1 unchanged sentence
Report of Independent Registered Public Accounting Firm
−Removed: To the Stockholders and Board of Directors
−Removed: Mistras Group, Inc.:
−Removed: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
−Removed: We have audited the accompanying consolidated balance sheets of Mistras Group, Inc.
−Removed: and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income (loss), comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).
−Removed: We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
−Removed: In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S.
−Removed: generally accepted accounting principles.
−Removed: Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
+Added: To the Board of Directors and Stockholders of Mistras Group, Inc.
+Added: Opinions on the Financial Statements and Internal Control over Financial Reporting
+Added: We have audited the accompanying consolidated balance sheet of Mistras Group, Inc.
+Added: and its subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of income (loss), of comprehensive income (loss), of equity and of cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”).
+Added: We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
+Added: In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
+Added: Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
−Removed: The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.
−Removed: Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.
+Added: The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.
+Added: Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audit.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
−Removed: We conducted our audits in accordance with the standards of the PCAOB.
−Removed: Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
−Removed: Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
+Added: We conducted our audit in accordance with the standards of the PCAOB.
+Added: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
+Added: Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
−Removed: Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
+Added: Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
−Removed: Our audits also included performing such other procedures as we considered necessary in the circumstances.
−Removed: We believe that our audits provide a reasonable basis for our opinions.
+Added: Our audit also included performing such other procedures as we considered necessary in the circumstances.
+Added: We believe that our audit provides a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
−Removed: A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
−Removed: (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
−Removed: 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.
+Added: A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
+Added: (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
+Added: and (iii) 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.
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 Matter
−Removed: 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:
−Removed: (1) relates 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 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.
−Removed: Valuation of goodwill for the Services and European reporting units
−Removed: As discussed in Note 1 to the consolidated financial statements, the Company tests goodwill for impairment annually on October 1 or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
−Removed: The Company considers the income and market approaches to estimate the fair value of its reporting units.
−Removed: As of December 31, 2022, the Company had goodwill of $199.6 million, of which a portion related to the Services and European reporting units.
−Removed: There were no impairment charges recorded during the year ended December 31, 2022.
−Removed: 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 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.
−Removed: Additionally, the audit effort associated with the evaluation of goodwill for impairment for the Services and European reporting units 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 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.
−Removed: 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.
−Removed: We performed sensitivity analyses over the forecasted gross margins to assess the impact of changes in those assumptions on the Company’s determination of the fair value of its reporting units.
−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 rates
−Removed: • 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
−Removed: • 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.
+Added: Critical Audit Matters
+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 (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
+Added: 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
+Added: Goodwill Impairment Assessment - North America Reporting Unit
+Added: As described in Notes 1 and 8 to the consolidated financial statements, the Company’s goodwill balance was $187.4 million as of December 31, 2023, which related to the North America reporting unit.
+Added: Management tests goodwill for impairment at a reporting unit level, which is represented by its North America segment.
+Added: Management reviews goodwill for impairment on October 1 of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.
+Added: Management considers the income and market approaches to estimate the fair value of the reporting unit, which requires significant judgments and assumptions related to revenue growth rates, gross margins, EBIT margins, and market multiples.
+Added: The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the North America reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the North America reporting unit;
+Added: (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, gross margins, and market multiples;
+Added: and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
+Added: Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
+Added: These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the North America reporting unit.
+Added: These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the North America reporting unit;
+Added: (ii) evaluating the appropriateness of the income and market approaches used by management;
+Added: (iii) testing the completeness and accuracy of underlying data used in the income and market approaches;
+Added: and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, gross margins, and market multiples.
+Added: Evaluating management’s assumptions related to revenue growth rates and gross margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the North America reporting unit;
+Added: (ii) the consistency with external market and industry data;
+Added: and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.
+Added: Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the income and market approaches and (ii) the reasonableness of the market multiples assumption.
+Added: /s/ PricewaterhouseCoopers LLP
+Added: Philadelphia, Pennsylvania
+Added: March 11, 2024
We have served as the Company’s auditor since 2023.
+Added: Report of Independent Registered Public Accounting Firm
+Added: To the Stockholders and Board of Directors Mistras Group, Inc.:
+Added: Opinion on the Consolidated Financial Statements
+Added: We have audited the accompanying consolidated balance sheet of Mistras Group, Inc.
+Added: and subsidiaries
+Added: (the Company) as of December 31, 2022, the related consolidated statements of income (loss), comprehensive income (loss), equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).
+Added: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with U.S.
+Added: generally accepted accounting principles.
+Added: Basis for Opinion
+Added: These consolidated financial statements are the responsibility of the Company’s management.
+Added: Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
+Added: We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
+Added: federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
+Added: We conducted our audits in accordance with the standards of the PCAOB.
+Added: Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
+Added: Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
+Added: Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
+Added: Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
+Added: We believe that our audits provide a reasonable basis for our opinion.
+Added: We served as the Company’s auditor from 2013 to 2023.
Short Hills, New Jersey
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Bad debt provision for troubled customers, net of recoveries — 42 —
−Removed: Impairment charges — — 106,062
+Added: Reorganization and other costs 12,269 195 —
+Added: Goodwill Impairment charges 13,799 — —
Legal settlement and litigation charges (benefit), net 1,058 ( 994 ) 2,042
7 unchanged sentences
Net income (loss) ( 17,445 ) 6,574 3,893
−Removed: net income (loss) attributable to noncontrolling interests, net of taxes 75 33 ( 5 )
+Added: net income attributable to noncontrolling interests, net of taxes 8 75 33
Net income (loss) attributable to Mistras Group, Inc.
17 unchanged sentences
Comprehensive loss ( 12,387 ) ( 6,510 ) ( 359 )
−Removed: net income (loss) attributable to noncontrolling interests, net of taxes 75 33 ( 5 )
+Added: net income attributable to noncontrolling interests, net of taxes 8 75 33
Foreign currency translation adjustments attributable to noncontrolling interests 4 ( 5 ) ( 2 )
7 unchanged sentences
Common Stock Additional
−Removed: paid-in capital
−Removed: comprehensive income (loss)
+Added: paid-in capital Retained
+Added: comprehensive income (loss) Total
Mistras Group,
−Removed: Stockholders’ Equity
−Removed: Noncontrolling Interest
+Added: Stockholders’ Equity Noncontrolling Interest
Shares Amount Total Equity
4 unchanged sentences
Net settlement on vesting of restricted stock units 312 3 ( 1,372 ) — — ( 1,369 ) — ( 1,369 )
−Removed: Exercise of stock options — — — — — — — —
Balance at December 31, 2021 29,546 $ 295 $ 238,687 $ ( 17,988 ) $ ( 20,311 ) $ 200,683 $ 229 $ 200,912
4 unchanged sentences
Balance at December 31, 2022 29,895 $ 298 $ 243,031 $ ( 11,489 ) $ ( 33,390 ) $ 198,450 $ 299 $ 198,749
−Removed: Net income — — — 6,499 — 6,499 75 6,574
+Added: Net income (loss) — — — ( 17,453 ) — ( 17,453 ) 8 ( 17,445 )
Other comprehensive loss, net of tax — — — — 5,054 5,054 4 5,058
17 unchanged sentences
Bad debt provision for troubled customers, net of recoveries — 42 —
+Added: Change in provision for doubtful accounts 346 — —
Foreign currency (gain) loss 1,030 ( 208 ) 417
44 unchanged sentences
Description of Business
−Removed: Mistras Group, Inc.
−Removed: and subsidiaries (the Company) is a leading “one source” 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 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.
+Added: Mistras Group, Inc., together with its subsidiaries (the "Company"), is a leading “one source” 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.
+Added: Backed by an innovative, data-driven asset protection portfolio, proprietary technologies and decades-long legacy of industry leadership, the Company helps customers 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;
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and building real-time monitoring systems to help avoid catastrophic incidents, 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 IIoT - 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.
−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.
+Added: The Company enhances value for its customers by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("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 (“NDT”) field inspections enhanced by advanced robotics, laboratory quality control, laboratory materials services, shop laboratory assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.
+Added: The Company has three operating segments.
+Added: During the first quarter of 2023, the Company renamed the Services segment to the North America segment to more closely align to the geographical area in which the Services segment operates.
+Added: We did not recast the corresponding financial information for the historical periods presented, as there was no change in the manner which our chief operating decision maker reviews the financial results of each segment and allocates resources.
+Added: Our Segments, with the updated naming convention, are as follows:
+Added: • North America (Referred to as "Services" in prior filings).
+Added: 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.
+Added: Software, digital and data services are included in this segment.
+Added: • International.
+Added: This segment offers services, products and systems similar to those of the other segments to select markets within Europe, the Middle East, Africa, Asia and South America, but not to customers in China and South Korea, which are served by the Products and Systems segment.
+Added: • Products and Systems.
+Added: This segment designs, manufactures, sells, installs and services the Company’s asset protection products and systems, including equipment and instrumentation, predominantly in the United States.
Recent Developments
−Removed: Issues related to the COVID-19 coronavirus (COVID-19) pandemic have subsided significantly during 2022 as compared to 2021.
−Removed: The Russian-Ukrainian war is creating disruption in the oil and gas market and the supply chain in general, which is resulting in some disruption to our business operations.
−Removed: With oil prices high, refineries are working at full capacity and are deferring maintenance and inspection work as much as possible, which is impacting our business as well.
−Removed: Overall, the Company has taken actions to help ensure the health and safety of Company employees and those of its customers and suppliers;
−Removed: maintain business continuity and financial strength and stability;
−Removed: and serve customers as they provide essential products and services to the world.
−Removed: Earlier in 2022, the Company eliminated substantially all of the COVID related cost reduction initiatives undertaken in 2020, including re-installment of the savings plan employer match and increasing wages back to pre-pandemic amounts.
−Removed: The Company is currently unable to predict with certainty the overall impact that the factors discussed above and the effect of inflationary pressures may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine.
+Added: During the third quarter of 2023, a triggering event was identified within the Company's reporting units within the International segment due to decreased gross margin in the current period as a result of inflationary pressures and rising energy costs which resulted in impairment charges within the International reporting units of $ 13.8 million.
+Added: Refer to Note 8 -Goodwill .
+Added: During 2022, the Company experienced unfavorable foreign currency exchange impacts as it relates to the Company's European operations.
+Added: Additionally, the Russian-Ukrainian war and the conflict in the Middle East between Israel and Hamas continues to create disruptions in the oil and gas market and the supply chain in general, which is resulting in some disruption to our business operations.
The Company’s European operations are currently experiencing increased costs associated with higher energy costs, among others, due in part to the Russian-Ukrainian war.
+Added: In 2022, the Company eliminated substantially all of the COVID related cost reduction initiatives undertaken in 2020, including re-instatement 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 inflationary pressures may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine.
The Company will continue to monitor market conditions and respond accordingly.
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As part of the above analysis, if it is determined that the Company has the power to direct the activities that most significantly impact the joint venture’s economic performance, the Company considers whether or not it has the obligation to absorb losses or rights to receive benefits of the VIE that could potentially be significant to the VIE.
−Removed: The Company became the primary beneficiary in July 2020 of a VIE in which the Company has a 49 % interest in a limited partnership, and a 49 % shareholder in the corporate general partner of the limited partnership.
+Added: The Company became the primary beneficiary in July 2020 of a VIE in which the Company has a 49 % interest in a limited partnership, and a 49 % stockholder in the corporate general partner of the limited partnership.
The Company consolidated the financial statements of the VIE with the financial statements of the Company.
−Removed: As of and for the year ended December 31, 2022, the VIE had immaterial assets and had approximately $ 4.7 million revenue.
+Added: As of and for the year ended December 31, 2023, the VIE had immaterial assets and had approximately $ 3.0 million of revenue.
The Company is the primary sub-contractor of the VIE.
38 unchanged sentences
Goodwill represents the excess purchase price of acquired businesses over the fair values attributed to underlying net tangible assets and identifiable intangible assets.
−Removed: The Company tests goodwill for impairment at a “reporting unit” level (which for the Company is represented by (i) its Services segment, (ii) its Products and Systems segment, (iii) the European component of its International segment and (iv) the Brazilian component of its International segment).
+Added: The Company tests goodwill for impairment at a “reporting unit” level (which for the Company is represented by (i) its North America segment, (ii) its Products and Systems segment, (iii) the European component of its International segment and (iv) the Brazilian component of its International segment).
The Company's annual impairment test is conducted on the first day of the Company's fourth quarter, which is October 1.
1 unchanged sentence
In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
−Removed: If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing a quantitative impairment test is not necessary.
+Added: If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing a quantitative
+Added: impairment test is not necessary.
If the Company concludes otherwise, the Company is required to perform a quantitative impairment test.
1 unchanged sentence
An impairment will be recorded in the amount that the fair value is less than the carrying value.
−Removed: The Company considers the income and market approaches to estimating the fair value of its reporting units, which requires significant judgment in evaluation of economic and industry trends, estimated future cash flows, discount rates and other factors.
+Added: The Company considers the income and market approaches to estimate the fair value of its reporting units, which requires significant judgment and assumptions related to revenue growth rates, gross margins, EBIT margins, and market multiples.
See Note 8- Goodwill for additional information related to the Company's goodwill impairment test during 2023.
23 unchanged sentences
The Company is self-insured for certain losses relating to workers’ compensation and health benefit claims.
−Removed: The Company maintains third-party excess insurance coverage for all workers' compensation and health benefit claims in excess of approximately $ 0.3 million per occurrence to reduce its exposure from such claims.
+Added: The Company maintains third-party excess insurance coverage for all workers' compensation and health benefit claims in excess of
+Added: approximately $ 0.3 million per occurrence to reduce its exposure from such claims.
Self-insured losses are accrued when it is probable that an uninsured claim has been incurred but not reported and the amount of the loss can be reasonably estimated at the balance sheet date.
31 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 is recognized over time as work progresses for the Company's service deliverables, which includes providing testing, inspection and mechanical services to the Company's 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.
2 unchanged sentences
For these arrangements, revenue is recognized on a cost-to-cost method tracked on an input basis.
−Removed: The majority of the Company's 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.
+Added: 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.
Contract costs include labor, material and overhead.
13 unchanged sentences
Revenue by industry was as follows (in thousands):
−Removed: Year ended December 31, 2022 Services International Products Corp/Elim Total
+Added: Year ended December 31, 2023 North America International Products Corp/Elim Total
Oil & Gas $ 379,221 $ 36,615 $ 159 $ — $ 415,995
7 unchanged sentences
Total $ 579,330 $ 124,414 $ 12,986 $ ( 11,257 ) $ 705,473
−Removed: Year ended December 31, 2021 Services International Products Corp/Elim Total
+Added: Year ended December 31, 2022 North America International Products Corp/Elim Total
Oil & Gas $ 356,763 $ 30,654 $ 335 $ — $ 387,752
7 unchanged sentences
Total $ 573,336 $ 112,425 $ 12,727 $ ( 11,115 ) $ 687,373
−Removed: Year ended December 31, 2020 Services International Products Corp/Elim Total
+Added: Year ended December 31, 2021 North America International Products Corp/Elim Total
Oil & Gas $ 330,880 $ 35,232 $ 808 $ — $ 366,920
8 unchanged sentences
Revenue per key geographic location was as follows (in thousands):
−Removed: Year ended December 31, 2022 Services International Products Corp/Elim Total
+Added: Year ended December 31, 2023 North America International Products Corp/Elim Total
United States $ 495,764 $ 934 $ 5,956 $ ( 2,372 ) $ 500,282
3 unchanged sentences
Total $ 579,330 $ 124,414 $ 12,986 $ ( 11,257 ) $ 705,473
−Removed: Year ended December 31, 2021 Services International Products Corp/Elim Total
+Added: Year ended December 31, 2022 North America International Products Corp/Elim Total
United States $ 485,551 $ 910 $ 6,495 $ ( 3,083 ) $ 489,873
3 unchanged sentences
Total $ 573,336 $ 112,425 $ 12,727 $ ( 11,115 ) $ 687,373
−Removed: Year ended December 31, 2020 Services International Products Corp/Elim Total
+Added: Year ended December 31, 2021 North America International Products Corp/Elim Total
United States $ 472,125 $ 912 $ 6,469 $ ( 4,284 ) $ 475,222
11 unchanged sentences
Changes in the contract asset and liability balances during the years ended December 31, 2023 and 2022, were not impacted by any other factors.
−Removed: The Company applies the practical expedient to expense incremental
−Removed: costs incurred related to obtaining a contract when the amortization period of 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 amortization period of the asset that the Company otherwise would have recognized is one year or less.
Earnings per Share
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares outstanding during the period.
−Removed: Diluted earnings per share is computed by dividing net income by the sum of (i) the weighted average number of shares of common stock outstanding during the period and (ii) the dilutive effect of assumed conversion of equity awards using the treasury stock method.
+Added: Diluted earnings 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.
With respect to the number of weighted-average shares outstanding (denominator), diluted shares reflects:
16 unchanged sentences
Diluted earnings (loss) per share $ ( 0.58 ) $ 0.21 $ 0.13
−Removed: The following potential common stock were excluded from the computation of diluted earnings per share, as the effect would have been anti-dilutive:
+Added: The following potential shares of common stock were excluded from the computation of diluted earnings per share, as the effect would have been anti-dilutive:
For the year ended December 31,
2023 2022 2021
−Removed: Potential common stock attributable to restricted stock units (RSUs) and performance stock units (PSUs) outstanding (1)
+Added: Potential shares of common stock attributable to restricted stock units (RSUs) and performance stock units (PSUs) outstanding (1)
547 1,005 109
−Removed: Potential common stock attributable to stock options outstanding 1 5 5
+Added: Potential shares of common stock attributable to stock options outstanding — 1 5
Total 547 1,006 114
−Removed: (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.
+Added: (1) For the year ended December 31, 2023, 1,014,527 shares of common stock related to restricted stock and 250,000 stock options, were excluded from the calculation of diluted EPS due to the net loss for the period.
Accounts Receivable
9 unchanged sentences
The Company received notice from the customer in December 2019, alleging that the work performed was not in compliance with the contract.
−Removed: 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: The Company recorded a full reserve for this receivable during 2019 and the status of this situation has not changed since 2019.
+Added: 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 damages.
+Added: The Company recorded a full reserve for this receivable during 2019.
+Added: The parties agreed to a settlement in the quarter ending June 30, 2023, with releases executed in July 2023, whereby the Company released its claim for the $ 1.4 million of outstanding receivables.
+Added: Accordingly, the receivable has been written off.
See Note 18-Commitments and Contingencies for additional details.
−Removed: During the fourth quarter of 2021, the Company wrote off approximately $ 5 million of past due receivables related to work performed during 2019.
−Removed: The Company recorded a full reserve for these receivables in the prior years.
Inventories consist of the following (in thousands):
19 unchanged sentences
Depreciation expense was approximately $ 25.6 million, $ 24.1 million, and $ 25.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.
−Removed: During the year ended December 31, 2021, the Company completed one acquisition for a small NDT services company in Canada.
−Removed: The Company acquired 100 % of the common stock in exchange for approximately $ 0.4 million during the first quarter of 2021.
−Removed: The results of the acquisition's operations are included within the Services segment and are not material to the consolidated financial statements.
−Removed: 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.
−Removed: Assets and liabilities of the acquired business 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.
Acquisition-Related expense
−Removed: In the course of its acquisition activities, the Company incurs costs in connection with due diligence, professional fees, and other expenses.
+Added: In the course of its acquisition activities, the Company incurs costs in connection with due diligence, such as professional fees, and other expenses.
Additionally, the Company adjusts the fair value of acquisition-related contingent consideration liabilities on a quarterly basis.
5 unchanged sentences
Acquisition-related expense, net $ 9 $ 76 $ 1,133
−Removed: As of December 31, 2022, the Company’s contingent consideration liabilities are recorded on the Consolidated Balance Sheet in accrued expenses and other current liabilities.
The changes in the carrying amount of goodwill by segment is shown below (in thousands):
−Removed: Services International Products and Systems Total
+Added: North America International Products and Systems Total
Balance at December 31, 2021 $ 190,656 $ 14,783 $ — $ 205,439
−Removed: Adjustments to preliminary purchase price allocations 280 — — 280
Foreign currency translation ( 4,946 ) ( 858 ) — ( 5,804 )
Balance at December 31, 2022 $ 185,710 $ 13,925 $ — $ 199,635
+Added: Impairment charges — ( 13,799 ) — ( 13,799 )
Foreign currency translation 1,644 ( 126 ) — 1,518
1 unchanged sentence
The Company reviews goodwill for impairment on a reporting unit basis on October 1 of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.
−Removed: During the first quarter of 2020, the Company’s market capitalization declined significantly compared to the fourth quarter of 2019.
−Removed: Over the same period, the equity value of the Company’s peer group, and the overall U.S.
−Removed: stock market also declined significantly amid market volatility.
−Removed: In addition, oil prices had dropped significantly.
−Removed: 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
−Removed: ("testing date").
−Removed: 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: 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.
−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 performed a quantitative annual impairment test as of October 1, 2022 and 2021 and the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable.
−Removed: Additionally, through December 31, 2022, the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable.
−Removed: 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: The Company's cumulative goodwill impairment as of December 31, 2022 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.
+Added: During the third quarter of 2023, a triggering event was identified within the Company's reporting units within the International segment due to decreased gross margin in the current period as a result of inflationary pressures and rising energy costs impacting the International reporting units' operations.
+Added: As a result, the Company performed an interim quantitative goodwill impairment test.
+Added: 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 of these valuation methodologies based upon availability and relevance of comparable Company data and determining the appropriate weighting.
+Added: 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.
+Added: The Company used internal forecasts, updated for recent events, to estimate future cash flows 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.
+Added: The Company's internal forecasts include assumptions about future profitability, including the expected demand for the Company’s goods and services.
+Added: Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in the forecasts.
+Added: 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.
+Added: The Company used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in the Company's internally developed forecasts and which are updated for recent events.
+Added: Increased interest rates in the current period increased the discount rate associated with the reporting units which contributed to an unfavorable decrease in the reporting units value.
+Added: The market approach valuation was derived from metrics of publicly traded companies or historically completed transactions of comparable businesses.
+Added: 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.
+Added: Based upon the results of the interim quantitative goodwill impairment test, the Company recorded an impairment charge of $ 13.8 million within the International reporting units.
+Added: The impairment was calculated based on the difference between the estimated fair value and the carrying value of the reporting units and is included in Goodwill impairment charges on the condensed consolidated statements of income (loss) for the year ended December 31, 2023.
+Added: Any significant adverse changes in future periods to the Company’s internal forecasts or the external market conditions, if any, could reasonably be expected to negatively affect its key assumptions and may result in future goodwill impairment charges which could be material.
+Added: The Company's cumulative goodwill impairment as of December 31, 2023 was $ 114.0 million, of which $ 57.2 million related to the North America segment, $ 43.6 million related to the International segment and $ 13.2 million related to the Products and Systems segment.
Intangible Assets
The gross carrying amount and accumulated amortization of intangible assets were as follows (in thousands):
+Added: (Years) Gross
Amount Accumulated
10 unchanged sentences
Total $ 188,835 $ ( 144,841 ) $ 43,994 $ 183,588 $ ( 134,573 ) $ 49,015
−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, and Products and Systems segments, as well as Corporate and Eliminations.
−Removed: 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.
−Removed: Recoverability testing indicated that certain intangible assets and right of use assets (See Note 17-Leases ) were potentially impaired.
−Removed: 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 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, 2023, 2022 and 2021, was approximately $ 8.5 million, $ 9.1 million, and $ 9.7 million, respectively, including amortization of software/technology for these periods of $ 2.9 million, $ 2.9 million, and $ 3.0 million, respectively.
7 unchanged sentences
Accrued workers' compensation and health benefits 4,385 3,660
−Removed: Deferred revenues 7,521 6,202
+Added: Deferred revenue 7,136 7,521
Right-of-use liability - Operating 10,686 10,376
23 unchanged sentences
• The Company has the benefit of the lowest SOFR margin if its Total Consolidated Debt Leverage Ratio is equal to or less than 1.25 to 1.0, and the margin increases as the ratio increases, to the maximum margin if the ratio is greater than 3.75 to 1.0.
−Removed: The New Credit Agreement is secured by liens on substantially all the assets of the Company and certain of its U.S subsidiaries and is guaranteed by those U.S subsidiaries.
+Added: The New Credit Agreement is secured by liens on substantially all of the assets of the Company and certain of its U.S subsidiaries and is guaranteed by those U.S subsidiaries.
• The Company has to maintain a Total Consolidated Debt Leverage Ratio of no more than 4.0 to 1.0 at the end of each quarter through June 30, 2023 and stepping down to a maximum permitted ratio of no more than 3.75 to 1.0 for the remainder of the term.
−Removed: • The Company has to maintain a Fixed Charge Coverage Ratio of 1.25 to 1.0 for the duration of the New Credit Agreement, as defined in the New Credit Agreement.
+Added: • As of December 31, 2023, the Fixed Charge Coverage Ratio was modified from a ratio of 1.25 to 1.0 to a ratio of 1.1 to 1.0 for the duration of the New Credit Agreement, as defined in the New Credit Agreement.
+Added: Refer to Note 21 - Subsequent Events for further information.
• The New Credit Agreement 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, make distributions to stockholders or repurchase our stock, enter into a new line of business, enter into transactions with affiliates and enter into burdensome agreements.
10 unchanged sentences
The Company's other debt includes bank financing provided at the local subsidiary level used to support working capital requirements and fund capital expenditures.
−Removed: At December 31, 2022, there was an aggregate of approximately $ 4.6 million outstanding, payable at various times through 2030.
+Added: At December 31, 2023, there was an aggregate of approximately $ 4.0 million
+Added: outstanding, payable at various times through 2030.
Monthly payments ran ge from $ 1 thousand to $ 19 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, 2023 are as follows (in thousands):
−Removed: Thereafter 799
Total $ 190,399
19 unchanged sentences
Balance at the end of the period:
−Removed: $ 937 $ 1,830
Financial instruments not measured at fair value on a recurring basis
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 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
+Added: 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
1 unchanged sentence
(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, and the remaining stock option award granted under the 2009 Plan expired during the three months ended March 31, 2022.
−Removed: 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.
+Added: No awards have been granted under the 2009 Plan since the 2016 Plan was approved by stockholders in 2016, and the remaining option award granted under the 2009 Plan expired during the three months ended March 31, 2022.
+Added: Awards granted under the 2016 Plan may be in the form of stock options, restricted stock units, restricted stock and other forms of share-based incentives, including performance-based restricted stock units, stock appreciation rights and deferred stock rights.
At the annual stockholders meeting on May 23, 2022, the Company’s stockholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 1.2 million, for a total of 4.9 million shares that are authorized for issuance under the 2016 plan, of which approximately 1,400,000 shares were available for future grants as of December 31, 2023.
Stock Options
−Removed: For each of the years ended December 31, 2022, 2021 and 2020, 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: On October 11, 2023, Mr.
+Added: Stamatakis was granted an award of stock options to purchase 250,000 shares of common stock of the Company, with an exercise price of $ 5.36 , the closing price of the Company's common stock as quoted on the New York Stock Exchange on the grant date (the "Options").
+Added: The Options were granted as an inducement for Mr.
+Added: Stamatakis to accept the position of Interim President and CEO of Mistras and were therefore granted outside the 2016 Plan, as permitted by NYSE Rules.
+Added: The Options can be exercised any time after the grant date until its expiration date, which is the earlier of 10 years from the grant date or one year following the date Mr.
+Added: Stamatakis is no longer serving as an officer, director or in any other capacity of the Company.
+Added: During the three months ended December 31, 2023, the Company recorded $ 0.8 million share-based compensation expenses related to the Options.
+Added: For each of the years ended December 31, 2022 and 2021, the Company did no t recognize any share-based compensation expense related to stock option awards, as the one outstanding stock option award was already fully vested.
No unrecognized compensation costs remained related to the stock option awards.
13 unchanged sentences
250 $ 5.36 — $ — 5 $ 22.35
+Added: Stock Issuances to Non-Employee Directors
+Added: As part of its compensation program for non-employee directors, the Company makes semi-annual issuances of fully-vested common stock to its non-employee directors.
+Added: A summary of the fully-vested common stock the Company issued to its non-employee directors, in connection with its non-employee director compensation, is as follows (in thousands):
+Added: For the year ended December 31,
+Added: 2023 2022 2021
+Added: Awards issued 133 70 51
+Added: Grant date fair value of awards issued $ 750 $ 450 $ 525
Restricted Stock Unit Awards
1 unchanged sentence
The Company recognized approximately $ 4.9 million, $ 3.7 million and $ 3.5 million of share-based compensation for the years ended December 31, 2023, 2022 and 2021, respectively, related to restricted stock unit awards.
−Removed: As of December 31, 2022, there were approximately $ 6.6 million of unrecognized compensation costs, net of estimated forfeitures, related to restricted stock unit awards, which are expected to be recognized over a remaining weighted average period of 2.6 years.
+Added: As of December 31, 2023, there was approximately $ 6.9 million of unrecognized compensation costs, net of estimated forfeitures, related to restricted stock unit awards, which are expected to be recognized over a remaining weighted average period of 2.5 years.
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.
2 unchanged sentences
2023 2022 2021
−Removed: Restricted stock awards vested 401 317 208
−Removed: Fair value of awards vested $ 2,524 $ 3,434 $ 837
−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):
−Removed: For the year ended December 31,
−Removed: 2022 2021 2020
Awards issued 683 401 317
−Removed: Grant date fair value of awards issued $ 450 $ 525 $ 326
+Added: Grand date fair value of awards issued $ 4,269 $ 2,524 $ 3,434
A summary of the Company's outstanding, non-vested restricted share units is as follows (in thousands, except per share amounts and years):
12 unchanged sentences
Performance Restricted Stock Units
−Removed: 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: For 2021, the Compensation Committee made changes to the Company’s equity incentive compensation plan for its executive officers and approved the new target awards for 2021.
−Removed: For 2021, the three metrics were:
−Removed: 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: The Company maintains Performance Restricted Stock Units ("PRSUs") that have been granted to select executives and senior officers whose ultimate payouts may vary between zero and 200 % of the target award, 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.
+Added: For 2022, the Compensation Committee of the Board of Directors utilized the same performance metrics for the Company's PRSUs awarded in 2022 as it utilized for the 2021 PRSUs.
+Added: The three metrics were:
+Added: Free Cash Flow defined as 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.
Adjusted EBITDA defined as net income attributable to the Company plus:
−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).
+Added: interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense and certain acquisition related costs
+Added: (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.
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.
1 unchanged sentence
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 2021), compared to the average share price during the 20 -trading day period ending on the final measurement date (the last 20 trading days of 2022).
−Removed: Any cash dividends or distributions paid in 2021 will be added to calculate the return to shareholders during the year.
+Added: Any cash dividends or distributions paid in 2022 were added to calculate the return to shareholders during the year.
TSR is considered a market condition for which the fair value of PRSUs with this condition is determined using a Monte Carlo valuation model.
6 unchanged sentences
The risk-free interest rate assumption was based on observed interest rates consistent with the approximate 1-year performance measurement period.
−Removed: For 2022, the Compensation Committee retained the Company’s prior year equity incentive compensation plan for its executive officers including utilizing the same metrics, as defined above, and approved the new target awards for 2022.
−Removed: PRSUs are equity-classified and compensation costs are initially measured using the fair value of the underlying stock at the date of grant.
−Removed: Compensation costs related to the PRSUs are subsequently adjusted for changes in the expected outcomes of the performance conditions.
−Removed: Compensation cost related to the PRSUs with a market condition is not reversed if the market
−Removed: condition is not achieved, provided the employee requisite service has been rendered.
−Removed: 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: For 2023, the Compensation Committee of the Board of Directors used different performance metrics for PRSUs approved in that year.
+Added: The three metrics are:
+Added: Free Cash Flow defined as 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 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: PRSUs are equity-classified and compensation costs related to PRSUs with performance conditions are initially measured using the fair value of the underlying stock at the date of grant.
+Added: Compensation costs related to the PRSUs with performance conditions are subsequently adjusted for changes in the expected outcomes of the performance conditions.
+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: Earned PRSUs generally vest ratably on each of the first four anniversary dates following completion of the performance period, for a total requisite service period of up to five years and have no dividend rights.
A summary of the Company's PRSU activity is presented as follows (in thousands, except per share amounts and years):
15 unchanged sentences
For the year ended December 31, 2022, 341,000 PRSUs were granted.
−Removed: There was a 56,000 unit reduction to these awards, which represents Company performance against target, during the year ended December 31, 2021.
+Added: There was a 285,000 net unit reduction to these awards, which represents Company performance below target, during the year ended December 31, 2022.
For the year ended December 31, 2021, 189,000 PRSUs were granted.
−Removed: 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.
+Added: There was a 56,000 unit reduction to these awards, which represents Company performance against target, during the year ended December 31, 2021.
Compensation expense related to all PRSUs described above was $ 0.7 million, $ 1.2 million, and $ 1.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
35 unchanged sentences
Permanent differences 485 ( 2.6 ) % 363 3.9 % 373 5.1 %
−Removed: Research and Development Credit ( 1,716 ) ( 18.5 ) % ( 214 ) 2.9 % ( 236 ) 0.2 %
−Removed: Federal loss carryback — — % — — % ( 1,938 ) 1.7 %
+Added: Research & Development Credit ( 602 ) 3.2 % ( 1,716 ) ( 18.5 ) % ( 214 ) ( 2.9 ) %
Change in valuation allowance ( 1,810 ) 9.7 % 1,320 14.2 % 2,052 28.2 %
4 unchanged sentences
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.
−Removed: This rate reduction had a favorable impact of approximately $ 1.9 million on the Company’s net deferred tax liabilities in this jurisdiction in 2019.
−Removed: As part of Alberta’s Recovery plan associated with the COVID-19 pandemic, Alberta accelerated the decrease in income tax rates from 10% in 2020 to 8% effective July 1, 2020.
−Removed: The accelerated tax rate reduction did not have a material impact on the Company’s net deferred tax liabilities but did reduce current taxes.
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
−Removed: The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to the Coronavirus outbreak,
−Removed: which among other things contains numerous income tax provisions.
+Added: The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to the Coronavirus outbreak, which among other things contains numerous income tax provisions.
Some of these tax provisions are effective retroactively for years ending before the date of enactment.
20 unchanged sentences
Finance lease obligations 275 463
+Added: Stock Options 187 —
Deferred stock based compensation 723 1,152
39 unchanged sentences
federal income tax examinations for years ending before December 31, 2017 and generally is no longer subject to state, local or foreign income tax examinations by tax authorities for years ending before December 31, 2019.
−Removed: Net income (loss) of foreign subsidiaries was $ 5.8 million, $ 3.7 million, and $( 55.7 ) million for the years ended December 31, 2022, 2021 and 2020, respectively.
−Removed: Generally, it has been the Company's practice and intention to reinvest the earnings of its non-U.S.
−Removed: subsidiaries in those operations.
+Added: Currently the Company is undergoing a federal tax audit for years ending December 31, 2018 through December 31, 2020.
As previously noted, the Tax Act made significant changes to the taxation of undistributed earnings, requiring that all previously untaxed earnings and profits of the Company's controlled foreign operations be subjected to the transition tax.
2 unchanged sentences
As of December 31, 2023, the Company has no t recognized a deferred tax liability for foreign withholdings and state taxes on its undistributed international earnings or losses of its foreign subsidiaries since it intends to indefinitely reinvest the earnings outside the United States.
−Removed: The Company has estimated that the amount of the unrecorded deferred tax liability related to undistributed international earnings is approximately $ 1.8 million.
+Added: The Company has estimated $73.3 million of unremitted international earnings which provides an unrecorded deferred tax liability related to undistributed international earnings is approximately $ 1.5 million.
Employee Benefit Plans
7 unchanged sentences
The Company’s contribution to the plan was $ 3.9 million, $ 3.0 million, and $ 1.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.
−Removed: 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.
+Added: 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 cover certain U.S.
based union employees.
−Removed: 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.
+Added: The plans provide pension benefits with contribution rates that are collectively bargained between participating employers and their affiliated Boilermakers and Pipefitters local unions.
Both the Boilermakers and Pipefitters plans are approximately 80 percent funded as of the latest Form 5500 filed, respectively.
−Removed: The Company did no t make any contributions to the Boilermakers during the years ended December 31, 2022 and 2021 while making de minimis contributions to the Pipefitters plan during the same periods.
+Added: The Company did no t make any contributions to the Boilermakers plan during the years ended December 31, 2023 and 2022 while making de minimis contributions to the Pipefitters plan during the same periods.
See Note 18-Commitments and Contingencies, Pension Related Contingencies, for additional detail.
7 unchanged sentences
The Company receives benefits consulting services from Capital Management Enterprise (“CME”).
−Removed: Stamatakis, one of the Company's non-employee directors, is the Chief Executive Officer of CME.
+Added: Stamatakis, Chairman of our Board of Directors and our interim President and Chief Executive Officer, is the Chief Executive Officer of CME.
The Company does no t pay any fees to CME and any compensation CME receives related to work for the Company is received by commissions paid by the third-party benefit providers.
60 unchanged sentences
The Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it.
−Removed: 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: 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.
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.
1 unchanged sentence
The Company was contracted to perform inspections of welds on various pipeline projects in Texas for a customer.
−Removed: As of December 31, 2022 approximately $ 1.4 million of past due receivables were outstanding from this customer.
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.
1 unchanged sentence
Epic Y-Grade Pipeline LP, to recover the $ 1.4 million and other amounts due to the Company.
−Removed: The customer filed a
−Removed: counterclaim on March 6, 2020, alleging breach of contract and seeking recovery of its alleged damages.
−Removed: The Company believes that any successful claim by the customer regarding the Company’s workmanship will be covered by insurance, subject to payment of a deductible.
−Removed: 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.
+Added: The customer filed a counterclaim on March 6, 2020, alleging breach of contract and seeking recovery of its alleged damages.
+Added: On April 25, 2023, the parties agreed to settle all claims, and in July 2023, the parties executed a settlement agreement.
+Added: As part of the settlement, the Company paid $ 0.3 million in July 2023 (which the Company estimates is significantly less than the cost of going to trial) and released its claim of $ 1.4 million for associated past due receivables, which were fully reserved for in prior periods.
In the year ended December 31, 2022, the Company recorded a charge of $ 0.1 million for a potential loss from this matter.
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.
−Removed: Two proceedings have been filed in California Superior Court for the County of Los Angeles regarding alleged violations of the California Labor Code.
−Removed: Both cases are captioned Justin Price v.
−Removed: Mistras Group, Inc., one being a purported class action lawsuit on behalf of current and former Mistras employees in California, filed on June 10, 2020, and the other was filed on September 18, 2020, behalf of the State of California under the California Private Attorney General Act on the basis of the same alleged violations.
−Removed: The two cases was consolidated and requested payment of all damages, including unpaid wages, and various fines and penalties available under California law.
+Added: Two proceedings were filed in California Superior Court for the County of Los Angeles regarding alleged violations of the California Labor Code.
+Added: Both cases were captioned Justin Price v.
+Added: Mistras Group, Inc.
+Added: , one being a purported class action lawsuit on behalf of current and former Mistras employees in California, filed on June 10, 2020, and the other was filed on September 18, 2020, on behalf of the State of California under the California Private Attorney General Act on the basis of the same alleged violations.
+Added: The two cases were consolidated and payment was demanded for all damages, including unpaid wages, and various fines and penalties available under California law.
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, as amended as of May 3, 2022.
8 unchanged sentences
The balance of the estimated total amount of this potential liability as of December 31, 2023 is approximately $ 2.5 million, which was incurred in 2018 and 2019.
−Removed: Severance and labor disputes
−Removed: 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.
−Removed: No other assets or liabilities other than those employee benefits related to employees working on the customer contracts were included in the sale.
−Removed: As of December 31, 2022, the Company has approximately $ 0.1 million of accrued estimated severance payment obligations, which takes into account the Company's estimate with respect to the employees that have been or will be transitioned to the German subsidiaries' other customers.
−Removed: 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: The Company was entitled to indemnification on certain labor claims from the sellers of a company acquired by its Brazilian subsidiary.
−Removed: 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 %.
−Removed: 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.
−Removed: 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 certain of its acquisitions.
−Removed: As of December 31, 2022, total potential acquisition-related contingent consideration ranged from zero to approximately $ 0.9 million.
During 2018, the Company sold a subsidiary in the Products and Systems segment.
4 unchanged sentences
The Company’s three operating segments are:
−Removed: 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.
+Added: • North America.
+Added: This segment provides asset protection solutions 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.
Software, digital and data services are included in this segment.
5 unchanged sentences
Sales to the International segment from the Products and Systems segment and subsequent sales by the International segment of the same items are recorded and reflected in the operating performance of both segments.
−Removed: Additionally, engineering charges and royalty fees charged to the Services and International segments by the Products and Systems segment are reflected in the operating performance of each segment.
+Added: Additionally, engineering charges and royalty fees charged to the North America and International segments by the Products and Systems segment are reflected in the operating performance of each segment.
The accounting policies of the reportable segments are the same as those described in Note 1-Summary of Significant Accounting Policies and Practices .
7 unchanged sentences
2023 2022 2021
−Removed: Services $ 573,336 $ 555,387 $ 476,164
+Added: North America $ 579,330 $ 573,336 $ 555,387
International 124,414 112,425 117,245
4 unchanged sentences
2023 2022 2021
−Removed: Services $ 159,049 $ 155,384 $ 141,084
+Added: North America $ 163,960 $ 159,049 $ 155,384
International 33,610 33,591 34,282
6 unchanged sentences
Income (loss) from operations
−Removed: Services $ 49,616 $ 48,458 $ ( 44,222 )
+Added: North America $ 55,170 $ 49,616 $ 48,458
International ( 12,229 ) 3,566 1,839
5 unchanged sentences
Depreciation and amortization
−Removed: Services $ 25,103 $ 25,259 $ 26,093
+Added: North America $ 25,774 $ 25,103 $ 25,259
International 7,580 7,648 8,791
3 unchanged sentences
Intangible assets, net
−Removed: Services $ 43,260 $ 51,862
+Added: North America $ 37,622 $ 43,260
International 2,998 4,422
2 unchanged sentences
$ 43,994 $ 49,015
−Removed: Services $ 407,779 $ 424,058
+Added: North America $ 402,782 $ 407,779
International 99,398 104,531
7 unchanged sentences
$ 312,320 $ 326,211
−Removed: Refer to Note 2-Revenue , for revenues by segment and by geographic area for the years ended December 31, 2022, 2021, and 2020.
+Added: Refer to Note 2-Revenue , for revenue by segment and by geographic area for the years ended December 31, 2023, 2022, and 2021.
Selected Quarterly Financial Information (unaudited)
10 unchanged sentences
Quarter ended December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022
−Removed: Revenues $ 171,163 $ 174,556 $ 177,677 $ 153,735
+Added: Revenue $ 168,218 $ 178,462 $ 179,031 $ 161,662
Gross Profit 50,939 53,784 53,558 39,892
6 unchanged sentences
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
5 unchanged sentences
Diluted $ — $ 0.11 $ 0.20 $ ( 0.18 )
+Added: Subsequent Events
+Added: On February 27, 2024, the Company entered into the First Amendment (the “Amendment”) to its New Credit Agreement, dated August 1, 2022, with JPMorgan Chase Bank N.A., as administrative agent for the lenders and a lender and the other lenders under the New Credit Agreement.
+Added: The First Amendment was filed as Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on March 1, 2024.
+Added: The Amendment increases the amount of non-recurring cash charges (as defined in the New Credit Agreement) allowed to be added back for any period of four consecutive quarters for purposes of defining EBITDA under Section 1.01 of the New Credit Agreement from $ 10 million to $ 15 million for the periods ended December 31, 2023 to December 31, 2024.
+Added: The allowable non-recurring cash charge addback reverts to $ 10 million starting January 1, 2025.
+Added: Additionally, the minimum Consolidated Fixed Charge Coverage Ratio was reduced from 1.25 to 1, to 1.10 to 1, for the fiscal quarters ended December 31, 2023 and March 31, 2024.
+Added: For the period ending June 30, 2024 to maturity, the Fixed Charge Coverage Ratio is 1.25 to 1 as stated in the New Credit Agreement.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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.