<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 NOVEMBER 30, 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.
- ----------------------------------------------------------------------------
(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)
1019 South Hood Street, Alvin, Texas 77511
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (281) 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
------- -------
On January 6, 1997, there were 5,159,842 shares of the Registrant's common
stock outstanding.
<PAGE> 2
TEAM, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
----------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets -- 3
November 30, 1996 and May 31, 1996
Consolidated Statements of Earnings -- 4
Three Months Ended
November 30, 1996 and 1995
Six Months Ended
November 30, 1996 and 1995
Consolidated Statements of Cash Flows -- 5
Six Months Ended
November 30, 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 4. Submission of Matters to a Vote of 9
Security Holders
Item 6. Exhibits and Reports on Form 8-K 9
</TABLE>
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
November 30, May 31,
1996 1996
(Restated)
----------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,030,000 $ 2,037,000
Accounts receivable, net of allowance for
doubtful accounts of $162,000 and $171,000 7,944,000 8,140,000
Materials and supplies 5,908,000 5,748,000
Prepaid expenses and other current assets 763,000 846,000
----------- -----------
Total Current Assets 16,645,000 16,771,000
Net Assets of Discontinued Operations, Net of
Reserve for Future Losses of $366,000 and $0 2,914,000 3,503,000
Property, Plant and Equipment:
Land and buildings 6,588,000 6,874,000
Machinery and equipment 11,376,000 11,088,000
----------- -----------
17,964,000 17,962,000
Less accumulated depreciation and amortization 12,048,000 12,197,000
----------- -----------
5,916,000 5,765,000
Other Assets 2,518,000 2,887,000
----------- -----------
$27,993,000 $28,926,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,739,000 $ 1,735,000
Accounts payable 1,171,000 846,000
Other accrued liabilities 3,409,000 3,546,000
Current income taxes payable 41,000 --
----------- -----------
Total Current Liabilities 6,360,000 6,127,000
Long-term Debt and Other Obligations 10,268,000 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 (15,081,000) (15,401,000)
Treasury stock at cost, 9,700 shares (97,000) (97,000)
----------- -----------
11,365,000 11,045,000
----------- -----------
$27,993,000 $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 SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
------------------------ ------------------------
1996 1995 1996 1995
(Restated) (Restated)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $11,271,000 $11,475,000 $21,426,000 $23,593,000
Operating expenses 6,261,000 7,044,000 11,976,000 13,634,000
Selling, general and administrative expenses 4,221,000 4,615,000 8,393,000 9,455,000
Interest 228,000 301,000 473,000 626,000
---------- ---------- ---------- ----------
Earnings (loss) from continuing operations before
income taxes 561,000 (485,000) 584,000 (122,000)
Provision (benefit) for income taxes 251,000 (65,000) 265,000 138,000
---------- ---------- ---------- ----------
Earnings (loss) from continuing operations, net of
income taxes 310,000 (420,000) 319,000 (260,000)
Earnings (loss) from Military Housing projects
discontinued operations, net -- (128,000) 182,000 (254,000)
Estimated loss on sale of Military Housing
projects discontinued operations, net -- -- (181,000) --
---------- ---------- ---------- ----------
Net earnings (loss) $ 310,000 $ (548,000) $ 320,000 $ (514,000)
========== ========== ========== ==========
Net earnings (loss) per common share:
Net earnings (loss) from continuing operations $ 0.06 $ (0.08) $ 0.06 (0.05)
Net earnings (loss) from Military Housing projects
discontinued operations $ 0.00 $ (0.03) 0.04 (0.05)
Net estimated loss on sale of Military Housing
projects discontinued operations $ 0.00 $ 0.00 (0.04) 0.00
---------- ---------- ---------- ----------
Net earnings (loss) $ 0.06 $ (0.11) $ 0.06 $ (0.10)
========== ========== ========== ==========
Weighted average number of shares outstanding 5,160,000 5,160,000 5,160,000 5,160,000
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements 4
<PAGE> 5
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
NOVEMBER 30, NOVEMBER 30,
1996 1995
(RESTATED)
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) from continuing operations $ 319,000 $ (260,000)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 723,000 1,077,000
(Gain) loss on sale of assets (21,000) 3,000
Change in assets and liabilities:
(Increase) decrease:
Accounts receivable 196,000 (688,000)
Materials and supplies (160,000) 471,000
Prepaid expenses and other assets 83,000 213,000
Increase (decrease):
Accounts payable 325,000 19,000
Other accrued liabilities (137,000) 118,000
Income taxes payable 41,000 22,000
----------- -----------
Net cash provided by operating activities 1,369,000 975,000
Cash Flows from Investing Activities:
Capital expenditures (916,000) (272,000)
Disposal of property and equipment 183,000 4,000
(Increase) decrease in other assets 205,000 (137,000)
(Increase) decrease in net assets of discontinued operations 589,000 (44,000)
----------- -----------
Net cash provided by (used in) investing activities 61,000 (449,000)
Cash Flows from Financing Activities:
Payments under debt agreements
and capital lease obligations (1,437,000) (1,733,000)
----------- -----------
Net cash used in financing activities (1,437,000) (1,733,000)
----------- -----------
Net decrease in cash and cash equivalents (7,000) (1,207,000)
Cash and cash equivalents at beginning of year 2,037,000 3,139,000
----------- -----------
Cash and cash equivalents at end of period $ 2,030,000 $ 1,932,000
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 480,000 $ 639,000
Income taxes paid $ 10,000 $ 57,000
Income taxes refunded $ 4,000 $ 21,000
</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. Also, certain amounts from the previous year have been
reclassified to conform with the current year presentation.
2. Dividends
No dividends were paid during the first six 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
As previously reported, the Company 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 was originally expected to
close in December; however, due to certain conditions having not yet
been met, management now anticipates final closing to occur late in the
third quarter or early in the fourth quarter of fiscal 1997. No
assurance can be made, however, that the transaction will be completed.
A summary of the discontinued Military Housing Projects' assets and
liabilities as of November 30, 1996 and May 31, 1996 follows:
<TABLE>
<CAPTION>
November 30, May 31,
1996 1996
------------- ------------
<S> <C> <C>>
Assets:
Current assets .............. $ 2,668,000 $ 2,890,000
Land and buildings, net ..... 40,394,000 41,123,000
------------ ------------
$ 43,062,000 $ 44,013,000
Liabilities:
Current liabilities.......... $ 1,527,000 $ 1,745,000
Long-term debt .............. 38,255,000 38,765,000
------------ ------------
$ 39,782,000 $ 40,510,000
------------ ------------
Net Assets .................. $ 3,280,000 $ 3,503,000
============ ============
</TABLE>
6
<PAGE> 7
For the three months ended November 30, 1996, the Military Housing
Projects had losses (before tax benefit) of approximately $95,000. The
original estimated future operating loss accrued at August 31, 1996 was
$180,000 while the original accrual for estimated loss on the sale of the
Projects was $281,000. Management estimates that no additional loss accruals
will be necessary.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 1996 COMPARED
TO THREE MONTHS ENDED NOVEMBER 30, 1995
For the three month period ended November 30, 1996, revenues from the
Company's industrial repair services business totaled $11.3 million, 2 percent
lower than revenues of $11.5 million reported in the same period of the prior
fiscal year. This decline in revenues was 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 a slowdown in environmental regulatory
activity. In addition, some of the Company's customers have implemented
internal reporting for emissions control services. Leak sealing revenues were
up 12 percent while hot tapping line repair revenues remain stable.
As a percent of sales, operating expenses in the Company's operations
declined 5 percent when compared to the second quarter of fiscal 1996. Gross
profit margins improved from 39 percent in the second quarter of fiscal 1996 to
44 percent for the second quarter of fiscal 1997. This improvement was due
primarily to the sale of the consulting and engineering division as well as
greater efficiencies in operations. Selling, general and administrative
expenses of $4.2 million in the second quarter of fiscal 1997 were $394,000 or
9 percent lower than in the prior year. The continuing impact of cost
reduction programs implemented during the prior fiscal year, as well as the
sale of the consulting and engineering division, have resulted in lower
personnel, insurance and general expenses.
Interest expense of $228,000 in the second quarter of fiscal 1997 was 24
percent lower than in the same period of fiscal 1996 due to reduced average
borrowing levels. Pre-tax earnings of $561,000 for the second quarter
increased from 1996 second quarter pre-tax losses of $485,000.
SIX MONTHS ENDED NOVEMBER 30, 1996 COMPARED
TO SIX MONTHS ENDED NOVEMBER 30, 1995
For the six month period ended November 30, 1996, revenues from the
Company's industrial repair services business totaled $21.4 million, 9 percent
lower than revenues of $23.6 million reported in the same period of last year.
The decline in revenues was primarily a result of the sale of the consulting
and engineering division whose revenues were $1.6 million in the prior period.
Also, revenues for emissions monitoring have decreased due to lower demand as
mentioned above. Contrastingly, revenues in our concrete repair, hot tapping
line repair and leak sealing services have increased slightly.
7
<PAGE> 8
As a percent of sales, operating expenses in the Company's operations
decreased by 2 percent. Gross profit margins increased from 42 percent to 44
percent. This improvement was due primarily to the sale of the consulting and
engineering division as well as greater efficiencies in operations. Selling,
general and administrative expenses of $8.4 million were $1.1 million or 11
percent lower than in the prior year. The continuing impact of cost reduction
programs implemented during the prior fiscal year, as well as the sale of the
consulting and engineering division, have resulted in lower personnel,
insurance and general expenses.
Interest expense of $473,000 in the first six months of fiscal 1997 was
24 percent lower than in the same period of fiscal 1996 due to reduced average
borrowing levels. Pre-tax earnings were significantly improved with $584,000
for the current six-month period compared to a loss of $122,000 for the same
period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1996, the Company's working capital totaled $10.3
million, a decrease of approximately $300,000 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 November 30, 1996, cash and cash equivalents totaled $2.0 million,
which is consistent with cash at May 31, 1996. Cash provided by operating
activities was $1.4 million while cash provided by investing activities was
$61,000 and cash used in financing activities was $1.4 million. 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 two quarters of fiscal 1997, capital expenditures
totaled $916,000, primarily for the purchase of LeakTrackers(R) 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 credit agreement provides for borrowings up to
$15,950,000, consisting of a $3,950,000 term loan and a $12,000,000 revolving
line of credit. The balances due at November 30, 1996 on the term loan and
revolving line of credit were $1,644,000 and $6,500,000, respectively. The
amount available at the end of quarter under the revolving line of credit was
approximately $550,000. The Company paid down the term note in the amount of
$1.3 million during the first six months of fiscal 1997.
As previously reported, the Company 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 was originally expected to close in
December; however, due to certain conditions having not yet been met,
management anticipates final closing to occur late in the third quarter or
early in the fourth quarter of fiscal 1997. No assurance can be made, however,
that the transaction will be completed. The cash proceeds from the sale will
be used to pay in full the Company's term loan with its primary lender and the
remainder used to increase available working capital.
LeakTracker(R) is a registered trademark of Tracker Technologies, Inc.
8
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1996 Annual Meeting of Shareholders of the Company was held on October 31,
1996. At the meeting, Messrs. William A. Ryan and John L. Farrell, Jr. were
reelected to serve as Class I Directors for a term of three years. The votes
with respect to the election of each such director were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME FOR WITHHELD
- --------------------------------------------------------------------------------
<S> <C> <C>
Mr. William A. Ryan 4,557,002 278,175
- --------------------------------------------------------------------------------
Mr. John L. Farrell, Jr. 4,478,679 356,498
- --------------------------------------------------------------------------------
</TABLE>
The four directors continuing in office until the expiration of their
respective terms are Messrs. Sidney B. Williams, George W. Harrison, Jack M.
Johnson, Jr., and E. Theodore Laborde.
The shareholders also approved the appointment of Deloitte & Touche as
independent certified public accountants to audit the Company's accounts for the
fiscal year ending May 31, 1997 by the following vote:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
<S> <C> <C>
- --------------------------------------------------------------------------------
4,717,915 103,718 13,544
- --------------------------------------------------------------------------------
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 First Amendment to the Consulting and Salary Continuation
Agreement by and between Team, Inc. and George W.
Harrison dated December 24, 1990
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no Form 8-K Reports filed during the quarter ended November
30, 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: January 13, 1997
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
10
<PAGE> 11
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.1 First Amendment to the Consulting and Salary Continuation
Agreement by and between Team, Inc. and George W.
Harrison dated December 24, 1990
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
[TEAM LOGO APPEARS HERE]
November 11, 1996
Mr. George W. Harrison
1019 S. Hood St.
Alvin, Texas 77511
Re: First Amendment to the Consulting and Salary Continuation
Agreement by and between Team, Inc. ("Team") and George W.
Harrison ("GWH") dated December 24, 1990 (the "Agreement")
Dear George:
This letter shall serve to amend the Agreement pursuant to Section 7.3
thereof. Therefore, in consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Team and GWH hereby
agree to amend the Agreement as follows:
1. Article II, Section 2.1(a), lines 5 and 6 shall be amended by
deleting the phrase "Four Thousand Dollars ($4,000)" and
inserting the phrase "Five Thousand, Six Hundred and Sixty Six
Dollars and 67/100 ($5,666.67)" in its stead.
2. Article II, Section 2.1(b), each of lines 4 and 6 shall be
amended by deleting the phrase "Four Thousand Dollars ($4,000)"
and inserting the phrase "Five Thousand, Six Hundred and Sixty
Six Dollars and 67/100 ($5,666.67)" in its stead.
3. Article II, Section 2.1(c), lines 4 and 5 shall be amended by
deleting the phrase "Four Thousand Dollars ($4,000)" and
inserting the phrase "Five Thousand, Six Hundred and Sixty Six
Dollars and 67/100 ($5,666.67)" in its stead.
<PAGE> 2
Mr. George W. Harrison
November 11, 1996
Page Two
On a personal note, George, Team looks forward to having use of your
extensive knowledge and expertise in the coming years.
IN WITNESS WHEREOF, this letter agreement has been entered into and is
effective on the date set forth above.
Very truly yours,
TEAM, INC.
By:/S/ WILLIAM A. RYAN
--------------------------------------
William A. Ryan,
Chairman of the Board, President
and Chief Executive Officer
I agree to the amendment of the Agreement as set forth herein.
/S/ GEORGE W. HARRISON
- ---------------------------------
George W. Harrison
<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 SIX MONTHS ENDED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 2,030,000
<SECURITIES> 0
<RECEIVABLES> 8,106,000
<ALLOWANCES> 162,000
<INVENTORY> 5,908,000
<CURRENT-ASSETS> 16,645,000
<PP&E> 17,964,000
<DEPRECIATION> 12,048,000
<TOTAL-ASSETS> 27,993,000
<CURRENT-LIABILITIES> 6,360,000
<BONDS> 10,268,000<F1>
0
0
<COMMON> 1,551,000
<OTHER-SE> 9,814,000
<TOTAL-LIABILITY-AND-EQUITY> 27,993,000
<SALES> 0
<TOTAL-REVENUES> 21,426,000
<CGS> 0
<TOTAL-COSTS> 11,976,000
<OTHER-EXPENSES> 8,393,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 473,000
<INCOME-PRETAX> 584,000
<INCOME-TAX> 265,000
<INCOME-CONTINUING> 319,000
<DISCONTINUED> 1,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 320,000
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
<FN>
<F1>Includes $1,643,000 for compensation accruals of former employees.
</FN>
</TABLE>
