<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 1 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended AUGUST 31, 1997
-------------------------------------------------
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 0-9950
---------------------------------------------------------
TEAM, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 74-1765729
(State or other jurisdiction (I.R.S. Employer
of incorporation Identification Number)
or organization)
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 October 1, 1997, there were 5,952,842 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
August 31, 1997 and May 31, 1997
Consolidated Statements of Earnings -- 4
Three Months Ended
August 31, 1997 and 1996
Consolidated Statements of Cash Flows -- 5
Three Months Ended
August 31, 1997 and 1996
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 6
of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1997 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,247,000 $ 1,672,000
Accounts receivable, net of allowance for doubtful
accounts of $61,000 and $61,000 7,742,000 7,211,000
Materials and supplies 6,400,000 6,310,000
Prepaid expenses and other current assets 954,000 820,000
------------ ------------
Total Current Assets 16,343,000 16,013,000
Property, Plant and Equipment:
Land and buildings 6,512,000 6,526,000
Machinery and equipment 10,593,000 11,292,000
------------ ------------
17,105,000 17,818,000
Less accumulated depreciation and amortization 11,398,000 12,010,000
------------ ------------
5,707,000 5,808,000
Other Assets 2,446,000 2,247,000
------------ ------------
$ 24,496,000 $ 24,068,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 347,000 $ 300,000
Accounts payable 632,000 740,000
Other accrued liabilities 3,914,000 3,298,000
Current income taxes payable 171,000 166,000
------------ ------------
Total Current Liabilities 5,064,000 4,504,000
Long-term Debt and Other Obligations 5,481,000 7,601,000
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, 5,950,542 and 5,259,542 shares issued at 1,780,000 1,578,000
August 31, 1997 and May 31, 1997, respectively
Additional paid-in capital 26,802,000 25,123,000
Accumulated deficit (14,534,000) (14,641,000)
Treasury stock at cost, 9,700 shares (97,000) (97,000)
------------ ------------
13,951,000 11,963,000
------------ ------------
$ 24,496,000 $ 24,068,000
============ ============
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
August 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues $ 10,229,000 $ 10,155,000
Operating expenses 6,051,000 5,716,000
Selling, general and administrative expenses 3,784,000 4,170,000
Interest 131,000 245,000
------------ ------------
Earnings from continuing operations before
income taxes 263,000 24,000
Provision for income taxes 156,000 14,000
------------ ------------
Earnings from continuing operations, net of
income taxes 107,000 10,000
Earnings from Military Housing projects
discontinued operations, net -- 182,000
Estimated loss on sale of Military Housing projects
discontinued operations, net -- (181,000)
------------ ------------
Net earnings $ 107,000 $ 11,000
============ ============
Net earnings (loss) per common share:
Net earnings from continuing operations $ 0.02 $ 0.00
Net earnings from Military Housing projects
discontinued operations -- 0.04
Net estimated loss on sale of Military Housing
projects discontinued operations -- (0.04)
------------ ------------
Net earnings $ 0.02 $ 0.00
============ ============
Weighted average number of shares outstanding 5,795,000 5,160,000
============ ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
August 31,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 107,000 $ 11,000
Earnings from discontinued operations -- (1,000)
----------- -----------
Net earnings from continuing operations 107,000 10,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 362,000 374,000
Gain on sale of assets -- (21,000)
Change in assets and liabilities:
(Increase) decrease:
Accounts receivable (531,000) 574,000
Materials and supplies (90,000) (86,000)
Prepaid expenses and other assets (134,000) 12,000
Increase (decrease):
Accounts payable (108,000) (140,000)
Other accrued liabilities 616,000 (678,000)
Income taxes payable 5,000 14,000
----------- -----------
Net cash provided by continuing operating activities 227,000 59,000
Cash Flows From Discontinued Operations:
Earnings from discontinued operations -- 1,000
Depreciation -- 365,000
Decrease in current assets -- 1,154,000
Decrease in current liabilities -- (461,000)
----------- -----------
Net cash provided by discontinued operations -- 1,059,000
----------- -----------
Net cash provided by operating activities 227,000 1,118,000
Cash Flows From Investing Activities:
Capital expenditures (218,000) (575,000)
Disposal of property and equipment 5,000 176,000
Decrease (increase) in other assets (63,000) 1,000
----------- -----------
Net cash used in investing activities (276,000) (398,000)
Cash Flows From Financing Activities:
Payments under debt agreements
and capital lease obligations - continuing (2,257,000) (959,000)
Payments under debt agreements - discontinued -- (510,000)
Issuance of common stock 1,881,000 --
----------- -----------
Net cash used in financing activities (376,000) (1,469,000)
----------- -----------
Net decrease in cash and cash equivalents (425,000) (749,000)
Cash and cash equivalents at beginning of year 1,672,000 2,037,000
=========== ===========
Cash and cash equivalents at end of period $ 1,247,000 $ 1,288,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest:
Operating $ 164,000 $ 250,000
Discontinued -- 1,648,000
----------- -----------
$ 164,000 $ 1,898,000
=========== ===========
Income taxes paid $ 152,000 $ 7,000
=========== ===========
</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, 1997.
2. Dividends
No dividends were paid during the first three months of fiscal 1998 or
1997. 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. Sale of Stock
As previously reported, the Company completed the sale of 650,000 shares
of Team's common stock for $3.00 per share to Armstrong International,
Inc. ("Armstrong") in a private placement transaction. After the purchase,
Armstrong owned approximately 10% of the Company's outstanding common
shares on a fully diluted basis. Proceeds from the sale were used to
reduce the Company's long-term debt. The Company also entered into an
Alliance Agreement with Armstrong to provide certain specialized energy
management and other industrial services to shared customers.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1997 COMPARED
TO THREE MONTHS ENDED AUGUST 31, 1996
For the three-month period ended August 31, 1997, revenues totaled $10.23
million, a modest improvement over revenues of $10.16 million reported in the
same period of the prior fiscal year. Four of the Company's five service
lines - hot tapping, leak repair, concrete repair and energy management
services - showed sales gains during the quarter. The emissions control service
line was alone in showing a revenue decline. This market continues to see
downward pricing pressure and customers performing their monitoring services
in-house.
6
<PAGE> 7
Gross margins declined from 43.7 percent to 40.8 percent from the first
quarter of fiscal 1997 primarily because of a 3 percent increase in operating
expenses. Ordinary compensation and insurance expenses were factors in the
increase. Selling, general and administrative expenses of $3.78 million in the
first quarter of fiscal 1998 were $386,000 or 9 percent lower than in the prior
year. The continuing impact of cost reduction programs previously implemented
has resulted in lower personnel and general expense.
Interest expense of $131,000 in the first three months of fiscal 1998 was
47 percent lower than in the same period of 1997 due to reduced average
borrowing levels. Pre-tax earnings of $263,000 for the first quarter increased
from 1997 first quarter pre-tax earnings of $24,000 as a result of reduced
interest and selling, general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1997, the Company's working capital totaled $11.28 million,
a decrease of $230,000 from working capital of $11.51 million at May 31, 1997.
The Company has been able to finance its working capital requirements primarily
through its internally generated cash flow.
As of August 31, 1997, cash and cash equivalents totaled $1.25 million,
decreasing $425,000 in the first quarter. This cash decrease resulted mainly
from $376,000 used in the Company's financing activities, $276,000 used in the
Company's investing activities offset by $227,000 provided by the Company's
operating activities. See "Consolidated Statements of Cash Flows" for
additional detail.
Management expects that capital expenditures which are intended to provide
for normal replacement of assets and new assets to support planned growth will
approximate $1.5 million for fiscal 1998. All planned capital expenditures are
discretionary and will be made based on available funds.
The Company's current and long-term debt and other obligations were $5.83
million compared to $7.90 million at May 31, 1997. Of this amount, $2.5 million
was owed to the Company's primary bank lender. The company paid down the
revolving line of credit in the amount of $2.0 million during the quarter.
As previously reported, the Company completed the sale of 650,000 shares
of Team's common stock for $3.00 per share to Armstrong in a private placement
transaction. Armstrong then owned approximately 10% of the Company's
outstanding common shares on a fully diluted basis. Proceeds from the sale were
used to reduce the Company's long-term debt. The Company also entered into an
Alliance Agreement with Armstrong to provide certain specialized energy
management and other industrial services to new and shared customers.
Also, as previously reported, the Company signed a letter of intent with
Wescon, S.A. of Singapore to provide leak sealing and hot tapping services in
Singapore, Malaysia, Indonesia and Brunei. In addition, the Company signed a
letter of intent for the potential sale of newly issued common stock to Wingate
Partners, L.P. at $3.125 per share representing 50% of Team's issued
7
<PAGE> 8
and outstanding shares. This transaction is contingent upon the negotiation and
consummation by Team of one or more mutually approved but as yet unidentified
business acquisitions, mutually acceptable definitive agreements, further due
diligence, and director, shareholder and regulatory approvals, and it is
expected that the proceeds of a stock sale to Wingate would be used for the
purchase consideration in such a business acquisition.
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
As previously reported, the Company filed one report on Form 8-K during
the quarter ended August 31, 1997.
(i) On June 6, 1997, the Company filed a Form 8-K reporting on the
disposition by certain of the Company's wholly-owned subsidiaries
of substantially all of the assets of the Section 801 Military
Housing Projects to U.S. National Housing Limited partnership, an
Alaska limited partnership ("Buyer"). The consideration given by
the Buyer consisted of $3,200,000 in immediately available funds
and the assumption of the indebtedness remaining on each of the
Section 801 Military Housing Projects.
(ii) The Company reported the following financial information on Form
8-K:
Pro Forma consolidated Balance Sheet as of February 28, 1997;
ProForma Consolidated Statement of Earnings for the Year ended
May 31, 1996 and the Nine Months ended February 28, 1997; and
Notes to Pro Forma Consolidated Financial Statements.
8
<PAGE> 9
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 3, 1997
/s/WILLIAM A. RYAN
---------------------------------------
William A. Ryan, Chairman of the Board,
President and Chief Executive Officer
/s/MARGIE E. ROGERS
---------------------------------------
Margie E. Rogers, Vice President,
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer
9
<PAGE> 10
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
Ex-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, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> AUG-31-1997
<CASH> 1,247,000
<SECURITIES> 0
<RECEIVABLES> 7,803,000
<ALLOWANCES> 61,000
<INVENTORY> 6,400,000
<CURRENT-ASSETS> 16,343,000
<PP&E> 17,105,000
<DEPRECIATION> 11,398,000
<TOTAL-ASSETS> 24,496,000
<CURRENT-LIABILITIES> 5,064,000
<BONDS> 5,481,000<F1>
0
0
<COMMON> 1,780,000
<OTHER-SE> 12,171,000
<TOTAL-LIABILITY-AND-EQUITY> 24,496,000
<SALES> 0
<TOTAL-REVENUES> 10,229,000
<CGS> 0
<TOTAL-COSTS> 6,051,000
<OTHER-EXPENSES> 3,784,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131,000
<INCOME-PRETAX> 263,000
<INCOME-TAX> 156,000
<INCOME-CONTINUING> 107,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,000
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
<FN>
<F1>Includes $1,530,000 for compensation accruals for former employees.
</FN>
</TABLE>
