding during the period, and (2) the dilutive effect of assumed conversion of equity awards using the treasury stock method.
+Added: With respect to the number of weighted average shares outstanding (denominator), diluted shares reflects:
(i) the exercise of options to acquire common stock to the extent that the options’ exercise prices are less than the average market price of common shares during the period and (ii) the pro forma vesting of restricted stock units.
15 unchanged sentences
Diluted earnings (loss) per share $ 0.13 $ ( 3.41 ) $ 0.21
−Removed: The following potential common shares were excluded from the computation of diluted earnings per share, as the effect would have been anti-dilutive:
+Added: The following potential common shares were excluded from the computation of diluted earnings per share, as the effect would have been anti-
For the year ended December 31,
3 unchanged sentences
Total 114 795 47
−Removed: (1) For the twelve months ended December 31, 2020, 254 shares related to RSUs/PSUs, were excluded from the calculation of diluted EPS due to the net loss for the period.
−Removed: Table o f Contents
+Added: (1) For the year ended December 31, 2020, 254 shares related to RSUs/PSUs, were excluded from the calculation of diluted EPS due to the net loss for the period.
Accounts Receivable
5 unchanged sentences
Unbilled revenue is generally billed in the subsequent quarter to their revenue recognition.
+Added: The Company considers unbilled receivables as short-term in nature as they are normally converted to trade receivables within 90 days, thus future changes in economic conditions will not have a significant effect on the credit loss estimate.
The Company was contracted to perform inspections of welds on various pipeline projects in Texas for a customer.
2 unchanged sentences
The Company filed a lawsuit to recover the $ 1.4 million and other amounts due to the Company and the customer filed a counterclaim, alleging breach of contract and seeking its damages.
−Removed: Accordingly, the Company recorded a reserve of $ 1.4 million during the twelve months ended December 31, 2019 for these past due receivables.
−Removed: The status of this situation has not changed during 2020.
+Added: The Company recorded a full reserve for this receivable during 2019 and the status of this situation has not changed since 2019.
See Note 18-Commitments and Contingencies for additional details.
−Removed: In the fourth quarter of 2018, the Company recorded a reserve of $ 0.7 million for a renewable energy industry customer, based in part on the available information about the financial difficulties of the customer.
−Removed: During the first quarter of 2019, the Company recorded an additional charge of $ 5.7 million to fully reserve for the amount of the exposure related to this customer.
−Removed: This customer filed for a voluntary insolvency proceeding on April 9, 2019.
−Removed: During the second quarter of 2019, the Company reversed $ 1.0 million of this reserve based on additional information obtained during the quarter.
−Removed: The status of the dispute has not changed since the second quarter of 2019.
−Removed: During 2019, the Company sold to an unaffiliated third party, without recourse, its remaining outstanding receivables owed from a customer which filed for bankruptcy, and for which the Company had initially recorded a charge during the second quarter of 2017.
−Removed: During the first quarter of 2019, the Company recorded a recovery of $ 0.2 million and during the second quarter of 2019, the Company recorded a recovery $ 1.7 million, related to a bad debt provision for the receivables due from this customer.
−Removed: This matter is considered fully resolved.
+Added: During the fourth quarter of 2021, the Company wrote off approximately $ 5 million of past due receivables related to work performed during 2019.
+Added: The Company recorded a full reserve for these receivables in the prior years.
Inventories consist of the following:
4 unchanged sentences
Inventories $ 12,686 $ 13,134
−Removed: Table o f Contents
Property, Plant and Equipment
12 unchanged sentences
Depreciation expense was approximately $ 25.2 million, $ 24.7 million, and $ 24.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.
−Removed: Acquisitions and Disposition
−Removed: The Company did no t complete any acquisitions during the year ended December 31, 2020.
+Added: During the year ended December 31, 2021, the Company completed one acquisition for a small NDT services company in Canada.
+Added: The Company acquired 100 % of the common stock in exchange for approximately $ 0.4 million during the first quarter of 2021.
+Added: The results of the acquisition's operations are included within the Services segment and are not material to the consolidated financial statements.
+Added: The Company completed its acquisition accounting for this transaction in accordance with the acquisition method of accounting for business combinations during the year ended December 31, 2021.
During September 2019, the Company completed one acquisition that provides pipeline integrity management software and services to energy transportation companies.
−Removed: The Company acquired all the equity interest of the acquiree in exchange for aggregate consideration of $ 4.4 million in cash, contingent consideration of up to $ 4.3 million to be earned based upon the acquired business achieving specific performance metrics over the initial three years of operations from the acquisition date and working capital adjustments.
+Added: The Company acquired all the equity interest of the acquired entity in exchange for aggregate consideration of $ 4.4 million in cash, contingent consideration of up to $ 4.3 million to be earned based upon the acquired business achieving specific performance metrics over the initial three years of operations from the acquisition date and working capital adjustments.
The goodwill recorded is primarily attributable to expected synergies and is generally deductible for tax purposes.
11 unchanged sentences
Net assets acquired $ 5,570
−Removed: The Company accounted for the acquisition completed in 2019 in accordance with the acquisition method of accounting for business combinations.
Assets and liabilities of the acquired businesses were included in the consolidated balance sheet based on their respective estimated fair value on the date of acquisition as determined in a purchase price allocation, using available information and making assumptions management believes are reasonable.
The amortization periods for the intangible assets acquired range from one year to eighteen years .
−Removed: Table o f Contents
−Removed: During the third quarter of 2018, substantially all of the assets and liabilities of a subsidiary in the Products and Systems segment were sold for approximately $ 4.3 million.
−Removed: For the year ended December 31, 2018, the Company recognized a gain of approximately $ 2.4 million related to the sale, which is reported as a gain on sale of subsidiary on the consolidated statements of income (loss).
−Removed: The sale also included a three-year agreement to purchase products from the buyer, with a cumulative commitment of $ 2.3 million (see Note 18- Commitments and Contingencies ).
Acquisition-Related expense
11 unchanged sentences
Balance at December 31, 2019 $ 247,215 $ 35,195 $ — $ 282,410
−Removed: Goodwill acquired during the year 1,535 — — 1,535
+Added: Impairment charges ( 57,227 ) ( 19,862 ) — ( 77,089 )
Adjustments to preliminary purchase price allocations 200 — — 200
11 unchanged sentences
These declines were driven in large part by the uncertainty surrounding the COVID-19 pandemic and other macroeconomic events such as the geopolitical tensions between OPEC and Russia.
−Removed: Based on these factors, the Company concluded that multiple triggering events occurred and, accordingly, an interim quantitative goodwill impairment test was performed for each reporting unit as of March 31, 2020.
+Added: Based on these factors, the Company concluded that multiple triggering events occurred and, accordingly, an interim quantitative goodwill impairment test was performed as of the testing date for each reporting unit as of March 31, 2020 ("testing date").
During the first quarter of 2020, the Company also performed an analysis to determine any impairment of long-lived assets (see Note 9-Intangible Assets ) based on the triggering events noted above.
−Removed: In performing the interim quantitative goodwill impairment test and consistent with prior practice, the Company determined the fair value of each of the reporting units using a combination of the income approach and the market approach by assessing each
−Removed: Table o f Contents
−Removed: of these valuation methodologies based upon availability and relevance of comparable company data and determining the appropriate weighting.
−Removed: Under the income approach, the fair value for each of the reporting units was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate.
−Removed: The Company used internal forecasts, updated for recent events, to estimate future cash flows with cash flows beyond the specific operating plans estimated using a terminal value calculation, which incorporates historical and forecasted trends, including an estimate of long-term future growth rates, based on the Company’s most recent views of the long-term outlook for each reporting unit.
−Removed: The internal forecasts include assumptions about future market recovery, including the expected demand for the Company’s goods and services.
−Removed: Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in the forecasts.
−Removed: The Company derived the discount rates using a capital asset pricing model and analyzing published rates for industries relevant to the reporting units to estimate the cost of equity financing.
−Removed: The Company used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in the internally developed forecasts, updated for recent events.
−Removed: The market approach valuations were derived from metrics of publicly traded companies or historically completed transactions of comparable businesses.
−Removed: The selection of comparable businesses was based on the markets in which the reporting units operate considering risk profiles, size, geography, and diversity of products and services.
−Removed: Based upon the results of the interim quantitative goodwill impairment test during the first quarter of 2020, the Company recorded an aggregate impairment charge of $ 77.1 million, which included $ 57.2 million in the services reporting unit within the Services segment, and $ 19.3 million in the European reporting unit and $ 0.6 million in the Brazilian reporting unit, both within the International segment.
−Removed: The impairment was calculated based on the difference between the estimated fair value and the carrying value of the reporting units and are included in Impairment charges on the Consolidated Statements of Income (Loss) for the year ended December 31, 2020.
−Removed: The Company's cumulative goodwill impairment as of December 31, 2020 was $ 100.2 million, of which $ 57.2 million related to the Services segment, $ 29.8 million related to the International segment and $ 13.2 million related to the Products and Systems segment.
−Removed: The Company's cumulative goodwill impairment as of December 31, 2019 was $ 23.1 million, of which $ 13.2 million related to the Products and Systems segment and $ 9.9 million related to the International segment.
−Removed: The Company elected to perform a qualitative assessment of goodwill on October 1, 2020.
−Removed: The Company's qualitative assessment considered relevant events and circumstances occurring since the interim quantitative goodwill impairment test performed as of March 31, 2020 (see previous paragraphs).
−Removed: Specifically, the Company considered changes in macroeconomic conditions, industry and market conditions, internal forecasts of future revenue and expenses, the Company's stock price, any significant events affecting the Company and actual changes in the carrying values of its net assets.
−Removed: After considering all positive and negative evidence for the assessment as of October 1, 2020, the Company concluded that it was not more likely than not that the carrying values of each reporting unit exceeded their respective fair values and as such, no additional impairment was indicated.
−Removed: Subsequent to October 1, 2020 through December 31, 2020, the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable.
+Added: Based upon the results of the interim quantitative goodwill impairment test during the first quarter of 2020, the Company recorded an aggregate impairment charge of $ 77.1 million, which consisted of $ 57.2 million in the services reporting unit within the Services segment, and $ 19.3 million in the European reporting unit and $ 0.6 million in the Brazilian reporting unit, both within the International segment.
+Added: The impairment was calculated based on the difference between the estimated fair value and the carrying value of the reporting units and are included in Impairment charges on the Consolidated Statements of Income (Loss) for the three months ended March 31, 2020.
+Added: The Company performed a quantitative annual impairment test as of October 1, 2021 and the Company did not identify any changes in circumstances that would indicate the carrying value of
+Added: goodwill may not be recoverable.
+Added: Additionally, through December 31, 2021, the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable.
Significant adverse changes in future periods could negatively affect the Company's key assumptions and may result in future goodwill impairment charges which could be material.
−Removed: Table o f Contents
+Added: The Company's cumulative goodwill impairment as of December 31, 2021 and December 31, 2020 was $ 100.2 million, of which $ 57.2 million related to the Services segment, $ 29.8 million related to the International segment and $ 13.2 million related to the Products and Systems segment.
Intangible Assets
1 unchanged sentence
Amount Accumulated
−Removed: Amortization Impairment Net
−Removed: Amount Accumulated
Amortization Net
+Added: Amount Accumulated
+Added: Amortization Impairment Net
Customer relationships 5 - 18
6 unchanged sentences
Total $ 187,571 $ ( 128,190 ) $ 59,381 $ 217,380 $ ( 119,944 ) $ ( 28,794 ) $ 68,642
−Removed: As described in Note 8- Goodwill , during the first quarter of 2020, there were negative market indicators that were determined to be triggering events indicating a potential impairment of certain long-lived assets within asset groups in the Services, International, Products and Corporate segments.
+Added: As described in Note 8- Goodwill , during the first quarter of 2020, there were negative market indicators that were determined to be triggering events indicating a potential impairment of certain long-lived assets within asset groups in the Services, International, and Products and Systems segments, as well as Corporate.
The asset groups are groupings of assets and liabilities determined at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
1 unchanged sentence
For asset groups that required an impairment measurement, similar to the valuations performed to determine the goodwill impairment, the Company used income and market approaches to estimate the fair value of the long-lived assets, which requires significant judgment in evaluation of the useful lives of the assets, economic and industry trends, estimated future cash flows, discount rates, and other factors.
−Removed: The result of the analysis was an aggregate impairment charge of $ 28.8 million, which included $ 25.9 million to software/technology, $ 2.2 million to customer relationships, $ 0.5 million to other intangibles and $ 0.2 million to covenants not to compete, all of which are in the Services reporting unit within the Services segment and are included in Impairment charges on the consolidated statements of income (loss) for the year ended December 31, 2020.
+Added: The result of the analysis was an aggregate impairment charge of $ 28.8 million, which consisted of $ 25.9 million to software/technology, $ 2.2 million to customer relationships, $ 0.5 million to other intangibles and $ 0.2 million to covenants not to compete, all of which are in the Services reporting unit within the Services segment and are included in Impairment charges on the consolidated statements of income (loss) for the year ended December 31, 2020.
Amortization expense for the years ended December 31, 2021, 2020 and 2019, was approximately $ 9.7 million, $ 11.0 million, and $ 14.3 million, respectively, including amortization of software/technology for these periods of $ 3.0 million, $ 3.6 million, and $ 5.6 million, respectively.
2 unchanged sentences
Total $ 59,381
−Removed: Table o f Contents
Accrued Expenses and Other Current Liabilities
9 unchanged sentences
Long-Term Debt
−Removed: Long-term debt consists of the following:
+Added: Long-term debt consisted of the following:
Senior credit facility $ 119,500 $ 120,312
6 unchanged sentences
Senior Credit Facility
−Removed: The Company has a credit agreement with its banking group (“Credit Agreement”) which provides the Company with a revolving line of credit and a $ 100 million senior secured term loan A facility.
−Removed: Pursuant to the Amendment described below, the revolving line of credit was reduced from $ 300 million to $ 175 million.
+Added: The Company has a credit agreement with its banking group (as amended, the “Credit Agreement”) which provides the Company with a revolving line of credit and a $ 100 million senior secured term loan A facility.
+Added: Pursuant to the Amendment described below, the revolving line of credit was reduced from $ 155 million to $ 150 million on December 31, 2021.
Both the revolving line of credit and the term loan A facility under the Credit Agreement have a maturity date of December 12, 2023.
−Removed: On May 15, 2020, the Company entered into the Third Amendment (the “Amendment”) to the Credit Agreement.
−Removed: The amendment was needed because the Company determined that as a result of the uncertain impact of the COVID-19 pandemic and the significant drop in oil prices, it would not meet the then existing financial covenants in the Credit Agreement for upcoming quarters.
−Removed: Accordingly, the Amendment modified the financial covenants to provide for:
−Removed: i) elimination of the Funded Debt Leverage Ratio (as defined in the Credit Agreement) for the quarters ended June 30 and September 30, 2020 and increased the Funded Debt Leverage ratio to no greater than 5.25 to 1 beginning for the quarter ending December 31, 2020 and decreasing each successive quarter to no greater than 3.50 to 1 for the quarter ended September 30, 2021, and all quarterly periods thereafter;
−Removed: ii) an elimination of the minimum Fixed Charge Coverage Ratio (as defined in the Credit Agreement for the quarters ended June 30, September 30 and December 31, 2020), a decrease to 1.0 to 1 for the quarter ending March 31, 2021 and returning to 1.25 to 1 for the quarter ending June 30, 2021 and thereafter;
−Removed: iii) the addition of a minimum EBITDA covenant requiring $ 3.44 million for the three months ending June 30, 2020, $ 24.25 million for the six months ending September 30, 2020, and $ 38.55 million for the nine months ending December 31, 2020, with no requirement thereafter;
−Removed: and iv) the addition of a minimum Liquidity (as defined in the Amendment) covenant of not less than $ 20.0 million at all times through September 30, 2020 and ceasing thereafter.
−Removed: In addition, the Amendment set a LIBOR floor of 1.0 % applicable to all LIBOR loans, and increased the LIBOR margin range to 1.50 % to 4.15 %, in addition to certain other modifications of the Credit Agreement.
−Removed: The Amendment also requires that the Company promptly prepay the outstanding amount under the revolving credit facility in an amount equal to the difference between (a) the aggregate sum of cash and cash equivalents of the Company and its subsidiaries held in the United States minus (b) $ 10.0 million if, for a period of two ( 2 ) consecutive business days, (i) the outstanding amount under the revolving credit facility exceeds $ 75.0 million and (ii) the sum of such cash and cash equivalents exceeds $ 10.0 million.
−Removed: Table o f Contents
−Removed: The Credit Agreement, as amended, provides that the Company may not make any acquisitions prior to June 30, 2021, and thereafter only if the Company's Funded Debt Leverage Ratio is less than 2.50 to 1, and after giving effect to such acquisition, its pro forma Funded Debt Leverage Ratio will not be greater than 3.25 to 1.
−Removed: The Credit Agreement also limits the Company’s ability to, among other things, create liens, make investments, incur more indebtedness, merge or consolidate, make dispositions of property, pay dividends and make distributions to stockholders or repurchase its stock, enter into a new line of business, enter into transactions with affiliates and enter into burdensome agreements.
−Removed: The Company may borrow up to $ 100 million in non-U.S.
+Added: On May 19, 2021, the Company entered into the Fifth Amendment (the “Amendment”) to the Credit Agreement.
+Added: The Amendment made the following changes:
+Added: • Removed the LIBOR floor of 1.0 %, which provided that if LIBOR is below 1.0 %, the interest rate will be calculated as if LIBOR is 1.0 %.
+Added: Now the actual LIBOR rate is used to calculate interest, even if LIBOR is below 1.0 %.
+Added: The LIBOR margins and base rate margins are unchanged but are based upon the new Total Consolidated Debt Leverage Ratio (defined below);
+Added: previously the margin was based upon the Funded Debt Leverage Ratio.
+Added: • Requires the Company to maintain a Total Consolidated Debt Leverage Ratio not to exceed 4.00 to 1.0 as of the end of each quarter through the quarter ending March 31, 2022, and for each quarter thereafter the ratio shall not exceed 3.50 to 1.0.
+Added: ◦ Total Consolidated Debt Leverage Ratio means the ratio of (a) Total Consolidated Debt to (b) EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters.
+Added: ◦ Total Consolidated Debt means all indebtedness (including subordinated debt) of the Company on a consolidated basis (with a limited exception).
+Added: • If the Company incurs certain subordinated debt or other permitted indebtedness, then the Company must maintain a Total Consolidated Debt Leverage Ratio not to exceed 4.50 to 1.0 and maintain a ratio of Senior Debt to EBITDA not to exceed 3.50 to 1.00, with Senior Debt being Total Consolidated Debt, less permitted subordinated debt.
+Added: • The Company must repay loans under the Credit Agreement with the net proceeds from certain dispositions of assets under certain circumstances and limits investments in non-guarantor subsidiaries under certain circumstances if the Company’s Total Consolidated Leverage Ratio is above 3.5 to 1.0.
+Added: • Quarterly payments on the term loan increased to $ 3.75 million through March 31, 2022, then to $ 5.0 million for each quarterly payment thereafter and a final balloon payment at maturity.
+Added: As a result of the borrowing capacity reduction on the revolving loan line of credit, the Company expensed $ 0.1 million in unamortized capitalized debt issuance costs during the year ended December 31, 2021, which was included in selling, general and administrative expenses on the Consolidated Statements of Income (Loss).
+Added: The Company incurred $ 0.5 million in financing costs for the Amendment, of which $ 0.2 million of third party costs were expensed and included in selling, general and administrative expenses on the Consolidated Statements of Income (Loss).
+Added: Under the Credit Agreement, the Company may borrow up to $ 100 million in non-U.S.
Dollar currencies and use up to $ 20 million of the credit limit for the issuance of letters of credit.
1 unchanged sentence
The Company has capitalized costs associated with debt modifications of $ 0.9 million as of December 31, 2021, which is included in Other Assets on the consolidated balance sheet.
−Removed: The Amendment reduced the Company's total available loan capacity, amongst other things, and as a result, the Company expensed approximately $ 0.6 million in capitalized debt issuance costs during the second quarter of 2020, which is included in Selling, general and administrative expenses on the consolidated statements of income (loss).
−Removed: As of December 31, 2020, the Company was in compliance with the terms of the Credit Agreement, as amended, and will continuously monitor its compliance with the covenants contained in its Credit Agreement.
+Added: As of December 31, 2021, the Company was in compliance with the terms of the Credit Agreement.
+Added: The Company continuously monitors its compliance with the covenants contained in its Credit Agreement.
The Company believes that it is probable, based on the amended covenants, that the Company will be able to comply with the financial covenants in the Credit Agreement as modified by the Amendment and that sufficient credit remains available under the Credit Agreement to meet the Company's liquidity needs.
However, due to the uncertainties being caused by the COVID-19 pandemic, the significant volatility in oil prices, and volatility in the aerospace production, such matters cannot be predicted with certainty.
−Removed: The Company's other debt includes local bank financing provided at the local subsidiary levels used to support working capital requirements and fund capital expenditures.
−Removed: At December 31, 2020, there was approximately $ 10.2 million outstanding, payable at various times through 2030.
−Removed: Monthly payments range from $ 1 thousand to $ 18 thousand.
−Removed: Interest rates range from 0.4 % to 3.5 %.
+Added: The Company's other debt includes bank financing provided at the local subsidiary level used to support working capital requirements and fund capital expenditures.
+Added: At December 31, 2021, there was an aggregate of approximately $ 6.4 million outstanding, payable at various times through 2030.
+Added: Monthly payments ran ge from $ 1 thousand to $ 18 thousand and interest rates range from 0.4 % to 3.5 %.
Scheduled principal payments due under all borrowing agreements in each of the five years and thereafter subsequent to December 31, 2021 are as follows:
9 unchanged sentences
Level 2 — Observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and inputs derived principally from or corroborated by observable market data.
−Removed: Table o f Contents
Level 3 — Unobservable inputs reflecting the Company’s own assumptions about inputs that market participants would use in pricing the asset or liability based on the best information available.
14 unchanged sentences
The Company has evaluated current market conditions and borrower credit quality and has determined that the carrying value of its long-term debt approximates fair value.
−Removed: The fair value of the Company’s notes payable and finance and operating lease obligations approximates their carrying amounts based on anticipated interest rates which management believes would currently be available to the Company for similar issuances of debt.
+Added: The fair value of the Company’s notes payable and finance lease obligations approximates their carrying amounts based on anticipated interest rates which management believes would currently be available to the Company for similar issuances of debt.
Share-Based Compensation
−Removed: The Company has share-based incentive awards outstanding to its eligible employees and directors under two employee stock ownership plans:
+Added: The Company has share-based incentive awards outstanding to its eligible employees and non-employee directors under two equity incentive plans:
(i) the 2009 Long-Term Incentive Plan (the "2009 Plan") and (ii) the 2016 Long-Term Incentive Plan (the "2016 Plan").
−Removed: No further awards may be granted under the 2009 Plan, although awards granted under the 2009 Plan remain outstanding in accordance with their terms.
+Added: No further awards may be granted under the 2009 Plan, although one stock option award granted under the 2009 Plan remains outstanding in accordance with its terms.
Awards granted under the 2016 Plan may be in the form of stock options, restricted stock units and other forms of share-based incentives, including performance restricted stock units, stock appreciation rights and deferred stock rights.
−Removed: At the annual shareholders meeting on May 19, 2020, the Company’s shareholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 2,000,000 , for a total of 3,700,000 shares that may be issued under the 2016 Plan, of which 1,787,000 shares were available for future grants as of December 31, 2020.
+Added: At the annual shareholders meeting on May 19, 2020, the Company’s shareholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 2 million, for a total of 3.7 million shares that may be issued under the 2016 Plan, of which 1,176,888 shares were available for future grants as of December 31, 2021.
As of December 31, 2021, there was an aggregate of approximately 5,000 stock options outstanding under the 2009 Plan.
−Removed: Table o f Contents
Stock Options
−Removed: For the years ended December 31, 2020, 2019 and 2018, the Company did no t have any share-based compensation expense related to stock option awards.
−Removed: No stock options were granted during the years ended December 31, 2020, 2019 and 2018.
−Removed: As of December 31, 2020, no unrecognized compensation costs remained related to stock option awards.
+Added: For each of the years ended December 31, 2021, 2020 and 2019, the Company did no t recognize any share-based compensation expense related to the stock option award, as the one outstanding stock option award was already fully vested.
+Added: No unrecognized compensation costs remained related to the stock option awards.
Cash proceeds from, and the intrinsic value of, stock options exercised during the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):
For the year ended December 31,
+Added: 2021 2020 2019 1
Cash proceeds from options exercised $ — $ — $ 32
2 unchanged sentences
1 During 2019, 2.1 million stock options were net exercised, wherein the option holders surrendered a portion of the underlying stock option awards to pay the exercise price and required minimum tax withholding.
−Removed: A summary of the stock option activity, weighted average exercise prices, and options outstanding and exercisable as of December 31, 2020, 2019 and 2018 is as follows (in thousands, except per share amounts and years):
+Added: The following table sets forth a summary of the stock option activity, weighted-average exercise prices and options outstanding as of December 31, 2021, 2020 and 2019 is as follows (in thousands, except per share amounts and years):
For the years ended December 31,
20 unchanged sentences
Upon vesting, restricted stock units are generally net share-settled to cover the required minimum withholding tax and the remaining amount is converted into an equivalent number of shares of common stock.
−Removed: Table o f Contents
A summary of the vesting activity of restricted stock unit awards, with the respective fair value of the awards, is as follows:
−Removed: (in thousands):
For the year ended December 31,
2 unchanged sentences
Fair value of awards vested $ 3,434 $ 837 $ 2,495
−Removed: A summary of the fully-vested common stock the Company issued to its six non-employee directors, in connection with its non-employee director compensation plan, is as follows (in thousands):
+Added: A summary of the fully-vested common stock the Company issued to its six non-employee directors, in connection with its non-employee director compensation plan, is as follows:
For the year ended December 31,
2 unchanged sentences
Grant date fair value of awards issued $ 525 $ 326 $ 450
−Removed: A summary of the Company's outstanding, non-vested restricted share units is presented below (in thousands, except per share amounts):
+Added: A summary of the Company's outstanding, non-vested restricted share units is as follows:
For the year ended December 31,
12 unchanged sentences
The Company maintains Performance Restricted Stock Units (PRSUs) that have been granted to select executives and senior officers whose ultimate payout is based on the Company’s performance over a one-year period based on specific metrics approved by the Compensation Committee of the Board of Directors of the Company.
−Removed: The PRSU awards granted in 2019 included three performance metrics, as defined:
−Removed: (1) Operating Income, (2) Adjusted EBITDAS (defined as net income attributable to MISTRAS Group, Inc.
−Removed: interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense and certain acquisition related costs (including transaction due diligence costs and adjustments to the fair value of contingent consideration), foreign exchange (gain) loss and, if applicable, certain special items which are noted) and (3) Revenue.
−Removed: There also is a discretionary portion of the 2019 PRSUs based on individual performance, granted at the discretion of the Compensation Committee (Discretionary PRSUs).
−Removed: PRSUs and Discretionary PRSUs generally vest ratably on each of the first four anniversary dates upon completion of the performance period, for a total requisite service period of up to five years and have no dividend rights.
−Removed: For 2020 awards, the Compensation Committee changed the criteria for the PRSUs to four metrics, with no discretionary portion.
−Removed: Revenue and Adjusted EBITDAS were retained, and two additional metrics, free cash flow as a percentage of revenue and return on average book equity, replaced Operating Income.
−Removed: These two newly-added metrics are relative metrics, the performance of which are based upon how the Company performs relative to a peer group.
−Removed: PRSUs are equity-classified and compensation costs are initially measured using the fair value of the underlying stock at the date of grant, assuming that the target performance conditions will be achieved.
+Added: For 2020, the Compensation Committee approved the following four metrics
+Added: Adjusted EBITDA defined as net income attributable to the Company plus:
+Added: interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense and certain acquisition related costs (including transaction due diligence costs and adjustments to the fair value of contingent consideration), foreign exchange (gain) loss and, if applicable, certain special items which are noted).
+Added: Free Cash Flow as a percentage of revenue.
+Added: Return on Average Book Equity defined as net income divided by average book value of shareholders equity.
+Added: The free cash flow and return on average book equity criteria are relative metrics, the performance of which are based upon how the Company performs relative to a peer group.
+Added: For 2021, the Compensation Committee made changes to the Company’s equity incentive compensation plan for its executive officers and approved the new target metrics for 2021.
+Added: For 2021, the three metrics are:
+Added: Free Cash Flow net cash provided by operating activities less purchases of property, plant, equipment and intangible assets and is subject to adjustments approved by the Compensation Committee.
+Added: Adjusted EBITDA as defined in the 2020 metric section above.
+Added: Total Shareholder Return (TSR) measures the total return to shareholders of the Company during 2021 versus the total return to the shareholders of a predefined peer group of companies that provide inspection, testing, certification or similar industrial services.
+Added: The return will be measured by the year over year percent change in share price.
+Added: The share prices used to calculate the return are the average share price during the 20 -trading day period ending on the initial measurement date (the last 20 trading days of 2020), compared to the average share price during the 20 -trading day
+Added: period ending on the final measurement date (the last 20 trading days of 2021).
+Added: Any cash dividends or distributions paid in 2021 will be added to calculate the return to shareholders during the year.
+Added: TSR is considered a market condition for which the fair value of PRSUs with this condition is determined using a Monte Carlo valuation model.
+Added: Key assumptions in the Monte Carlo valuation model included:
+Added: Expected Volatility.
+Added: Expected volatility of the Company’s common stock at the date of grant was estimated based on a historical average volatility rate for the approximate 1-year performance period.
+Added: Dividend Yield .
+Added: The dividend yield assumption was based on historical and anticipated dividend payouts (assumed at zero ).
+Added: Risk-Free Interest Rate .
+Added: The risk-free interest rate assumption was based on observed interest rates consistent with the approximate 1-year performance measurement period.
+Added: PRSUs are equity-classified and compensation costs are initially measured using the fair value of the underlying stock at the date of grant.
Compensation costs related to the PRSUs are subsequently adjusted for changes in the expected outcomes of the performance conditions.
−Removed: Table o f Contents
−Removed: Discretionary PRSUs are liability-classified and adjusted to fair value (with a corresponding adjustment to compensation expense) based upon the targeted number of shares to be awarded and the fair value of the underlying stock each reporting period until approved by the Compensation Committee, at which point they are equity-classified.
−Removed: A summary of the Company's PRSU activity is presented below (in thousands, except per share amounts):
+Added: Compensation cost related to the PRSUs with a market condition is not reversed if the market condition is not achieved, provided the employee requisite service has been rendered.
+Added: PRSUs generally vest ratably on each of the first four anniversary dates upon completion of the performance period, for a total requisite service period of up to five years and have no dividend rights.
+Added: A summary of the Company's PRSU activity is presented as follows:
For the year ended December 31,
12 unchanged sentences
For the year ended December 31, 2021, 189,000 PRSUs were granted.
−Removed: There was a 99,000 net unit reduction to these awards, which represents Company performance against target (including an increase of 1,000 units due to the Compensation Committee approving the final calculation of the award metrics for calendar year 2019), during the year ended December 31, 2020.
+Added: There was a 56,000 net unit reduction to these awards, which represents Company performance against target, during the year ended December 31, 2021.
For the year ended December 31, 2020, 292,000 PRSUs were granted.
−Removed: There was a 103,000 unit reduction to these awards, which represents Company performance below target, during the year ended December 31, 2019.
−Removed: As of December 31, 2019, the aggregate liability related to 29,000 outstanding discretionary PRSUs was less than $ 0.1 million and is classified within Accrued expenses and other liabilities on the consolidated balance sheet.
+Added: There was a 99,000 unit reduction to these awards, which represents Company performance against target, (including an increase of 1,000 units due to the Compensation Committee approving the final calculation of the award metrics for calendar year 2019), during the year ended December 31, 2020.
For the year ended December 31, 2019, 190,000 PRSUs were granted.
1 unchanged sentence
As of December 31, 2019, the aggregate liability related to 29,000 outstanding discretionary PRSUs was less than $ 0.1 million and is classified within Accrued expenses and other liabilities on the consolidated balance sheet.
−Removed: The Compensation Committee approved these PRSUs during the first quarter of 2019, which further reduced these awards by 3,000 units.
−Removed: The discretionary portion of these awards were reclassified from a liability to equity on the consolidated balance sheet upon Compensation Committee approval.
Compensation expense related to all PRSUs described above was $ 1.4 million, $ 1.2 million, and $ 1.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.
9 unchanged sentences
Income (loss) before income taxes $ 7,288 $ ( 114,172 ) $ 10,439
−Removed: Table o f Contents
The provision for income taxes consists of the following:
9 unchanged sentences
Foreign ( 1,884 ) ( 10,045 ) ( 4,095 )
+Added: Reserve for uncertain tax positions 155 — —
Total deferred provision (benefit) ( 2,176 ) ( 14,070 ) ( 3,812 )
12 unchanged sentences
Permanent differences 373 5.1 % 944 ( 0.8 ) % 464 4.4 %
−Removed: Transition tax, net of foreign tax credits — — % — — % 1,158 8.1 %
Federal loss carryback — — % ( 1,938 ) 1.7 % — — %
6 unchanged sentences
The Tax Act is complex and significantly changes the U.S.
−Removed: corporate tax system by, among other things, (a) reducing the federal corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017, (b) replacing the prior system of taxing corporations on foreign earnings of their foreign subsidiaries when the earnings are repatriated with a partial territorial tax system that provides a 100% dividends-received deduction (DRD) to domestic corporations for foreign-sourced dividends received from 10%-or-more owned foreign corporations, (c) subjecting certain unrepatriated foreign earnings to a mandatory
−Removed: Table o f Contents
−Removed: one-time transition tax on post-1986 earnings and profits ("the transition tax"), and (d) further limiting a public entity's ability to deduct compensation in excess of $1 million for covered employees.
−Removed: During the year ended December 31, 2018, the Company completed its accounting for the effects of the Tax Act on the period ended December 31, 2017, which resulted in income tax expense of $ 1.7 million.
−Removed: This consisted primarily of $ 0.1 million of an increase in the Company's net deferred tax liabilities due to the reduction in the federal corporate rate from 35% to 21%, an increase of $ 1.3 million in tax expense attributable to the transition tax and a decrease in deferred tax assets of $ 0.4 million due to changes made to executive compensation.
+Added: corporate tax system by, among other things, (a) reducing the federal corporate tax rate from 35% to 21% for tax years beginning after December 31, 2017, (b) replacing the prior system of taxing corporations on foreign earnings of their foreign subsidiaries when the earnings are repatriated with a partial territorial tax system that provides a 100% dividends-received deduction (DRD) to domestic corporations for foreign-sourced dividends received from 10%-or-more owned foreign corporations, (c) subjecting certain unrepatriated foreign earnings to a mandatory one-time transition tax on post-1986 earnings and profits ("the transition tax"), and (d) further limiting a public entity's ability to deduct compensation in excess of $1 million for covered employees.
On June 28, 2019, the Canadian province of Alberta enacted the Job Creation Tax Cut which reduced the Alberta corporate income tax rate from 12% to 11% starting in 2019 with further annual reductions to 10% in 2020, 9% in 2021, and 8% in 2022.
14 unchanged sentences
The Company is currently evaluating the impact of this guidance on its consolidated financial position, results of operations, and cash flows, but does not expect it to have a material impact.
−Removed: Table o f Contents
Deferred income tax attributes resulting from differences between financial accounting amounts and income tax basis of assets and liabilities are as follows:
6 unchanged sentences
Finance lease obligations 741 942
−Removed: Capital losses — 463
Deferred stock based compensation 996 920
25 unchanged sentences
Except for those deferred tax assets subject to the valuation allowance, management believes that it will realize all deferred tax assets as a result of sufficient future taxable income in each tax jurisdiction in which the Company has deferred tax assets.
−Removed: Table o f Contents
The following table summarizes the changes in the Company’s gross unrecognized tax benefits, excluding interest and penalties:
3 unchanged sentences
Additions for tax positions related to prior years 1 32
−Removed: Decreases for tax positions related to prior years — —
−Removed: Current year acquisitions — —
Impact of foreign exchange fluctuation — ( 5 )
−Removed: Settlements — ( 465 )
Reductions related to the expiration of statutes of limitations ( 203 ) ( 73 )
2 unchanged sentences
As of December 31, 2021 and December 31, 2020, there were approximately $ 0.3 million and $ 0.3 million of unrecognized tax benefits, respectively, including penalties and interest.
−Removed: If the Company recognized these unrecognized tax benefits, approximately $ 0.2 million would favorably affect the effective tax rate for both December 31, 2020 and December 31, 2019.
+Added: If the Company recognized these unrecognized tax benefits, approximately $ 0.3 million and $ 0.2 million would favorably affect the effective tax rate for both December 31, 2021 and December 31, 2020, respectively.
Interest and penalties related to unrecognized tax benefits are recorded in income tax expense and are not significant for the years ended December 31, 2021, 2020 and 2019.
18 unchanged sentences
There is a five-year vesting schedule for the Company match.
−Removed: To respond to the economic downturn resulting from the COVID-19 pandemic, significant volatility in oil prices and decreased traffic in the aerospace industry, the Company temporarily suspended its 401(k) match effective with the second quarter of 2020.
+Added: During the third quarter of 2021, the Company re-installed the employer match which was previously suspended as part of the Company's cost reduction initiatives undertaken in 2020 due to the COVID-19 pandemic.
The Company’s contribution to the plan was $ 1.2 million, $ 1.1 million, and $ 4.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.
−Removed: Table o f Contents
The Company's subsidiary participated with other employers in contributing to the Boilermaker-Blacksmith National Pension Trust (EIN 48-6168020) (“Boilermakers”) and Plumbers and Pipefitters National Pension Fund (EIN 52-6152779) (“Pipefitters”), multi-employer defined benefit pension plans, which covers certain U.S.
1 unchanged sentence
The plans provide multiple plan benefits with corresponding contribution rates that are collectively bargained between participating employers and their affiliated Boilermakers and Pipefitters local unions.
−Removed: Both the Boilermakers and Pipefitters plans are between 66 percent and 75 percent funded as of the latest Form 5500 filed.
+Added: Both the Boilermakers and Pipefitters plans are approximately 70 percent funded as of the latest Form 5500 filed, respectively.
The Company did no t make any contributions to the Boilermakers during the years ended December 31, 2021 and 2020 while making de minimis contributions to the Pipefitters plan during the same periods.
−Removed: The Company’s contributions to the Boilermakers and Pipefitters plans, collectively, were $ 0.6 million for the year ended December 31, 2018.
See Note 18-Commitments and Contingencies, Pension Related Contingencies, for additional detail.
11 unchanged sentences
Concurrent with the adoption of ASC 842, the Company recognized a right-of-use (ROU) asset and lease liability based on the present value of the future lease payments over the lease term for each lease agreement.
−Removed: The Company has elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less and will continue to recognize lease expense for these leases on a straight-line basis over the lease term.
+Added: The Company elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less and will continue to recognize lease expense for these leases on a straight-line basis over the lease term.
The Company has leases with both lease components and non-lease components, such as common area maintenance, utilities, or other repairs and maintenance.
12 unchanged sentences
The ROU liability for this facility is approximately $ 2.9 million as of December 31, 2021 and $ 3.8 million as of December 31, 2020.
−Removed: Table o f Contents
Total rent payments for this facility were approximately $ 1.3 million and $ 0.7 million during the years ended December 31, 2021 and 2020.
2 unchanged sentences
As described in Note 9-Intangible Assets , the Company performed an analysis to determine whether there was any impairment of long-lived assets, which included the ROU assets, within the Services, International, and Products and Systems operating segments as well as Corporate.
−Removed: The result of the analysis was a $ 0.2 million impairment of a ROU asset in an asset group within the Services segment which is included in Impairment charges on the consolidated statements of income (loss) for the year ended December 31, 2020.
+Added: The result of the analysis was a $ 0.2 million impairment of a ROU asset in an asset group within
+Added: the Services segment which is included in Impairment charges on the consolidated statements of income (loss) for the year ended December 31, 2020.
The components of lease costs for the year ended December 31, 2021 and 2020 are as follows:
11 unchanged sentences
Additional information related to leases as of December 31, 2021 and 2020 is as follows:
−Removed: Cash paid for amounts included in the measurement of lease liabilities for finance leases:
+Added: Cash paid for amounts included in the measurement of lease liabilities for finance and operating leases:
Finance - financing cash flows $ 4,060 $ 4,095
11 unchanged sentences
Maturities of lease liabilities as of December 31, 2021 is as follows:
−Removed: Table o f Contents
Finance Operating
10 unchanged sentences
Legal Proceedings and Government Investigations
−Removed: The Company is subject to periodic lawsuits, investigations and claims that arise in the ordinary course of business.
+Added: The Company is periodically involved in lawsuits, investigations and claims that arise in the ordinary course of business.
The Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it.
−Removed: Except possibly for certain of the matters described below, the Company does not believe that any currently pending legal proceeding to which the Company is a party will have a material adverse effect on its business, results of operations, cash flows or financial condition.
−Removed: The costs of defense and amounts that may be recovered against the Company may be covered by insurance for certain matters.
+Added: Except for possible losses from the matters described below, the Company does not believe that any currently pending or threatened legal proceeding to which the Company is or is likely to become a party will have a material adverse effect on its business, results of operations, cash flows or financial condition.
+Added: The costs incurred by the Company to defend lawsuits, investigations and claims and amounts the Company pays to other parties because of these matters may be covered by insurance in some circumstances.
Litigation and Commercial Claims
2 unchanged sentences
The customer provided the Company with notice in December 2019, alleging that the Company’s inspection of 66 welds (out of approximately 16,000 welds inspected) were not in compliance with the contract, claimed approximately $ 7.6 million in damages, and requested that the Company pay these damages and any other damages incurred.
−Removed: The Company has filed a lawsuit in the District Court of Bexar County, Texas, 37th Judicial District, in an action captioned Mistras Group, Inc.
+Added: The Company filed a lawsuit in the District Court of Bexar County, Texas, 37th Judicial District, in an action captioned Mistras Group, Inc.
Epic Y-Grade Pipeline LP, to recover the $ 1.4 million and other amounts due to the Company.
2 unchanged sentences
At this time, the Company is unable to determine whether it has any liability in connection with this matter and if so, the amount or range of any such liability, and accordingly, has no t established any accruals for this matter.
−Removed: Accordingly, the Company recorded a reserve of $ 1.4 million during the twelve months ended December 31, 2019 for these past due receivables.
−Removed: See 4-Accounts Receivable for additional details.
−Removed: Two proceedings have been filed in California Superior Court for the County of Los Angeles regarding alleged violations of California Labor Code.
−Removed: Both cases are captions Justin Price v.
+Added: Accordingly, the Company recorded a reserve in the amount of $ 1.4 million during the twelve months ended December 31, 2019 for these past due receivables.
+Added: Two proceedings have been filed in California Superior Court for the County of Los Angeles regarding alleged violations of the California Labor Code.
+Added: Both cases are captioned Justin Price v.
Mistras Group, Inc., one being a purported class action lawsuit on behalf of current and former Mistras employees in California and the other was filed on behalf of the State of California under the California Private Attorney General Act on the basis of the same alleged violations.
−Removed: Both cases are requesting payment of all damages, including unpaid wages, and various fines and penalties available under California law.
−Removed: As a result of continued legal proceedings through March 2021, the Company established a liability of $ 0.8 million at December 31, 2020 for a probable loss on this matter.
−Removed: However, no assurance can be given that this will be the limit of the loss, or that the loss will not be materially more than the $ 0.8 million liability.
−Removed: An estimate of the total possible loss or range of the total possible loss cannot be made at this time as matters are in preliminary stages.
+Added: The two cases have been consolidated and are requesting payment of all damages, including unpaid wages, and various fines and penalties available under California law.
+Added: On May 4, 2021, the Company agreed to a settlement of all claims in the cases, which was more formally documented pursuant to a settlement agreement completed October 5, 2021.
+Added: Pursuant to the settlement, the Company will pay $ 2.3 million to resolve the allegations in these proceedings and will be responsible for the employer portion of payroll taxes on the amount of the settlement allocated to wages.
+Added: The settlement is subject to court approval and will cover claims for the period from June 2016 through July 31, 2021.
+Added: The Company recorded expense of approximately $ 1.6 million during the three months ended March 31, 2021 related to this settlement, which is in addition to expense of $ 0.8 million the Company recorded during the three months ended December 31, 2020.
Pension Related Contingencies
−Removed: The workforce of certain of the Company’s subsidiaries are unionized and the terms of employment for these workers are governed by collective bargaining agreements, or CBAs.
−Removed: Under these CBAs, the Company’s subsidiaries are required to contribute to the national pension funds for the unions representing these employees, which are multi-employer pension plans.
−Removed: The Company was notified that a significant project was awarded to another contractor in January 2018, and as a result, one of the Company’s subsidiaries experienced a significant reduction in the number of its employees covered by one of the CBAs.
−Removed: Table o f Contents
−Removed: Under certain circumstances, such a reduction in the number of employees participating in multi-employer pension plans pursuant to this CBA could result in a complete or partial withdrawal liability to these multi-employer pension plans under the Employee Retirement Income Security Act of 1974 ("ERISA").
−Removed: Management explored options to retain a level of union work that would avoid withdrawal liability to the pension plans, but concluded during the third quarter of 2018 that the Company's subsidiaries probably would not obtain sufficient union work to avoid withdrawal liability.
−Removed: Therefore, the Company determined that it is probable that its subsidiary would incur a withdrawal liability related to these multi-employer pension plans.
−Removed: Accordingly, the Company recorded a charge of $ 5.9 million during 2018 and $ 0.8 million during 2019 for this potential withdrawal liability.
−Removed: The Company’s subsidiary reached an agreement with one of the pension funds in September 2019 and made a final payment of $ 0.9 million in complete satisfaction of the withdrawal liability of the subsidiary.
−Removed: Excluding the settlement payment, the Company made monthly payments totaling $ 3.3 million through the time of final settlement payment, for total payments of $ 4.2 million.
−Removed: The balance of the estimated total amount of this potential liability as of December 31, 2020 is approximately $ 2.5 million.
+Added: Certain of Company’s subsidiaries had significant reductions in their unionized workers in 2018.
+Added: The collective bargaining agreements for these employees required contributions for these employees to national multi-employer pension funds.
+Added: The reduction in employees resulted in a subsidiary incurring a complete withdrawal to one of the pension funds under the Employee Retirement Income Security Act of 1974 ("ERISA"), which was fully satisfied in 2019.
+Added: The Company has determined that the subsidiary is likely to incur partial or complete withdrawal liability to the other pension fund.
+Added: The balance of the estimated total amount of this potential liability as of December 31, 2021 is approximately $ 2.6 million, $ 2.5 million of which were incurred in 2018 and 2019 and $ 0.1 million of which were incurred in the three months ended December 31, 2021.
Severance and labor disputes
−Removed: The Company’s German subsidiary provides employees to customers under temporary staff leasing arrangements.
−Removed: In April 2017, the German Labor Lease Act was passed in Germany limiting the duration of temporary workers to eighteen months , or longer as subsequently agreed with by a customer appropriate authority.
−Removed: Since the passing of the German Labor Lease Act, the Company explored selling its staff leasing services and concluded during the third quarter of 2018 that a sale would not be probable.
−Removed: As a result, the Company decided that it would not renew several of these leasing services contracts when they expired beginning in 2019.
−Removed: Due to the limit on the length of service allowed under the German Labor Lease Act, employees are being transitioned off the customer contracts.
−Removed: The German subsidiary has terminated, or will terminate, some these employees, creating a severance obligation to the terminated employees, and has transitioned, or will transition other employees to the Company's other customers.
−Removed: During December 2019, the Company executed an agreement to sell the rights of certain customer contracts for total consideration of approximately $ 0.1 million, effective January 1, 2020.
+Added: During December 2019, the Company executed an agreement to sell the rights of certain customer "staff leasing" contracts related to its German subsidiary for total consideration of approximately $ 0.1 million, effective January 1, 2020.
No other assets or liabilities other than those employee benefits related to employees working on the customer contracts were included in the sale.
1 unchanged sentence
The $ 0.1 million of estimated obligations is net of $ 0.4 million in payments made and $ 1.0 million in reversals due to employees being transitioned to customer contracts.
−Removed: During 2018, the Company recorded approximately $ 1.2 million in charges related to labor claims against its Brazilian subsidiary, which are included within selling, general and administrative expenses.
−Removed: These claims related to employees in a company acquired by the Brazilian subsidiary in a prior period.
−Removed: The Company is entitled to indemnification from the sellers of the acquired company for most of these charges and won an arbitration award against the seller in 2020.
−Removed: The Company and the seller subsequently entered into a settlement agreement for $ 1.0 million, which provides for payment in two installments, the first for approximately 31 % of the settlement and the second for the remaining 69 %.
−Removed: The first installment in the amount of $ 0.3 million was paid by the sellers in December 31, 2020 and recognized as a gain in selling, general and administrative expenses in the same period.
−Removed: The remaining payment is due in the first quarter of 2021, and the recovery resulting from this second payment will be recorded upon receipt.
+Added: The Company was entitled to indemnification on certain labor claims from the sellers of a company acquired by its Brazilian subsidiary.
+Added: The Company and the sellers entered into a settlement agreement for approximately $ 1.0 million, which provided for payment in two installments, the first for approximately 31 % of the settlement and the second for the remaining 69 %.
+Added: The first installment in the amount of approximately $ 0.3 million was paid by the sellers in December 2020 and the Company recognized that amount as a gain in selling, general and administrative expenses in the same period.
+Added: The remaining payment for $ 0.6 million was received in the first quarter of 2021 and the Company recognized that amount as a gain in selling, general and administrative expenses in the same period.
Acquisition and disposition related contingencies
−Removed: The Company is liable for contingent consideration in connection with one of its acquisitions.
−Removed: As of December 31, 2020, total potential acquisition-related contingent consideration ranged from zero to approximately $ 4.3 million and would be payable upon the achievement of specific performance metrics by certain of the acquired companies over the next 1.75 years.
−Removed: With respect to the acquisition made in 2018, the Company filed a claim with the sellers and the Company's insurance carrier through which the Company has representations and warranty insurance.
−Removed: The Company received release of escrow funds from the Seller and is still pursuing its claim with the insurance carrier.
+Added: The Company is liable for contingent consideration in connection with certain of its acquisitions.
+Added: As of December 31, 2021, total potential acquisition-related contingent consideration ranged from zero to approximately $ 2.8 million and would be payable upon the achievement of specific performance metrics by certain of the acquired companies over the next twelve months .
During 2018, the Company sold a subsidiary in the Products and Systems segment.
−Removed: As part of the sale, the Company entered into a three-year agreement to purchase products from the buyer, with a cumulative commitment of $ 2.3 million, of which $ 1.2 million is remaining as of December 31, 2020.
−Removed: The agreement is based on third party pricing and the Company's planned purchase requirements over the three-year purchase period to meet the minimum contractual purchases.
+Added: As part of the sale, the Company entered into a three-year agreement to purchase products from the buyer.
+Added: On August 3, 2021, the parties amended the agreement and extended the period by 12 months .
+Added: As of December 31, 2021, approximately $ 1.0 million is remaining on the amended purchase commitment.
+Added: The agreement is based on third party pricing and the Company's planned purchase requirements over the duration of the extension to meet the minimum contractual purchases.
Segment Disclosure
The Company’s three operating segments are:
−Removed: Table o f Contents
This segment provides asset protection solutions predominantly in North America, with the largest concentration in the United States, followed by Canada, consisting primarily of NDT, inspection, mechanical and engineering services that are used to evaluate the safety, structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components.
−Removed: PCMS software and pipeline related software and data analysis solutions are included in this segment.
+Added: Software, digital and data services are included in this segment.
• International.
11 unchanged sentences
Corporate loss from operations consists of administrative charges related to corporate personnel and other charges that cannot be readily identified for allocation to a particular segment.
−Removed: Selected financial information by segment for the periods shown was as follows (intercompany transactions are eliminated in Corporate and eliminations):
+Added: Selected consolidated financial information by segment for the periods shown was as follows (with intercompany transactions eliminated in Corporate and eliminations):
For the year ended December 31,
13 unchanged sentences
Income (loss) from operations by operating segment includes intercompany transactions, which are eliminated in Corporate and eliminations .
−Removed: Table o f Contents
For the year ended December 31,
33 unchanged sentences
The following is a summary of the quarterly results of operations for calendar years 2021, 2020, and 2019.
−Removed: Table o f Contents
Quarter ended December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021
−Removed: Revenues $ 160,777 $ 147,894 $ 124,435 $ 159,465
+Added: Revenue $ 171,163 $ 174,556 $ 177,677 $ 153,735
Gross Profit 49,594 52,216 55,336 40,001
8 unchanged sentences
Gross Profit 49,345 47,384 41,158 40,644
−Removed: Income from operations 2,335 10,779 15,419 ( 4,396 )
+Added: Income (loss) from operations 4,652 5,742 ( 383 ) ( 111,228 )
Net income (loss) attributable to Mistras Group, Inc.
14 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.