<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period __________________ to _______________________________
Commission file number 1-8604
TEAM, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1765729
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1001 Fannin, Suite 4656, Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 659-3600
_________________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No
----- -----
On March 31, 1995, there were 5,159,842 shares of the Registrant's common stock
outstanding.
<PAGE> 2
TEAM, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -- 3
February 28, 1995 and May 31, 1994
Consolidated Statements of Operations -- 4
Three Months Ended February 28, 1995
and 1994 and Nine Months Ended
February 28, 1995 and 1994
Consolidated Statements of Cash Flows -- 5
Nine Months Ended
February 28, 1995 and 1994
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 8
of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, May 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,314,000 $ 3,742,000
Accounts receivable, net of allowance for
doubtful accounts of $531,000 and $285,000 10,760,000 12,662,000
Materials and supplies 7,294,000 8,308,000
Prepaid expenses and other current assets 1,520,000 1,442,000
------------ ------------
Total current assets 21,888,000 26,154,000
Net Assets of Discontinued Operations -- 6,250,000
Property, Plant and Equipment:
Land and buildings 7,480,000 7,359,000
Transportation equipment 4,805,000 5,432,000
Other machinery and equipment 12,990,000 13,896,000
------------ ------------
25,275,000 26,687,000
Less accumulated depreciation and amortization (16,904,000) (16,638,000)
------------ ------------
8,371,000 10,049,000
Military Housing Projects:
Restricted cash and other assets 1,793,000 2,852,000
Land and buildings, net of accumulated
depreciation of $4,347,000 and $1,262,000 42,835,000 45,920,000
------------ ------------
44,628,000 48,772,000
Goodwill, Net of Amortization 5,774,000 6,023,000
Other Assets 4,953,000 5,905,000
------------ ------------
Total Assets $ 85,614,000 $103,153,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 5,754,000 $ 3,903,000
Accounts payable 2,916,000 3,800,000
Other accrued liabilities 4,212,000 4,757,000
Current income tax payable -- 895,000
------------ ------------
Total Current Liabilities 12,882,000 13,355,000
Deferred Income Taxes Payable -- 346,000
Long-term Debt 12,182,000 21,001,000
Military Housing Projects' Non-recourse Obligations:
Debt 39,722,000 40,603,000
Other 768,000 1,551,000
------------ ------------
40,490,000 42,154,000
------------ ------------
Stockholders' Equity:
Preferred stock, cumulative, par value $100 per
share, 500,000 shares authorized, none issued -- --
Common stock, par value $.30 per share, 10,000,000
shares authorized, 5,169,542 shares issued 1,551,000 1,551,000
Additional paid-in capital 24,992,000 24,992,000
Accumulated deficit (6,386,000) (149,000)
Treasury stock at cost, 9,700 shares (97,000) (97,000)
------------ ------------
Total Stockholders' Equity 20,060,000 26,297,000
------------ ------------
Total Liabilities and Stockholders' Equity $ 85,614,000 $103,153,000
============ ============
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- ---------------------------------
February 28, February 28, February 28, February 28,
1995 1994 1995 1994
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Operating revenue $15,397,000 $16,881,000 $45,278,000 $51,012,000
Military Housing
Project lease revenue 1,250,000 1,183,000 3,660,000 3,036,000
----------- ----------- ----------- -----------
16,647,000 18,064,000 48,938,000 54,048,000
Operating costs and expenses:
Operating expenses 8,469,000 8,993,000 25,169,000 27,432,000
Selling, general and
administrative expenses 5,975,000 6,748,000 19,045,000 20,359,000
Interest 410,000 430,000 1,261,000 1,279,000
Writedown of assets -- -- 1,971,000 --
----------- ----------- ----------- -----------
14,854,000 16,171,000 47,446,000 49,070,000
Military Housing Project
Costs and Expenses:
Operating expenses 566,000 350,000 1,517,000 867,000
General and
administrative expenses 329,000 89,000 1,081,000 110,000
Interest 849,000 866,000 2,561,000 2,210,000
Writedown of assets -- -- 4,832,000 --
----------- ----------- ----------- -----------
1,744,000 1,305,000 9,991,000 3,187,000
Earnings (loss) from continuing operations
before income taxes 49,000 588,000 (8,499,000) 1,791,000
Provision (benefit)
for income taxes 9,000 284,000 (2,719,000) 862,000
----------- ----------- ----------- -----------
Earnings (loss) from continuing
operations net of income taxes 40,000 304,000 (5,780,000) 929,000
Change in estimated loss on
sale of discontinued
operations, net of income taxes -- -- (457,000) --
----------- ----------- ----------- -----------
Net earnings (loss) $ 40,000 $ 304,000 $(6,237,000) $ 929,000
=========== =========== =========== ===========
Net earnings (loss)
per common share:
Earnings (loss) from $ 0.01 $ 0.06 $ (1.12) $ 0.18
continuing operations
Change in estimated
loss on sale of
discontinued operations -- -- (0.09) --
----------- ----------- ----------- -----------
Net earnings (loss) $ 0.01 $ 0.06 $ (1.21) $ 0.18
=========== =========== =========== ===========
Weighted number of
shares outstanding 5,160,000 5,161,000 5,160,000 5,161,000
</TABLE>
See notes to consolidated financial statements 4
<PAGE> 5
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------
February 28, February 28,
1995 1994
------------- ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Earnings (loss) from continuing
operations, net of income taxes $(5,780,000) $ 929,000
Adjustments to reconcile earnings (loss)
from continuing operations, net of
income taxes, to net cash provided
by operating activities:
Depreciation and amortization 3,540,000 3,249,000
Provision for doubtful accounts 441,000 642,000
and notes receivable
Gain on sale of assets (14,000) (2,000)
Writedown of assets 6,803,000 --
Noncurrent deferred income taxes (1,798,000) --
Change in assets and liabilities:
(Increase) decrease:
Accounts receivable 1,199,000 (654,000)
Materials and supplies 701,000 657,000
Prepaid expenses and other assets (528,000) 584,000
Increase (decrease):
Accounts payable (884,000) (1,920,000)
Other accrued liabilities (1,121,000) (734,000)
Income taxes payable (754,000) 532,000
----------- -----------
Net cash provided by operating activities 1,805,000 3,283,000
Cash Flows from Investing Activities:
Capital expenditures (344,000) (1,035,000)
Disposal of property and equipment 42,000 36,000
Cash received on sale of company 4,550,000 --
Decrease (increase) in other assets 327,000 (2,091,000)
Decrease in net assets of discontinued operations -- 2,541,000
Military housing projects' capital expenditures -- (6,059,000)
Decrease (increase) in military housing projects'
restricted cash and other assets 1,059,000 (1,738,000)
----------- -----------
Net cash provided by (used in)
investing activities 5,634,000 (8,346,000)
Cash Flows From Financing Activities:
Payments under debt agreements
and capital lease obligations (7,475,000) (7,129,000)
Borrowings under debt agreements 272,000 5,929,000
Proceeds from issuance of non-recourse debt -- 10,248,000
Payments on military housing
projects' non-recourse debt (881,000) (414,000)
Decrease in military housing projects'
other non-recourse obligations (783,000) (1,124,000)
Redemption of treasury stock -- 8,000
----------- -----------
Net cash provided by (used in)
financing activities (8,867,000) 7,518,000
Net increase (decrease) in cash and cash equivalents (1,428,000) 2,455,000
Cash and cash equivalents at beginning of year 3,742,000 1,682,000
----------- -----------
Cash and cash equivalents at end of period $ 2,314,000 $ 4,137,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest:
Operating interest $ 1,445,000 $ 1,341,000
Military housing projects 3,433,000 2,816,000
----------- -----------
$ 4,878,000 $ 4,157,000
=========== ===========
Income taxes $ 542,000 $ 168,000
=========== ===========
</TABLE>
Supplemental schedule of non-cash financing activities:
During the period, computer hardware and software acquired under capital
lease obligations amounted to $254,000.
See notes to consolidated financial statements
5
<PAGE> 6
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Method of Presentation
General
The interim financial statements are unaudited but, in the opinion of
management, reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of results
for such periods. The results of operations for any interim period
are not necessarily indicative of results for the full year. These
financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's annual report
for the fiscal year ended May 31, 1994.
Certain reclassifications have been made to previously reported
balances to conform with fiscal 1995 classifications.
2. Dividends
No dividends were paid during the first nine months of fiscal 1995 or
1994. Pursuant to the Company's Credit Agreement, the Company may not
pay quarterly dividends without the consent of its senior lender.
Future dividend payments will depend upon the Company's financial
condition and other relevant matters.
3. Discontinued Operations
As previously reported, in July 1994 Team sold substantially all the
assets of Infrastructure Services, Inc. The sale price consisted of
$4,550,000 in cash and a subordinated promissory note in the principal
amount of $1,700,000. This note bears interest at 9 percent per annum
payable semi-annually and matures July 2002. A principal payment of
$500,000 is due and payable in August 1997 and principal payments of
$120,000 are due and payable semi-annually thereafter. The assets
sold excluded certain real estate previously occupied by
Infrastructure Services, Inc., which has been leased to an unrelated
third party. The cash proceeds from the sale were used to reduce the
Company's term loan with its primary lender. (See Note 4).
4. Debt and Credit Arrangements
Team's credit facility with its primary lender consists of a Term Loan
which matures in August 1995 and a revolving line of credit which
matures in October 1995. Under the terms of the revolving line of
credit, the maturity date can be extended to April 1997, at the
Company's option in certain circumstances. The balance due at
February 28, 1995 on the Term Loan was $4,950,000. During the third
quarter, the Company and its lender executed a First Amendment and
Supplement to Credit Agreement; and Term Note Modification Agreement
("the Amendment"). This Amendment reduced the third quarter payment
on the term loan to $250,000, reduces the fourth quarter payment to
6
<PAGE> 7
$500,000 and requires the remainder to be paid in full at the August
1995 maturity date. In addition, certain financial covenants
contained in the credit agreement were modified. The amount
outstanding on the revolving line of credit was $9,086,000 at February
28, 1995.
5. Legal Proceedings
As previously reported, several lawsuits were filed in fiscal 1994 by
subsidiaries of the Company against the general contractor of the
military housing projects seeking unquantified damages, including
punitive damages and attorneys' and other fees, in connection with the
construction of the projects. The general contractor asserted
counterclaims to the Company's allegations, requesting damages,
including punitive damages and attorneys' and other fees. Subsequent
to the end of the quarter, these lawsuits were settled by the Company
out of Certificate of Participation proceeds which were previously
escrowed by the Company with the Trustee for the Certificate holders.
Also, as previously reported, another subsidiary of the Company was
committed, pursuant to an agreement with the United States Army Corps
of Engineers (the "Corps"), to construct a fourth, 200 unit Federal
housing project near the Ft. Stewart Military Reservation located in
Hinesville, Georgia. Construction of this project never commenced as
a result of extensive delays in obtaining easements, licenses and
permits necessary in order to develop the project. In fiscal 1993,
the Company filed a Claim and Request for Change Order with the Corps
for additional costs and expenses incurred as a result of these
delays, which is presently being appealed. During fiscal 1994, the
Corps terminated the Agreement, thereby cancelling the project. The
Company has separately appealed the Corps' decision to terminate the
Agreement. At this time, the Company cannot predict the final outcome
of its appeal of the Corps' decision to cancel the project or of its
claim for additional costs and expenses.
6. Writedown of Assets
The loss from continuing operations for the nine months included
second quarter pre-tax charges of $6.8 million primarily representing
writedowns in the carrying value of certain of the Company's assets.
The charge included provisions of approximately $4.8 million to reduce
the carrying value of the military housing projects and related
deferred expenses. In addition, the Company booked pre-tax charges of
approximately $2.0 million to write down the value of certain assets
and to record provisions for certain deferred charges and accounts
receivable losses. The Company also increased estimated losses on the
sale of its discontinued operations by $457,000, net of income taxes.
7. Other
The Company's management is presently pursuing negotiations to sell
its transportation and military housing business segments. Should
such a sale be consummated, the operations of these business segments
will be accounted for as discontinued operations.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth for the periods indicated (i) the percentage
which certain items in the financial statements of the Company bear to revenues
and (ii) the percentage change in the dollar amount of such items from period
to period:
<TABLE>
<CAPTION>
Percentage of Revenue Increase/(Decrease)
--------------------------------------------------- ------------------------
Three Nine
Three Months Nine Months Months Months
Ended February 28, Ended February 28, Ended Ended
--------------------- --------------------- -------------------------
1995 1994 1995 1994 2/28/95 2/28/95
------ ------- ------ ------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Core businesses 92.5% 93.5% 92.5% 94.4% (8.8)% (11.2)%
Military housing
project lease revenue 7.5 6.5 7.5 5.6 5.7 20.6
----- ----- ----- -----
Total Revenue 100.0% 100.0% 100.0% 100.0% 7.8 9.5
Core Business
Costs and Expenses:
Operating expenses 50.9 49.8 51.5 50.7 (5.8) (8.2)
SG&A expenses 35.9 37.3 38.9 37.7 (11.5) (6.5)
Interest 2.4 2.4 2.6 2.4 4.7 (1.4)
Writedown of assets 0.0 0.0 4.0 0.0 N/M N/M
----- ----- ----- -----
89.2 89.5 97.0 90.8 (8.1) (3.3)
Military
Housing Projects:
Operating expenses 3.4 1.9 3.1 1.6 61.7 75.0
G&A expenses 2.0 0.5 2.2 0.2 269.7 882.7
Interest 5.1 4.8 5.2 4.1 2.0 15.9
Writedown of assets -- 0.0 9.9 0.0 N/M N/M
----- ----- ----- -----
10.5 7.2 20.4 5.9 33.6 213.5
Earnings (loss) from
continuing operations
before income taxes 0.3 3.3 (17.4) 3.3 (91.7) N/M
Provision (benefit)
for income taxes 0.1 1.6 (5.6) 1.6 (96.8) N/M
----- ----- ----- -----
Earnings (loss) from
continuing operations
net of income taxes 0.2% 1.7% (11.8)% 1.7% (86.8)% N/M
===== ===== ===== ===== ===== =====
</TABLE>
Note: Amounts designated as "N/M" are not meaningful due to the change from
earnings in 1994 periods to losses in 1995 period.
8
<PAGE> 9
The Company's core businesses include its Environmental Services, comprised
of leak repair, emissions monitoring and environmental engineering and
consulting services, and its Transportation Services, which include
transportation, hauling and rental of tanks for the oil and gas production
industry.
Results of Operations
Three Months Ended February 28, 1995 Compared
to Three Months Ended February 28, 1994
Core Business: Revenues for the three months ended February 28, 1995 totaled
$15.4 million, a decrease of 9% from revenues of $16.9 million reported for the
same period of 1994. Environmental services revenues were $13.1 million in the
three months ended February 28, 1995, compared to revenues of $14.2 in the
comparable period last year. Lower maintenance spending by industrial
customers and unseasonably warm weather during the winter months of 1994/5
reduced demand for the Company's leak sealing services during the fiscal third
quarter. In addition, lower revenues in emissions monitoring and engineering
consulting services resulted from increased competition and certain of the
Company's customers implementing internal environmental reporting.
Transportation services revenues of $2.3 million were $427,000, or 16%, less
than revenues of $2.7 million in the same period last year, due to lower
drilling activity in South Texas, which was affected by lower prices for
natural gas.
During the three month period ending February 28, 1995, operating expenses
in the Company's environmental and transportation services segments decreased
by $524,000, or 6%, from the same period last year. Gross profit margins of 45%
in the fiscal third quarter were slightly lower than gross margins of 47% in
the third quarter of last year. Selling, general and administrative expenses
in the Company's core businesses were $6.0 million, a decrease of 11%, or
$773,000, from the prior year period. Lower personnel expenses and reduced
insurance costs accounted for most of the reduction in selling, general and
administrative expenses. Net interest expenses of $410,000 in the Company's
primary operations decreased by 5% from the prior year period due to lower
average borrowings, somewhat offset by increased interest rates.
For the three months ending February 28, 1995, operating income in the
Company's core businesses was $543,000, compared to operating income of
$710,000 in the prior year period.
Military Housing Projects: Rental revenues from the three military housing
projects owned by the Company were $1,250,000 in the three month period ending
February 28, 1995, compared to revenues of $1,183,000 in the prior year period.
Rental revenues are sufficient to cover debt payments, property taxes and
insurance related to the three properties. General and administrative expenses
were $329,000 in the three month period ending February 28, 1995, an increase
of $240,000 from the prior year, primarily as a result of higher legal fees
incurred in litigation with the general contractor on the projects. The
Company reached a settlement with the general contractor in March 1995, which
will not have a material impact on the Company's financial results. (See Note
5, "Notes
9
<PAGE> 10
to Consolidated Financial Statements"). For the third quarter of fiscal 1995,
the military housing projects incurred a loss before income taxes of $494,000,
compared to a loss before income taxes of $122,000 in the same period last year.
For the three-month period ended February 28, 1995, total net earnings from
continuing operations were $40,000, compared to net earnings of $304,000 in the
prior year.
Nine Months Ended February 28, 1995 Compared
To Nine Months Ended February 28, 1994
Core Business: For the first nine months of fiscal 1995, revenues from the
Company's core businesses were $45.3 million, $5.7 million, or 11%, lower than
revenues of $51 million in the comparable period last year. Reduced demand for
leak sealing maintenance and engineering consulting services accounted for $4.4
million of the decline in revenues. In Transportation services, revenues for
the first nine months of fiscal 1995 were $6.6 million, 17% lower than
revenues of $8 million in the prior year period, due primarily to reduced
drilling activity in the South Texas market area.
Operating expenses in the nine months ended February 28, 1995 were $25.2
million, 8% lower than operating expenses in the same period last year. The
Company has reduced costs as revenues have declined; however such decreases
have not fully offset the decline in revenues due to competitive pressures.
Selling, general and administrative expenses were $19.0 million in the first
nine months of fiscal 1995, $1.3 million lower than in the prior year.
Management expects continued reductions in fixed costs as it restructures
operations to reflect the reduced level of business activity.
Including the effect of the $2.0 million write down of assets and other
one-time charges recorded in the fiscal second quarter ending November 30,
1994, the loss before taxes in the Company's core business was $2.2 million,
compared to pre-tax earnings of $1.9 million in the first nine months of fiscal
1994.
Military Housing Projects: For the nine months ended February 28, 1995,
rental revenues were $3.7 million, $624,000 higher than rentals in the prior
year when rentals were recorded for less than the full period, due to final
completion of all of the projects in November 1993. The pre-tax loss, before
the provisions for write down of assets, was $1.5 million in the nine-month
period ended February 28, 1995, compared to a loss of $151,000 in the
comparable period in 1994. Higher depreciation expense and increased legal
fees accounted for the change. In the second quarter of fiscal year 1995, the
Company recorded a $4.8 million provision in the carrying value of the Military
Housing Projects, resulting in a total pre-tax loss of $6.3 million in the
nine-month period ending February 28, 1995.
The net loss from continuing operations for the nine months ended February
28, 1995 was $5.8 million, compared to net income of $929,000 last year.
Including the net change in the estimate on sale of discontinued operations of
$457,000, recorded in the second quarter of
10
<PAGE> 11
fiscal 1995, the Company's net loss was $6.3 million for the nine months ended
February 28, 1995.
Liquidity and Capital Resources
At February 28, 1995, the Company's net working capital was $9.0 million, a
decrease of $3.8 million from May 31, 1994. Cash and cash equivalents were
$2.3 million at February 28, 1995, of which $1.6 million was held in trust and
was not available for use in the Company's operations. The reduction in
working capital resulted primarily from lower accounts receivable and
inventory, and an increase in the current portion of long-term debt. The
reduction in accounts receivable resulted from lower overall business activity
and improvement in collection of past-due accounts. Lower inventory levels
resulted from efforts to improve inventory utilization and improve cash flow.
Capital expenditures for the nine-month period ended February 28, 1995 were
$344,000, $691,000 less than capital expenditures in the comparable period of
the prior year. Management estimates that capital expenditures for the fiscal
year ending May 31, 1995 will be approximately $500,000, primarily for normal
replacement of operating assets. All planned capital expenditures are
discretionary and will be made based on the availability of funds.
The Company's current and long-term debt, excluding non-recourse obligations of
$39.7 million of the military housing projects, was $17.9 million at February
28, 1995, $7 million less than debt of $24.9 million at May 31, 1994. Of
this amount, $14 million was owed to the Company's primary bank lender. In
February 1995, the Company amended the terms of its credit agreement with its
primary bank in order to reduce scheduled principal payments through May 1995
and to amend certain financial covenants incorporated in the credit agreement.
The Company was in compliance with the amended credit agreement at February 28,
1995.
In order to meet its financial obligations and to focus its efforts on the
Company's environmental maintenance and consulting services, management intends
to sell its transportation and military housing businesses. The proceeds of
such sales, if completed, will be used to reduce bank debt and increase
available working capital. Management is presently negotiating with
prospective buyers, although there can be no assurance that any transaction
will be completed.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, several lawsuits were filed in fiscal 1994 by
subsidiaries of the Company against the general contractor of the military
housing projects seeking unquantified damages, including punitive damages and
attorneys' and other fees, in connection with the construction of the projects.
The general contractor asserted counterclaims to the Company's allegations,
requesting damages, including punitive damages and attorneys' and other fees.
Subsequent to the end of the quarter, these lawsuits were settled by the
Company out of Certificate of Participation proceeds which were previously
escrowed by the Company with the Trustee for the Certificate holders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 First Amendment and Supplement to Credit Agreement; and Term Note
Modification Agreement.
(b) Reports on Form 8-K
There were no Form 8-K Reports filed during the quarter ended
February 28, 1995.
12
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
TEAM, INC.
(Registrant)
Date: April 7, 1995
/s/ H. WESLEY HALL
_____________________________________
H. Wesley Hall, Chairman of the Board,
President and Chief Executive Officer
/s/ JOHN M. SLACK
_____________________________________
John M. Slack, Vice President
and Chief Financial Officer
13
<PAGE> 14
INDEX TO EXHIBITS
10.1 First Amendment and Supplement to Credit Agreement; and Term Note
Modification Agreement.
<PAGE> 1
FIRST AMENDMENT AND SUPPLEMENT TO CREDIT AGREEMENT; AND
TERM NOTE MODIFICATION AGREEMENT
THIS FIRST AMENDMENT AND SUPPLEMENT TO CREDIT AGREEMENT; AND TERM NOTE
MODIFICATION AGREEMENT ("First Amendment") effective as of February 28, 1995
(the "First Amendment Effective Date") is made and entered into by and among
TEAM, INC. (the "Borrower"), a Texas corporation, and TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, a national banking association (the "Lender").
RECITALS
WHEREAS, the Borrower and the Lender are parties to a Credit Agreement
dated as of April 17, 1994 ("the Credit Agreement"); and
WHEREAS, the Borrower and the Lender have agreed, on the terms and
conditions herein set forth, to amend certain aspects of the Credit Agreement
and to modify the payment terms of the Term Note;
NOW, THEREFORE, IT IS AGREED THAT:
Section 1. Definitions. Terms used herein which are defined in
the Credit Agreement shall have the same meanings when used herein unless
otherwise provided herein.
Section 2. Amendments to the Credit Agreement. On and after the
First Amendment Effective Date, the Credit Agreement shall be amended as
follows:
(a) Section 2.06 Notes. Section 2.06(b) of the Credit
Agreement is hereby amended by deleting the first full
paragraph thereof and substituting therefore the following
paragraph:
"The Loans to be made by the Lender to the Borrower
pursuant to Subsection 2.01(c) shall be evidenced by
the Term Note, being that certain promissory note of
the Borrower dated the Closing Date, in the original
principal amount of $11,500,000, payable to the order
of the Lender in six (6) consecutive quarterly
installments commencing on March 31, 1994, the first
two (2) of which being in the amount of $750,000
each, the third (3rd) of which being in the amount of
$250,000, the fourth (4th) of which being in the
amount of $250,000, the fifth (5th) of which being in
the amount of $500,000, with the sixth (6th) and
final installment being in the amount of $750,000
together with any unpaid principal balance then owing
under the Term Note, being due and payable on the
Final Maturity Date. The Term Note shall otherwise
be in substantially the form of Exhibit A-2 hereto."
<PAGE> 2
(b) Section 9.03 Investments, Loans and Advances. Section
9.03 of the Credit Agreement is hereby amended and
supplemented as follows:
(i) Section 9.03(j) is hereby amended by deleting the
word "and" from the end thereof;
(ii) Section 9.03(k) is hereby amended by deleting the "."
from the end thereof and substituting therefor ";
and"; and
(iii) Section 9.03 is hereby further amended and
supplemented to add thereto a new subsection, to be
subsection (l), to read in its entirety as follows:
"(l) advances to Portales 801, Inc., Pensacola 801,
Inc., Ft. Bragg 801, Inc., and Ft. Stewart 801, Inc.
not to exceed $1,400,000 in the aggregate at any
time."
(c) Section 9.12 Capital Expenditures. Section 9.12 of the
Credit Agreement is hereby amended by deleting the amount
"$2,500,000" from the fifth line thereof and substituting
therefor "$1,500,000."
(d) Section 9.14 Tangible Net Worth. Section 9.14 of the
Credit Agreement is hereby amended by deleting the amount
"$20,500,000" from the third line thereof and substituting
therefor "$13,500,000."
(e) Section 9.15 Funded Debt to Cash Flow. Section 9.15 of
the Credit Agreement is hereby amended and supplemented as
follows:
(i) Section 9.15(d) is hereby amended in its entirety as
follows:
"(d) For the four fiscal-quarter period ended
February 28, 1995, the Borrower will not permit the
ratio of (i) Funded Debt to (ii) Cash Flow (for the
previous twelve-month period) to be greater than
4.25 to 1.0."
(ii) Section 9.15 is hereby further amended and
supplemented to add thereto two new subsections, to
be subsections (e) and (f), to read in their entirety
as follows:
"(e) For the four fiscal-quarter period ended May
31, 1995, the Borrower will not permit the ratio of
(i) Funded Debt to (ii) Cash Flow (for the previous
twelve-month period) to be greater than 3.75 to 1.0.
(f) For the four fiscal-quarter period ended August
31, 1995, the Borrower will not permit the ratio of
(i) Funded Debt to (ii) Cash Flow (for the previous
twelve-month period) to be greater than 3.5 to 1.0."
- 2 -
<PAGE> 3
(f) Section 9.16 Fixed Charge Coverage Ratio. Section 9.16 of
the Credit Agreement is hereby amended and supplemented as
follows:
(i) Section 9.16(d) is hereby amended in its entirety as
follows:
"(d) For the four fiscal-quarter period ended on
February 28, 1995, the Borrower will not permit the
ratio of (i) Cash Flow (for the previous twelve-month
period) to (ii) cash payments made for mandatory
payments of principal and interest plus capital
expenditures plus dividends of the Borrower and its
Consolidated Subsidiaries (for the previous
twelve-month period) to be less than 0.7 to 1.0."
(ii) Section 9.16 is hereby further amended and
supplemented to add thereto two new subsections, to
be subsections (e) and (f), to read in their entirety
as follows:
"(e) For the four fiscal-quarter period ended on May
31, 1995, the Borrower will not permit the ratio of
(i) Cash Flow (for the previous twelve-month period)
to (ii) cash payments made for mandatory payments of
principal and interest plus capital expenditures plus
dividends of the Borrower and its Consolidated
Subsidiaries (for the previous twelve-month period)
to be less than 0.75 to 1.0.
"(f) For the four fiscal-quarter period ended on
August 31, 1995, the Borrower will not permit the
ratio of (i) Cash Flow (for the previous twelve-month
period) to (ii) cash payments made for mandatory
payments of principal and interest plus capital
expenditures plus dividends of the Borrower and its
Consolidated Subsidiaries (for the previous
twelve-month period) to be less than 0.95 to 1.0."
(g) Section 9.17 Interest Coverage Ratio. Section 9.17 of the
Credit Agreement is hereby amended and supplemented as
follows:
(i) Section 9.17(d) is hereby amended in its entirety as
follows:
"(d) For the four fiscal-quarter period ended
February 28, 1995, the Borrower will not permit the
ratio of (i) Cash Flow (for the previous twelve-month
period) to (ii) cash interest payments made by the
Borrower and its Consolidated Subsidiaries (for the
previous twelve-month period) to be less than 2.5 to
1.0."
- 3 -
<PAGE> 4
(ii) Section 9.17 is hereby further amended and
supplemented to add thereto two new subsections, to
be subsections (e) and (f), to read in their entirety
as follows:
"(e) For the four fiscal-quarter period ended May
31, 1995, the Borrower will not permit the ratio of
(i) Cash Flow (for the previous twelve-month period)
to (ii) cash interest payments made by the Borrower
and its Consolidated Subsidiaries (for the previous
twelve-month period) to be less than 2.75 to 1.0.
"(f) For the four fiscal-quarter period ended August
31, 1995, the Borrower will not permit the ratio of
(i) Cash Flow (for the previous twelve-month period)
to (ii) cash interest payments made by the Borrower
and its Consolidated Subsidiaries (for the previous
twelve-month period) to be less than 3.0 to 1.0."
Section 3. Term Note Modification. Notwithstanding anything to
the contrary contained in the Term Note or the Credit Agreement, the principal
amount of the Term Note shall be due and payable as provided in Section 2.06(b)
of the Credit Agreement, as amended and supplemented hereby. Accrued interest
at the rate or rates specified or referred to in the Term Note, shall remain
due and payable and payable on the dates specified or referred to in the Term
Note.
Section 4. Limitations. The amendments set forth herein are
limited precisely as written and shall not be deemed to (a) be a consent to, or
waiver or modification of, any other term or condition of the Credit Agreement,
the Notes or any of the other Security Instruments, or (b) except as expressly
set forth herein, prejudice any right or rights which the Lender may now have
or may have in the future under or in connection with the Credit Agreement, the
Notes, the Security Instruments or any of the other documents referred to
therein. Except as expressly supplemented, amended or modified hereby or by
express written amendments thereof, the terms and provisions of the Credit
Agreement, the Notes, and any other Security Instruments or any other documents
or instruments executed in connection with any of the foregoing are and shall
remain in full force and effect. In the event of a conflict between this First
Amendment and any of the foregoing documents, the terms of this First Amendment
shall be controlling.
Section 5. Payment of Expenses. The Borrower agrees, whether or
not the transactions hereby contemplated shall be consummated, to reimburse and
save the Lender harmless from and against liability for the payment of all
reasonable substantiated out-of-pocket costs and expenses arising in connection
with the preparation, execution, delivery, amendment, modification, waiver and
enforcement of, or the preservation of any rights under this First Amendment,
including, without limitation, the reasonable fees and expenses of any local or
other counsel for the Lender, and all stamp taxes (including interest and
penalties, if any), recording taxes and fees, filing taxes and fees, and other
charges which may be payable in respect of, or in respect of any modification
of, the Credit Agreement and the other Security Instruments. The provisions of
this Section shall survive the termination of the Credit Agreement and the
repayment of the Loans.
Section 6. Governing Law. This First Amendment and the rights
and obligations of the parties hereunder and under the Credit Agreement shall
be construed in accordance with and be governed by the laws of the State of
Texas and the United States of America.
- 4 -
<PAGE> 5
Section 7. Descriptive Headings, etc. The descriptive headings
of the several Sections of this First Amendment are inserted for convenience
only and shall not be deemed to affect the meaning or construction of any of
the provisions hereof.
Section 8. Entire Agreement. This First Amendment and the
documents referred to herein represent the entire understanding of the parties
hereto regarding the subject matter hereof and supersede all prior and
contemporaneous oral and written agreements of the parties hereto with respect
to the subject matter hereof, including, without limitation, any commitment
letters regarding the transactions contemplated by this First Amendment.
Section 9. Counterparts. This First Amendment may be executed
in any number of counterparts and by different parties on separate counterparts
and all of such counterparts shall together constitute one and the same
instrument.
Section 10. Amended Definitions. As used in the Credit Agreement
(including all Exhibits thereto) and all other instruments and documents
executed in connection therewith, on and subsequent to the First Amendment
Effective Date the term "Agreement" shall mean the Credit Agreement as amended
by this First Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their respective duly authorized
offices as of March 13, 1995, and effective as of the date first above written.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE Section 26.02
THIS FIRST AMENDMENT AND OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE
PARTIES BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NOT
UNWRITTEN ORAL AGREEMENT BETWEEN THE PARTIES.
TEAM, INC.
By: /s/ JOHN M. SLACK
______________________________________
John M. Slack
Vice President, Chief Financial Officer
- 5 -
<PAGE> 6
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ C. D. KARGES
_______________________________
C.D. Karges
Senior Vice President
Address for Notices:
712 Main Street
Houston, Texas 77002
Attention: Mr. C.D. Karges
Lending Office for Base Rate and
Eurodollar Loans:
712 Main Street
Houston, Texas 77002
Telecopier No.: (713) 216-6004
Telephone No.: (713) 216-5929
Attention: C.D. Karges
with a copy to:
Loan Agreements
1111 Fannin, 10th Floor
Houston, Texas 77002
Telecopier No.: (713) 750-2951
Telephone No.: (713) 750-2990
Attention: Manager
