SecProbe.io

CORRESP
1
filename1.htm

corresp

HQTS: P: (609) 716-4000 • F: (609) 716-0706

195 Clarksville Road • Princeton Jct., NJ 08550

www.mistrasgroup.com

Via EDGAR, Overnight Courier and Facsimile

February 11, 2011

Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, DC 20549

    Attention:

    Jay Ingram, Legal Branch Chief

Erin K. Jaskot, Staff Attorney

    Re:

    Mistras Group, Inc.

Form 10-K for the Fiscal Year Ended May 31, 2010

Filed August 17, 2010

Definitive Proxy Statement on Schedule 14A

Filed September 16, 2010

Form 10-Q for the Quarterly Period Ended November 30, 2010

Filed January 13, 2010

File No. 001-34481

Ladies and Gentlemen:

Mistras Group, Inc. (“Mistras” or the “Company”) is submitting this letter in response to the
comments from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”)
contained in the letter dated January 28, 2011 (the “Comment Letter”) regarding the Company’s Form
10-K for the fiscal year ended May 31, 2010, Definitive Proxy Statement on Schedule 14A and Form
10-Q for the quarterly period ended November 30, 2010. Please find our responses to the Staff’s
comments below. For your convenience, each of the comments in the Comment Letter is included
immediately preceding our response to the comment, and the headings and numbered responses in this
response letter correspond to the headings and numbered comments contained in the Comment Letter.

Form 10-K for the Fiscal Year Ended May 31, 2010

Staff Comment #1:

Business, page 3

General

    1.

    In future filings, please include the information required by Item 101(b) of
Regulation S-K. In addition, please include a general discussion of your three
financial segments within your Business section.

Response to Comment #1:

The Company respectfully acknowledges the Staff’s comment. In the Company’s next filing on Form
10-K, and other future filings which require the disclosures in Item 101(b) of Regulation S-K, the
Company will include a general discussion of its three financial segments within the Business section. The Company expects
such discussion to be presented as follows:

    Securities and Exchange Commission

    February 11, 2011

    Page 2

The Company has three financial segments:

    •

    Services. This segment provides primarily asset protection solutions in North
and Central America with the largest concentration in the United States, consisting
primarily of non-destructive testing and inspection services that are used to evaluate
the structural integrity of critical energy, industrial and public infrastructure.

    •

    Products and Systems. This segment designs, manufactures, sells, installs and
services our asset protection products and systems, including equipment and
instrumentation, predominantly in the United States.

    •

    International. This segment offers services, products and systems similar to
those of our Services and Products and Systems segments to global markets, principally
in Europe, the Middle East, Africa, Asia and South America, but not to customers in
China and South Korea, which are served by our Products and Systems segment.

For discussion of segment revenues, operating results and other financial information, see
Management’s Discussion and Analysis of Financial Condition and Results of Operations which
begins on page [xx], as well as the Notes to the Consolidated Financial Statements which
begin on page [xx].

Staff Comment #2:

    2.

    We note your disclosure on page 28 that your business is seasonal. In future
filings, please provide disclosure regarding the extent to which the business of your
segment(s) is or may be seasonal. See Item 101(c)(v) or Regulation S-K.

Response to Comment #2:

The Company respectfully acknowledges the Staff’s comment. In the Company’s next filing on Form
10-K, the Company will disclose that the seasonality of its business primarily relates to the
Services segment. The Company may include additional disclosure that presents revenues by quarter
for the most recent fiscal year to disclose more clearly the impact of this seasonality on
revenues. An example of such disclosure is as follows:

     Our business is seasonal. This seasonality relates primarily to our Services
segment. Our first and third fiscal quarter revenues for our Services segment
are typically lower than our revenues in the second and fourth fiscal quarters because
demand for our asset protection solutions from the oil and gas as well as the fossil and
nuclear power industries increases during their non-peak production periods. For instance,
U.S. refineries’ non-peak periods are generally in our second fiscal quarter, when they are
retooling to produce more heating oil for winter, and in our fourth fiscal quarter, when
they are retooling to produce more gasoline for summer. Our quarterly Services segment
revenues for the fiscal year ended May 31, 2011, as a percentage of total Services revenues
for the same period, was XX% (1st quarter) XX% (2nd quarter), XX%
(3rd quarter), and XX% (4th quarter). As a result of these trends,
we generally have reduced cash flows in our second and fourth fiscal quarters, which may
require us to borrow under our credit agreement or to discontinue or curtail some of our
operations. In addition, most of our operating expenses, such as employee compensation and
property rental expense, are relatively fixed over the short term. Moreover, our spending
levels are based in part on our expectations regarding future revenues. As a result, if
revenues for a particular quarter are below expectations, we may not be able to
proportionately reduce operating expenses for that quarter. We expect that the impact of
seasonality on our first and third fiscal quarter revenues and profitability and second and
fourth fiscal quarter cash flows will continue.

Staff Comment #3:

    3.

    We note your disclosure on page 31 that you rely on a limited number of
suppliers to provide you with radioisotopes and certain electronic components. To the
extent material, in future filings please provide a discussion of your sources and
availability of raw materials. See Item 101 (c)(iii) of Regulation S-K.

    Securities and Exchange Commission

    February 11, 2011

    Page 3

Response to Comment #3:

The Company respectfully acknowledges the Staff’s comment. The Company will continue to monitor
its supply of radioisotopes and certain electronic components on a regular basis. To the extent
material, the Company will provide a discussion of the sources and availability of these raw
materials in its future filings on Form 10-K and to the extent necessary in filings on Form 10-Q,

Staff Comment #4:

Customers, page 21

    4.

    We note your disclosure on page 6 that your largest customer accounted for
approximately 18%, 17% and 17% of your revenues for fiscal year 2010, 2009 and 2008,
respectively. In future filings, please disclose the name and relationship of this
customer and include a description of your contractual relationship. See Item
(c)(vii) of Regulation S-K. Also, please advise us if you have considered filing your
agreements with this customer as a material exhibit under Item 601(b)(10)(ii)(B) of
Regulation S-K.

Response to Comment #4:

The Company respectfully acknowledges the Staff’s comment. The identity of BP plc. (“BP”), the
Company’s largest customer, will be disclosed in future filings of Form 10-K and Form 10-Q. The
Company’s relationship with BP is comprised of separate contracts for non-destructive testing and
inspection services with multiple affiliated entities within a commonly controlled group. Mistras
conducts business with various divisions or affiliates of the BP organization through numerous
contracts covering many segments of BP’s business including downstream (refinery), midstream
(pipelines) and upstream (exploration). These contracts are typically negotiated locally with the
specific location, are of varying lengths, have different start and end dates and differ in terms
of the scope of work and nature of services provided. Most contracts are based on time and
materials.

The Company considered filing its agreements with BP, but concluded that these contracts with BP
are ordinary course of business agreements and are similar to the contracts Mistras and many other
inspection and non-destructive testing companies have around the country for work in the oil and
gas industry. In addition, while BP as a whole is a large and important customer, the Company’s
business is not substantially dependent on any single contract or relationship with BP, nor does
the Company sell a major part of its products and services to BP.

Staff Comment #5:

    5.

    We note that you list the names of your “larger customers by revenues for
fiscal 2010” for each of your target markets. In future filings, please disclose the
revenue threshold used to determine which customers would be included in this list, and
whether this list includes all of your customers that exceeded such threshold.

Response to Comment #5:

The Company respectfully acknowledges the Staff’s comment. Given the disparity in customer size
between different target markets, it is not practical to use a single revenue threshold for all
target markets. For example, it would take significantly more customers to capture 50% of total revenues in the Composite and Part
Testing market than it would in the Oil and Gas target market. Accordingly, in future filings on
Form 10-K, the Company will list the largest customers for each target market, while disclosing the
percentage of that target market’s revenues that these customers represent. An example of possible
future disclosure with regards to this table is provided below:

    Securities and Exchange Commission

    February 11, 2011

    Page 4

    Composite

    Oil & Gas, including

    Power Generation &

    and Part Testing,

    Petrochemicals

    Transmision

    including Aerospace

    Chemicals

    (X%)

    (X%)

    (X%)

    (X%)

    Company 1

    Company 1

    Company 1

    Company 1

    Company 2

    Company 2

    Company 2

    Company 2

    Company 3

    Company 3

    Company 3

    Company 3

    Company 4

    Company 4

    Company 4

    Company 4

    Company 5

    Company 5

    Company 5

    Company 5

    Company 6

    Company 6

    Company 6

    Company 6

    Company 7

    Company 7

    Company 7

    Company 8

    Company 8

    Company 8

    Company 9

    Company 10

    Public Infrastructure,

    Research and

    Industrial

    Process Industries

    Engineering

    (X%)

    (X%)

    (X%)

    Company 1

    Company 1

    Company 1

    Company 2

    Company 2

    Company 2

    Company 3

    Company 3

    Company 3

    Company 4

    Company 4

    Company 4

    Company 5

    Company 5

    Company 6

    Company 6

    Company 7

The percentage in each heading above represents the percentage that target market
comprises of our total revenues. The companies listed under each target market comprise, in
total, the following percentage of the revenues for that target market:

Oil & Gas: XX%

Power Generation: XX%

Composite and Part Testing: XX%

Chemicals: XX%

Industrial: XX%

Process Industries: XX%

Public Infrastructure: XX%

Staff Comment #6:

    6.

    We note your disclosure of certain countries that were responsible for 1% or
more of your revenues in fiscal year 2010. In future filings, please provide the
disclosure required by Item 101(d) of Regulation S-K.

Response to Comment #6:

The Company respectfully acknowledges the Staff’s comment. In the Company’s next Form 10-K
filing, the Company will refer to the appropriate note to its financial statements that
provides information regarding segments and geographic regions. In addition, the Company
will include in the financial statement note the information required by Item 101(d) of
Regulation S-K. Historically,
 no individual foreign country accounted for a material
portion of the Company’s revenues or had a material amount of the Company’s long-lived
assets.

Staff Comment #7:

Intellectual Property, page 23

    7.

    In future filings, to the extent material, please disclose the importance to
each segment, and the duration and effect, of your specific patents and trademarks, and
services marks. See Item 101(c)(iv) of Regulation S-K.

    Securities and Exchange Commission

    February 11, 2011

    Page 5

Response to Comment #7:

The Company respectfully acknowledges the Staff’s comment. In the Company’s future filings on Form
10-K, the Company will make additional disclosures regarding patents, trademarks and service marks
which are important to each segment. The Company expects that its fiscal year 2011 disclosure
regarding its patents, trademarks and service marks will be consistent with the following:

We currently hold [X] patents and license certain other patents, but we currently do not
principally rely on these patents or licenses to provide our proprietary asset protection
solutions. Our trademarks and service marks provide us and our products and services with a
certain amount of brand recognition in our markets. However, we do not consider any single
patent, trademark or service mark material to our financial condition or results of
operations.

Staff Comment #8:

Properties, page 25

    8.

    In future filings, please identify the segment(s) that use the properties
described. See Item 102 of Regulation S-K.

Response to Comment #8:

The Company respectfully acknowledges the Staff’s comment. In the Company’s next filing on Form
10-K, the Company expects its disclosure regarding Item 2. Properties to be as follows:

     ITEM 2. PROPERTIES

As of May 31, 2011, we operated [XX] offices in [XX] countries, with our corporate
headquarters located in Princeton Junction, New Jersey. Our headquarters in Princeton
Junction is our primary location, where our manufacturing and research and development is
conducted. While we lease most of our facilities, as of May 31, 2011, we owned properties
located in Olds, Alberta; Monroe, North Carolina; Trainer, Pennsylvania; Houston, Pasadena,
and Deer Park, Texas; Burlington, Washington; and Gillette, Wyoming. These properties, as well
as approximately [XX] offices throughout North America, are utilized by our Services
segment. Our Products and Systems segment’s primary location is our Princeton Junction
facility. Our international segment has [XX] offices located in Brazil, United Kingdom, the
Netherlands, France, Greece, Russia, Japan and India.

Staff Comment #9:

Executive Officers, page 36

    9.

    In future filings, please include a description of the business experience for each
executive officer that covers the principal occupations and employment of such
executive officer during the past five years. For example, it is unclear if the full
five years are covered for Michael C. Keefe and Ralph L. Genesi. See Item
401(e) of Regulation S-K.

Response to Comment #9:

The Company respectfully acknowledges the Staff’s comment. In future filings, the Company will
include the dates for Messrs. Keefe and Genesi and any other executive officers’ prior positions to
clarify that the full five years are covered. For example, Mr. Keefe’s experience will state that
Mr. Keefe worked at International Fight League from 2007 until 2009, and was with Lucent
Technologies and AT&T from 1990 until 2006.

    Securities and Exchange Commission

February 11, 2011

    Page 6

Staff Comment #10:

Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 41

Fiscal 2010 compared to fiscal 2009, page 45

Fiscal 2009 compared to fiscal 2008, page 48

    10.

    We note that your discussion does not fully discuss the factors that lead to
the changes in various line items from period-to-period. For example, for both the
fiscal year ended 2009 and