<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 August 31, 1996
----------------------------
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
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TEAM, INC.
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(Exact name of registrant as specified in its charter)
Texas 74-1765729
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(State or other jurisdiction (I.R.S. Employer
of incorporation Identification Number)
or organization)
1019 South Hood Street, Alvin, Texas 77511
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 331-6154
--------------------
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
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On October 1, 1996, there were 5,159,842 shares of the Registrant's common stock
outstanding.
<PAGE> 2
TEAM, INC.
INDEX
PART I. FINANCIAL INFORMATION Page No.
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Item 1. Financial Statements
Consolidated Balance Sheets -- 3
August 31, 1996 and May 31, 1996
Consolidated Statements of Earnings -- 4
Three Months Ended
August 31, 1996 and 1995
Consolidated Statements of Cash Flows -- 5
Three Months Ended
August 31, 1996 and 1995
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 7
of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, May 31,
1996 1996
(Restated)
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,288,000 $ 2,037,000
Accounts receivable, net of allowance for doubtful
accounts of $162,000 and $171,000 7,566,000 8,140,000
Materials and supplies 5,834,000 5,748,000
Prepaid expenses and other current assets 834,000 846,000
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Total Current Assets 15,522,000 16,771,000
Net Assets of Discontinued Operations, Net of Reserve
for Future Losses of $461,000 and $0 2,954,000 3,503,000
Property, Plant and Equipment:
Land and buildings 6,594,000 6,874,000
Machinery and equipment 11,149,000 11,088,000
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17,743,000 17,962,000
Less accumulated depreciation and amortization 11,874,000 12,197,000
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5,869,000 5,765,000
Other Assets 2,829,000 2,887,000
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$ 27,174,000 $ 28,926,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,733,000 $ 1,735,000
Accounts payable 706,000 846,000
Other accrued liabilities 2,868,000 3,546,000
Current income taxes payable 14,000 --
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Total Current Liabilities 5,321,000 6,127,000
Long-term Debt and Other Obligations 10,797,000 11,754,000
Stockholders' Equity:
Preferred stock, cumulative, par value $100 per share,
500,000 shares authorized, none issued -- --
Common stock, par value $.30 per share, 10,000,000
shares authorized and 5,169,542 shares issued 1,551,000 1,551,000
Additional paid-in capital 24,992,000 24,992,000
Accumulated deficit (15,390,000) (15,401,000)
Treasury stock at cost, 9,700 shares (97,000) (97,000)
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11,056,000 11,045,000
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$ 27,174,000 $ 28,926,000
============= =============
</TABLE>
See notes to consolidated financial statements 3
<PAGE> 4
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
August 31,
---------------------------
1996 1995
(Restated)
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<S> <C> <C>
Revenues $ 10,155,000 $ 12,117,000
Operating expenses 5,716,000 6,590,000
Selling, general and administrative expenses 4,170,000 4,840,000
Interest 245,000 325,000
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Earnings from continuing operations before
income taxes 24,000 362,000
Provision for income taxes 14,000 203,000
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Earnings from continuing operations, net of
income taxes 10,000 159,000
Earnings (loss) from Military Housing projects
discontinued operations, net 182,000 (126,000)
Estimated loss on sale of Military Housing projects
discontinued operations, net (181,000) --
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Net earnings $ 11,000 $ 33,000
============= =============
Net earnings (loss) per common share
Net earnings from continuing operations $ 0.00 $ 0.03
Net earnings (loss) from Military Housing projects
discontinued operations 0.04 (0.02)
Net estimated loss on sale of Military Housing
projects discontinued operations (0.04) 0.00
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Net earnings $ 0.00 $ 0.01
============= =============
Weighted average number of shares outstanding 5,160,000 5,160,000
============= =============
</TABLE>
4
<PAGE> 5
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
August 31, August 31,
1996 1995
(Restated)
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<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings from continuing operations $ 10,000 $ 159,000
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 374,000 547,000
(Gain) loss on sale of assets (21,000) 3,000
Change in assets and liabilities:
(Increase) decrease:
Accounts receivable 574,000 (744,000)
Materials and supplies (86,000) 179,000
Prepaid expenses and other assets 12,000 509,000
Increase (decrease):
Accounts payable (140,000) (142,000)
Other accrued liabilities (678,000) 244,000
Income taxes payable 14,000 126,000
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Net cash provided by operating activities 59,000 881,000
Cash Flows from Investing Activities:
Capital expenditures (575,000) (145,000)
Disposal of property and equipment 176,000 4,000
Decrease (increase) in other assets 1,000 (121,000)
(Increase) decrease in net assets of
discontinued operations 549,000 (180,000)
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Net cash provided by (used in) investing
activities 151,000 (442,000)
Cash Flows From Financing Activities:
Payments under debt agreements
and capital lease obligations (959,000) (1,283,000)
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Net cash used in financing activities (959,000) (1,283,000)
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Net decrease in cash and cash equivalents (749,000) (844,000)
Cash and cash equivalents at beginning of year 2,037,000 3,139,000
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Cash and cash equivalents at end of period $ 1,288,000 $ 2,295,000
============= =============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 250,000 $ 292,000
============= =============
Income taxes $ 7,000 $ 13,000
============= =============
</TABLE>
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,
1996.
The prior period financial statements have been restated to reflect the
Military Housing projects segment as discontinued operations.
2. Dividends
No dividends were paid during the first three months of fiscal 1997 or
1996. 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 Operation - Military Housing Projects
The Company has entered into an Agreement of Purchase and Sale with
respect to the sale of the Company's 801 Military Housing projects. The
closing of the sale is subject to certain conditions but is anticipated to
occur no later than December 5, 1996. A summary of the discontinued
Military Housing projects' assets and liabilities as of August 31, 1996 and
May 31, 1996 follows:
August 31, May 31,
1996 1996
--------------- ---------------
Assets:
Current assets............... $ 1,730,000 $ 2,890,000
Land and buildings, net...... 40,758,000 41,123,000
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$ 42,488,000 $ 44,013,000
Liabilities:
Current liabilities.......... $ 818,000 $ 1,745,000
Long-term debt............... 38,255,000 38,765,000
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$ 39,073,000 $ 40,510,000
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Net Assets................... $ 3,415,000 $ 3,503,000
=============== ===============
6
<PAGE> 7
A summary of the results of the discontinued Military Housing projects'
operations for the period ended August 31, 1996 and 1995 follows:
Three Months Ended
August 31,
--------------------------------------
1996 1995
---------------- ----------------
Revenues $ 1,263,000 $ 1,257,000
Operating expenses................... (561,000) (556,000)
General and administrative expenses.. (20,000) (90,000)
Interest expense..................... (818,000) (839,000)
Estimated future losses.............. (180,000) --
Other income......................... 592,000 37,000
--------------- ---------------
Earnings (loss) before income taxes.. 276,000 (191,000)
(Provision) benefit for income taxes. (94,000) 65,000
---------------- ---------------
Net earnings.........................$ 182,000 $ (126,000)
=============== ===============
During the quarter, $180,000 was accrued for estimated future losses of the
Military Housing projects' operations through the expected date of disposition.
In addition, $281,000 was accrued for the estimated loss on the sale of the
projects.
Also, as previously reported, during the quarter Team received $559,000
from the Armed Services Board of Contract Appeals in settlement of the Ft.
Stewart claim for costs and expenses associated with the termination of the
Agreement with the United States Army Corps of Engineers to construct a Federal
housing project.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended August 31, 1996 Compared
to Three Months Ended August 31, 1995
For the three month period ended August 31, 1996, revenues from the
Company's industrial repair services business totaled $10.2 million, 16 percent
lower than revenues of $12.1 million reported in the same period of the prior
fiscal year. This decline in revenues is primarily a result of the sale in May
1996 of the consulting and engineering division and lower demand for emission
monitoring services, as a result of reduced reporting requirements by many of
the Company's customers, due to slowdown in environmental regulatory activity.
In addition, some of the Company's customers have implemented internal reporting
for emissions control services.
As a percent of sales, operating expenses in the Company's operations
increased by 2 percent from the first quarter of fiscal 1996. Gross profit
margins declined from 45.6 percent to 43.7 percent as the Company was not able
to reduce costs sufficiently to offset the decline in revenues. Selling, general
and administrative expenses of $4.2 million in the first quarter of fiscal 1997
were $670,000
7
<PAGE> 8
or 14 percent lower than in the prior year. The continuing impact
of cost reduction programs implemented during the prior fiscal year has resulted
in lower personnel, insurance and general expenses.
Interest expense of $245,000 in the first three months of fiscal 1997 was
25 percent lower than in the same period of fiscal 1996 due to reduced average
borrowing levels. Pre-tax earnings of $24,000 for the first quarter decreased
from 1996 first quarter pre-tax earnings of $362,000.
Liquidity and Capital Resources
At August 31, 1996, the Company's working capital totaled $10.2 million, a
decrease of $443,000 from working capital of $10.6 million at May 31, 1996. The
Company has been able to finance its working capital requirements through its
internally generated cash flow.
As of August 31, 1996, cash and cash equivalents totaled $1.3 million,
decreasing $749,000 in the first quarter. This cash decrease resulted mainly
from $959,000 used in the Company's financing activities offset by $151,000
provided in the Company's investing activities and by $59,000 provided by the
Company's operating activities. See "Consolidated Statements of Cash Flows" for
additional detail.
Management expects that capital expenditures for fiscal 1997 will be
approximately $1.5 million, as the Company plans to replace, upgrade and expand
its data collection, computer and other operating equipment. All planned capital
expenditures are discretionary and will be made based on available funds. During
the first quarter of fiscal 1997, capital expenditures totaled $575,000,
primarily for the purchase of LeakTrackers(registered trademark) used in
expanding the Company's emissions control services data handling programs
as well as the purchase of equipment used in hot tapping line repairs.
The Company's current and long-term debt and other obligations were $12.5
million compared to $13.4 million at May 31, 1996. Of this amount, $8.5 million
was owed to the Company's primary bank lender. The Company paid down the term
note in the amount of $900,000 during the quarter.
The Company has entered into an Agreement of Purchase and Sale with respect
to the sale of the Company's 801 Military Housing projects. The closing of the
sale is subject to certain conditions, but is anticipated to occur no later than
December 5, 1996. Although there can be no assurance that any potential
transaction will be completed, management intends to utilize the proceeds of
such a sale, if any, to further reduce bank debt and to increase available
working capital. (See Note 3 of Notes to Consolidated Financial Statements.)
LeakTracker(registered trademark) is a registered trademark of Tracker
Technologies, Inc.
8
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no Form 8-K Reports filed during the quarter ended August 31,
1996.
9
<PAGE> 10
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: October 10, 1996
WILLIAM A. RYAN
---------------------------------------
William A. Ryan, Chairman of the Board,
President and Chief Executive Officer
MARGIE E. ROGERS
---------------------------------------
Margie E. Rogers, Treasurer and
Chief Accounting Officer
<PAGE> 11
EXHIBIT INDEX
27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements and related notes of Team, Inc. and
Subsidiaries for the three months ended August 31, 1996 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> AUG-31-1996
<CASH> 1,228,000
<SECURITIES> 0
<RECEIVABLES> 7,728,000
<ALLOWANCES> 162,000
<INVENTORY> 5,834,000
<CURRENT-ASSETS> 15,522,000
<PP&E> 17,743,000
<DEPRECIATION> 11,874,000
<TOTAL-ASSETS> 27,174,000
<CURRENT-LIABILITIES> 5,321,000
<BONDS> 10,797,000<F1>
0
0
<COMMON> 1,551,000
<OTHER-SE> 9,505,000
<TOTAL-LIABILITY-AND-EQUITY> 27,174,000
<SALES> 0
<TOTAL-REVENUES> 10,155,000
<CGS> 0
<TOTAL-COSTS> 5,716,000
<OTHER-EXPENSES> 4,170,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 245,000
<INCOME-PRETAX> 24,000
<INCOME-TAX> 14,000
<INCOME-CONTINUING> 10,000
<DISCONTINUED> 1,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,000
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
<FN>
<F1>Includes $1,680,000 for compensation accruals of former employees.
</FN>
</TABLE>
