<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 9, 1999
TEAM, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 0-9950 74-1765729
- ---------------------------- ---------------- -------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
200 Hermann Drive, Alvin, Texas 77511
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 331-6154
<PAGE> 2
TEAM, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of X-Ray Inspection, Inc.
Independent Auditors' Report 1
Financial Statements
Balance Sheets as of December 31, 1998 and 1997 2
Statements of Operations for the Years Ended December 31, 1998 and 1997 4
Statements of Retained Earnings for the Years Ended
December 31, 1998 and 1997 5
Statements of Cash Flows for the Years Ended December 31, 1998 and 1997 6
Notes to Financial Statements 7-11
(b) Pro Forma Consolidated Financial Information of Team, Inc. (Unaudited)
Pro Forma Consolidated Financial Statements 12
Pro Forma Consolidated Balance Sheet as of February 28, 1999 13
Pro Forma Consolidated Statement of Operations - Year Ended May 31, 1998 14
Pro Forma Consolidated Statement of Operations - Nine Months Ended
February 28, 1999 15
Notes to Pro Forma Consolidated Financial Statements 16
</TABLE>
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
X-Ray Inspection, Inc.
Lafayette, Louisiana
We have audited the accompanying Balance Sheets of X-Ray Inspection,
Inc. as of December 31, 1998 and 1997, and the related Statements of Operations,
Retained Earnings, and Cash Flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of X-Ray Inspection,
Inc. as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
WRIGHT, MOORE, DEHART,
DUPUIS & HUTCHINSON
Certified Public Accountants
February 17, 1999
-1-
<PAGE> 4
X-RAY INSPECTION, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 680,601 $ 443,939
Accounts Receivable 1,359,965 863,562
Employee Advances 4,594 1,725
Prepaid Income Taxes 3,740 --
Prepaid Expenses 78,879 46,280
------------ ------------
Total Current Assets 2,127,779 1,355,506
------------ ------------
PROPERTY AND EQUIPMENT
Automobile and Trucks 1,566,212 1,292,569
Buildings and Improvements 36,857 34,615
Furniture and Fixtures 80,780 65,737
Machinery and Equipment 1,136,463 946,778
Mobile Homes -- 16,000
------------ ------------
Total Property and Equipment 2,820,312 2,355,699
Less: Accumulated Depreciation (1,276,513) (1,119,836)
------------ ------------
Net Property and Equipment 1,543,799 1,235,863
------------ ------------
OTHER ASSETS
Computer Software (Net of Amortization) 7,766 9,537
------------ ------------
TOTAL ASSETS $ 3,679,344 $ 2,600,906
============ ============
</TABLE>
The Accompanying Notes are an Integral Part of This Statement.
-2-
<PAGE> 5
X-RAY INSPECTION, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 185,046 $ 112,104
Accrued Expenses
Payroll Taxes 524,152 402,598
Salaries 58,647 75,627
Insurance 5,731 5,577
Sales Tax 608 1,365
Income Tax Payable -- 797
Line of Credit 100,030 --
Current Maturities of Capital Lease Obligations 22,251 --
Current Maturities of Long-Term Debt 202,156 180,459
------------ ------------
Total Current Liabilities 1,098,621 778,527
------------ ------------
LONG-TERM LIABILITIES
Long-Term Debt (Less Current Maturities) 68,552 86,759
Capital Lease Obligations (Less Current Maturities) 110,322 --
Deferred Taxes 35,496 35,845
------------ ------------
Total Long-Term Liabilities 214,370 122,604
------------ ------------
OTHER LIABILITIES
Related Party Notes Payable 1,826,762 1,156,333
------------ ------------
Total Liabilities 3,139,753 2,057,464
------------ ------------
STOCKHOLDERS' EQUITY
Common Stock (No Par Value, 100,000 Shares
Authorized; 17,000 Shares Issued and Outstanding) 34,000 34,000
Treasury Stock, 12,000 Shares at Cost (260,000) (260,000)
Retained Earnings 765,591 769,442
------------ ------------
Total Stockholders' Equity 539,591 543,442
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,679,344 $ 2,600,906
============ ============
</TABLE>
The Accompanying Notes are an Integral Part of This Statement.
-3-
<PAGE> 6
X-RAY INSPECTION, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
REVENUES $ 9,355,433 $ 7,433,813
DIRECT COSTS 4,889,285 3,920,192
-------------- --------------
GROSS PROFIT 4,466,148 3,513,621
-------------- --------------
GENERAL AND ADMINISTRATIVE EXPENSES
Office Expenses 4,214,764 3,300,436
Shop Expenses 244,314 173,274
-------------- --------------
Total General and Administrative Expenses 4,459,078 3,473,710
-------------- --------------
INCOME BEFORE OTHER INCOME (EXPENSE) AND
PROVISION FOR INCOME TAXES 7,070 39,911
-------------- --------------
OTHER INCOME (EXPENSE)
Interest Income 6,977 7,650
Interest Expense (125,601) (68,765)
Miscellaneous Income 130,098 61,818
Loss on Disposal of Assets (20,493) (14,489)
-------------- --------------
Total Other Income (Expense) (9,019) (13,786)
-------------- --------------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES (1,949) 26,125
PROVISION FOR INCOME TAXES 1,902 15,520
-------------- --------------
NET INCOME (LOSS) $ (3,851) $ 10,605
============== ==============
</TABLE>
The Accompanying Notes are an Integral Part of This Statement.
-4-
<PAGE> 7
X-RAY INSPECTION, INC.
STATEMENTS OF RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
RETAINED EARNINGS - BEGINNING $ 769,442 $ 758,837
NET INCOME (LOSS) (3,851) 10,605
------------ ------------
RETAINED EARNINGS - ENDING $ 765,591 $ 769,442
============ ============
</TABLE>
The Accompanying Notes are an Integral Part of This Statement.
-5-
<PAGE> 8
X-RAY INSPECTION, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (3,851) $ 10,605
-------------- --------------
Adjustments to Reconcile Net Income to Net
Cash Provided By Operating Activities:
Depreciation and Amortization 376,990 292,401
Loss on Disposal of Property 20,493 14,489
Changes in Assets and Liabilities:
Accounts Receivable (496,403) (205,114)
Employee Advances (2,869) 509
Prepaid Income Taxes (3,740) 1,648
Prepaid Expenses (32,599) (9,215)
Accounts Payable 72,942 (18,272)
Accrued Liabilities 103,971 19,542
Income Taxes Payable (797) 788
Deferred Taxes Payable (349) 13,202
-------------- --------------
Total Adjustments 37,639 109,978
-------------- --------------
Net Cash Provided By Operating Activities 33,788 120,583
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Return of Deposits -- 147
Cash Payments for Purchase of Equipment (299,210) (282,358)
Cash Proceeds From Sale of Equipment 43,796 2,000
-------------- --------------
Net Cash Used In Investing Activities (255,414) (280,211)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on Line of Credit 100,030 --
Proceeds From Issuance of Related Party Debt 1,155,429 1,215,392
Principal Payments on Related Party Debt (485,000) (205,722)
Principal Payments on Long-Term Debt (312,171) (424,491)
-------------- --------------
Net Cash Provided By Financing Activities 458,288 585,179
-------------- --------------
NET INCREASE IN CASH AND EQUIVALENTS 236,662 425,551
CASH AND EQUIVALENTS, BEGINNING OF YEAR 443,939 18,388
-------------- --------------
CASH AND EQUIVALENTS, END OF YEAR $ 680,601 $ 443,939
============== ==============
</TABLE>
The Accompanying Notes are an Integral Part of This Statement.
-6-
<PAGE> 9
X-RAY INSPECTION, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - X-Ray Inspection, Inc. (the Company) is primarily
engaged in the nondestructive testing (NDE) industry. The company provides
NDE services in radiography, ultrasonics, magnetic particle, and liquid
penetrate, and also provides welder certification, welding consultation
and holiday detector rental. The Company markets these various services to
the pipeline, chemical and paper/pulp industries throughout the Gulf Coast
States Region. The Company's main office is in Lafayette, Louisiana and
has three branch facilities in Louisiana and one in Alabama.
ACCOUNTS RECEIVABLE - The Company generally does not require collateral,
and the majority of its trade receivables are unsecured. The carrying
amount for accounts receivable approximates fair value because of the
short maturity of these instruments.
Uncollectible accounts receivable are charged directly against earnings
when they are determined to be uncollectible. Use of this method does not
result in a material difference from the valuation method required by
generally accepted accounting principles.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Expenditures for property and equipment which substantially increase the
useful lives of existing assets are capitalized at cost and depreciated.
Routine expenditures for repairs and maintenance are expensed as incurred.
Depreciation is computed by using the straight-line method on the
estimated useful lives of the assets. The modified accelerated cost
recovery method is used for tax purposes.
CASH AND CASH EQUIVALENTS - For purposes of the Statement of Cash Flows,
the Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
INCOME TAXES - Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax basis of
assets and liabilities that will result in taxable or deductible amounts
in the future, based on enacted tax laws and rates applicable to the
periods in which these differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the
tax payable or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities.
-7-
<PAGE> 10
X-RAY INSPECTION, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998 AND 1997
(A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject the Company to a concentration of credit risk consists primarily
of cash and accounts receivable. The Company places its cash in highly
rated financial institutions. Concentration of credit risk with respect to
the receivables are limited due to the large number and size of the
customers.
The Company maintains cash balances at various financial institutions.
Accounts at each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1998 and 1997, the Company's
uninsured cash balances total $925,192 and $280,323, respectively.
(B) INCOME TAXES
The deferred tax liability results from the use of accelerated methods of
depreciation of property and equipment, and different tax basis of
property and equipment due to deferred gains and losses on assets traded
and sold.
The components of income tax expense (benefits) are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Current Expense $ 2,251 $ 2,318
Deferred Expense (Benefit) (349) 13,202
-------- --------
$ 1,902 $ 15,520
======== ========
</TABLE>
Federal and state tax credits utilized to offset income tax expense for
the years ended December 31, 1998 and 1997, amounted to $5,319 and $3,738,
respectively.
(C) DEBT
LINE OF CREDIT - The Company has a $100,030 line of credit, all of which
was outstanding at December 31, 1998. Bank advances on this line are
payable on demand and carry an interest rate of 6.2%. The credit line is
secured by a certificate of deposit owned by shareholder. The Company also
has an additional $500,000 line of credit with bank, none of which has
been drawn.
LONG-TERM DEBT
Long-term debt consisted of the following at December 31,:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Note payable to bank, secured by equipment,
payable in monthly installments of $8,950
including interest at 7.15%, maturing in December, 1998 $ -- $ 52,126
</TABLE>
-8-
<PAGE> 11
X-RAY INSPECTION, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998 AND 1997
(C) DEBT - CONTINUED
LONG TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Various notes payable to banks, secured by vehicles, payable in monthly
installments totaling $16,095 and $10,008 for 1998 and 1997, respectively
including interest ranging from 8.25% to 10.15%, maturing between March,
1999 and October, 2000 $ 229,246 $ 186,759
Various notes payable to finance company, secured by vehicles, payable in
monthly installments of $2,217 with interest rates ranging between 2.9%
and 7.99%, maturing in December, 1999 and December 2000 41,462 28,332
------------ ------------
TOTAL 270,708 267,217
LESS CURRENT MATURITIES 202,156 180,459
------------ ------------
LONG-TERM DEBT $ 68,522 $ 86,758
============ ============
</TABLE>
Future cash flow requirements for long-term debt are as follows:
<TABLE>
<CAPTION>
Years Ending December 31: Amount
------------------------- ------
<S> <C>
1999 $202,156
2000 68,552
--------
TOTAL $270,708
========
</TABLE>
(D) OPERATING LEASES
The Company has the following operating leases:
Office and warehouse space for the Gonzales location is leased under a
five year term expiring January, 2003, requiring monthly payments of
$1,590.
Office and warehouse space for the Belle Chase location is leased under
a three-year lease term expiring April, 2001, requiring monthly
payments of $2,000.
Office and warehouse space for the Lafayette location is leased from
the stockholder under a five-year lease term expiring December 31,
2002, requiring monthly payments of $4,400.
-9-
<PAGE> 12
X-RAY INSPECTION, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998 AND 1997
(D) OPERATING LEASES - CONTINUED
Office and warehouse space for the Sulphur location is leased from the
stockholder under a five-year lease term expiring December 31, 2002,
requiring monthly payments of $1,595.
Future minimum rentals are as follows:
<TABLE>
<CAPTION>
Years Ending December 31: Amount
------------------------- ------
<S> <C>
1999 $115,020
2000 115,020
2001 99,020
2002 91,020
2003 1,590
--------
Total $421,670
========
</TABLE>
(E) CAPITAL LEASES
During 1998, the Company leased three vehicles which include
radiographic equipment from a related company. The assets and
liabilities under capital leases are recorded at the lower of the
present value of the minimum lease payments or the fair value of the
asset. The assets are amortized over the lower of their related lease
terms or their estimated productive lives. Amortization of assets under
capital leases is included in depreciation expense for 1998. The total
amount capitalized under this leasing arrangement is $134,916.
The interest rate on capitalized leases is 9.5% which was imputed based
on the lower of the Company's incremental borrowing rate at the
inception of each lease of the lessor's implicit rate of return.
Future minimum capital lease payments are as follows:
<TABLE>
<CAPTION>
Years Ending December 31: Amount
------------------------- ------
<S> <C>
1999 $ 34,200
2000 34,200
2001 34,200
2002 34,200
2003 30,400
--------
Total minimum lease payments 167,200
Less: Amount representing interest (34,627)
--------
Present value of minimum lease payments $132,573
========
</TABLE>
-10-
<PAGE> 13
X-RAY INSPECTION, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1998 AND 1997
(F) RELATED PARTY TRANSACTIONS
At December 31, 1998 and 1997, the Company had notes payable to its
stockholder and to members of his family, payable in monthly
installments of $32,500. Interest is paid on the total outstanding
balances of these notes at an annual rate of 10.0%, which amounted to
$95,010 and $39,884 in 1998 and 1997, respectively.
The Company leases two facilities from its stockholder as more fully
discussed in Note (D). Total rent paid under these leases for 1998 and
1997 was $64,850 and $58,800, respectively.
During 1998 and 1997, the Company paid consulting fees to XRI
Management, Inc., which is owned by its stockholder and other related
individuals, in the amount of $1,409,468 and $691,237, respectively.
During 1998, the Company leased three vehicles and radiographic
equipment from XRI Management, Inc. as more fully discussed in Note
(E). The total amount of capital lease payments made during 1998 was
$3,800 which included interest.
During 1998, the Company sold three vehicles to XRI Management for a
total of $10,500. Gain on the sale of these vehicles amounted to
$1,120.
(G) SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Cash paid during the year for: 1998 1997
---------- ----------
<S> <C> <C>
Interest $ 118,281 $ 68,765
Income Taxes $ 6,788 $ -0-
</TABLE>
Supplemental Disclosure of Noncash Investing and Financing Activities
during the year:
During 1998 and 1997, the Company financed the purchase of property and
equipment in the amount of $313,318 and $295,687, respectively by
entering into various installment note obligations. In 1998, the
Company also effectively financed the purchase of property and
equipment in the amount of $134,916 by entering into a capital lease.
(H) SUBSEQUENT EVENTS
During February, 1999, the Company's stockholders entered into
negotiations to sell all of their stock in the company to a publicly
traded corporation.
-11-
<PAGE> 14
Team, Inc.
Pro Forma Consolidated Financial Statements
(Unaudited)
As reported in the Quarterly Report on Form 10-Q for the quarterly period
ended February 28, 1999, on April 9, 1999, Team, Inc. (the "Company")
acquired 100% of the outstanding capital stock of X-Ray Inspection, Inc.,
("X-Ray"), a Louisiana corporation, from E. Patrick Manual and B. Dal
Miller in consideration for the payment to the sellers of an aggregate of
$8.4 million in cash and 595,000 shares of newly issued Company common
stock. The cash component included $7.7 million paid at closing and an
additional $700,000 paid subsequent to closing for excess working capital
conveyed in the transaction. Additional consideration of up to $2.5
million in cash could be payable to the sellers over the next four years
if certain high growth operating results are achieved by X-Ray. In order
to finance the purchase, the Company borrowed $8.4 million under its
existing credit facilities. X-Ray is in the business of providing
mechanical inspection services consisting primarily of non-invasive
inspections of pipelines and piping systems in industrial plants using
x-ray and similar inspection techniques. X-Ray's inspection services
include radiographic testing, ultrasonic testing, magnetic particle
testing, and visual inspection.
As previously reported, on August 28, 1998, the Company acquired all of
the outstanding capital stock of Climax Portable Machines Tools, Inc., an
Oregon corporation ("Climax"), in exchange for cash in the amount of
$6,400,000 and 200,000 newly-issued shares of Team's common stock. In
order to finance the acquisition and repay Climax debt, the Company
borrowed $8.5 million under a new credit facility.
The following unaudited pro forma consolidated statements of operations
for the twelve months ended May 31, 1998 and the nine months ended
February 28, 1999 give effect to the purchase by the Company of the
capital stock of X-Ray and Climax as if the acquisitions and related
financings occurred on June 1, 1997 (the beginning of fiscal 1998). The
following pro forma consolidated balance sheet as of February 28, 1999
gives effect to the purchase of X-Ray as if the acquisition and related
financing occurred as of that date. X-Ray's historical cost basis balance
sheet as of March 31, 1999 was used to prepare the pro forma consolidated
balance sheet. The acquisition of Climax is already reflected in the
Company's balance sheet as of February 28, 1999.
The pro forma financial information is based on the historical
consolidated financial statements of the Company and the historical
financial statements of Climax and X-Ray and should be read in conjunction
with such financial statements and accompanying notes. The historical
financial statements of Climax were presented in a previously filed Form
8-K/A dated November 9, 1998. X-Ray's historical statements of operations
used in the preparation of the pro forma statements of operations are for
the twelve months ended May 31, 1998 and the nine months ended March 31,
1999. Climax's historical statements of operations used in the preparation
of the pro forma statements of operations are for the twelve months ended
June 30, 1998 and the three months ended August 31, 1998. Climax's results
are included in the Company's results subsequent to August 31, 1998. Net
sales and income from continuing operations of Climax for the one-month
ended June 30, 1998 of $924,000 and $98,000, respectively, have been
included in the pro forma results of operations for both the year ended
May 31, 1998 and the nine months ended February 28, 1999. The purchase
method of accounting was used to prepare the pro forma financial
statements using estimated fair values of the assets and liabilities of
X-Ray and Climax. The purchase accounting adjustments to reflect the fair
values of the assets and liabilities of X-Ray and Climax were based on
management's evaluation as of this filing date and are subject to change
pending final evaluation of the fair values of the assets and liabilities.
The pro forma financial information does not purport to be indicative of
either a) the results of operations which would have actually been
obtained if the acquisition had occurred on the dates indicated, or b) the
results of operations which will be reported in the future.
-12-
<PAGE> 15
TEAM, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
X-RAY
INSPECTION, PRO FORMA PRO FORMA
TEAM, INC. INC. ADJUSTMENTS CONSOLIDATED
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 300,000 $ 195,000 $ 495,000
Receivables 10,700,000 1,393,000 12,093,000
Materials and supplies 8,406,000 175,000 (6) 8,581,000
Prepaid expenses and other current assets 1,177,000 43,000 1,220,000
----------- ----------- ----------- -----------
Total Current Assets 20,583,000 1,631,000 175,000 22,389,000
Property, Plant and Equipment:
Land and buildings 9,565,000 37,000 9,602,000
Machinery and equipment 15,525,000 2,686,000 $(1,288,000)(1) 16,923,000
----------- ----------- ----------- -----------
25,090,000 2,723,000 (1,288,000) 26,525,000
Less accumulated depreciation and amortization (13,102,000) (1,288,000) 1,288,000 (1) (13,102,000)
----------- ----------- ----------- -----------
11,988,000 1,435,000 13,423,000
----------- ----------- ----------- -----------
Goodwill 3,677,000 7,338,000 (1) 11,015,000
Other Assets 2,318,000 7,000 (138,000)(2) 2,187,000
----------- ----------- ----------- -----------
Total Assets $ 38,566,000 $ 3,073,000 $ 7,375,000 $ 49,014,000
============ =========== =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 426,000 $ 426,000
Accounts payable 1,516,000 $ 124,000 1,640,000
Other accrued liabilities 3,627,000 176,000 $ 100,000 (3) 3,903,000
Current income taxes payable 191,000 133,000 324,000
----------- ----------- ----------- -----------
Total Current Liabilities 5,760,000 433,000 100,000 6,293,000
Long-Term Debt and Other 13,130,000 8,437,000 (4) 21,567,000
Deferred Taxes 28,000 28,000
Commitment and Contingencies
Stockholders' Equity:
Common stock 2,275,000 34,000 144,000 (5) 2,453,000
Additional paid-in capital 30,965,000 1,812,000 (540,000)(5) 32,237,000
Accumulated deficit (13,406,000) 1,026,000 (1,026,000)(5) (13,406,000)
Unearned compensation (61,000) (61,000)
Less treasury stock at cost (97,000) (260,000) 260,000 (5) (97,000)
----------- ----------- ----------- -----------
Total Stockholders' Equity 19,676,000 2,612,000 (1,162,000) 21,126,000
----------- ----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 38,566,000 $ 3,073,000 $ 7,375,000 $ 49,014,000
============ =========== =========== ============
</TABLE>
-13-
<PAGE> 16
TEAM, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
CLIMAX
PORTABLE X-RAY
MACHINE TOOLS, INSPECTION, PRO FORMA PRO FORMA
TEAM, INC. INC. INC. ADJUSTMENTS CONSOLIDATED
------------ -------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $ 45,457,000 $ 12,194,000 $ 7,896,000 $ 65,547,000
Operating expenses 25,933,000 5,775,000 4,278,000 35,986,000
Selling, general and administrative
expenses 16,610,000 4,882,000 3,546,000 $ (1,789,000)(1) 23,249,000
Interest expense 450,000 135,000 90,000 1,009,000 (2) 1,684,000
------------ ------------ ----------- ------------ -----------
Income from continuing
operations before income taxes 2,464,000 1,402,000 (18,000) 780,000 4,628,000
Provision for income taxes 1,071,000 400,000 10,000 359,000 (3) 1,840,000
------------ ------------ ----------- ------------ -----------
Income from continuing operations $ 1,393,000 $ 1,002,000 $ (28,000) $ 421,000 $ 2,788,000
============ ============ =========== =========== ===========
Net income per common share:
Basic $ 0.23 $ 0.41
Diluted $ 0.23 $ 0.40
Weighted average number of
shares outstanding:
Basic 5,947,000 6,742,000
Diluted 6,112,000 6,907,000
</TABLE>
-14-
<PAGE> 17
TEAM, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED FEBRUARY 28, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
CLIMAX
PORTABLE X-RAY
MACHINE TOOLS, INSPECTION, PRO FORMA PRO FORMA
TEAM, INC. INC.* INC. ADJUSTMENTS CONSOLIDATED
------------ -------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 39,679,000 $ 2,303,000 $ 7,186,000 $ 49,168,000
Operating expenses 23,248,000 1,396,000 3,930,000 28,574,000
Selling, general and
administrative expenses 14,598,000 910,000 3,678,000 (2,169,000) (1) 17,017,000
Severance and other charges 1,241,000 1,241,000
Interest expense 543,000 102,000 115,000 398,000 (2) 1,158,000
---------- --------- ---------- ----------- -----------
Income from continuing
operations before income taxes 49,000 (105,000) (537,000) 1,771,000 1,178,000
Provision (benefit) for income
taxes 207,000 (37,000) 657,000 (3) 827,000
---------- --------- ---------- ----------- -----------
Income from continuing
operations $ (158,000) $ (68,000) $ (537,000) $ 1,114,000 $ 351,000
========== ========= ========== =========== ===========
Net income per common share:
Basic $ (0.02) $ 0.04
Diluted $ (0.02) $ 0.04
Weighted average number of
shares outstanding:
Basic 7,413,000 8,073,000
Diluted 7,413,000 8,308,000
</TABLE>
* The information for Climax represents the historical results for the three
months ended August 31, 1998. Subsequent to that date, Climax's results are
included in Team's results.
-15-
<PAGE> 18
TEAM, INC
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MAY 31, 1998 AND THE NINE MONTHS
ENDED FEBRUARY 28, 1999
(UNAUDITED)
Balance Sheet
The pro forma adjustments to the consolidated balance sheet reflect the
following:
(1) Allocation of purchase price of X-Ray:
<TABLE>
<S> <C>
Cash and borrowings $ 8,437,000
Common stock issued 1,451,000
Transaction costs 238,000
-----------
10,126,000
Fair market value of net assets acquired (2,788,000)
-----------
Excess purchase price to be allocated to goodwill $ 7,338,000
===========
</TABLE>
The purchase accounting adjustments to reflect the fair value of assets
and liabilities was based on management's evaluation as of this filing
date and are subject to change pending final evaluation of the assets and
liabilities. At this time, the net book value of property, plant and
equipment is estimated to approximate fair value. It is not expected that
the final allocation of purchase price will produce materially different
results from those presented herein.
(2) To reduce other assets by the transaction costs incurred and recorded as
other assets prior to the closing of the transaction. Amount is included
in the purchase price allocation detailed in note (1) above.
(3) To accrue for additional transaction costs incurred, but not paid, as of
the closing of the transaction.
(4) To reflect the borrowings made by the Company of $8,437,000 to finance the
transaction.
(5) To reflect the elimination of X-Ray's equity and the issuance of 595,000
shares of the Company's $.30 par value common stock (with a market price
of $2.44 at the closing date).
(6) To record materials and supplies excluded from historical balance sheet.
Statement of Operations
(1) To eliminate (a) $604,000 and $1,086,000 from X-Ray's results for the year
ended May 31, 1998 and nine months ended February 28, 1999, respectively,
representing consulting fees paid to a related management company which
would not have been paid had the Company owned X-Ray; (b) $979,000 and
$877,000 from X-Ray's results for the year ended May 31, 1998 and nine
months ended February 28, 1999, respectively, representing bonuses paid to
the former owner of X-Ray; and (c) $282,000 and $166,000 of private
company expenses from X-Ray's results for the year ended May 31, 1998 and
nine months ended February 28, 1999, respectively; (d) $200,000 from
Climax's results in each of the periods presented representing special
bonuses given to key employees and former shareholders in connection with
the Climax acquisition; and to record goodwill amortization based on the
goodwill resulting from the acquisitions on a straight-line basis over a
40-year period.
-16-
<PAGE> 19
(2) To eliminate X-Ray's and Climax's interest expense on debt repaid and
forgiven at the closings of the transactions and to record interest
expense at 7.3%, which approximates the interest rate in effect during the
periods presented, on the $8.5 million and $8.4 million borrowed to
finance the purchase of Climax and X-Ray, respectively.
(3) To record the tax effect of the taxable pro forma adjustments at the
statutory rate of 34%.
-17-
<PAGE> 20
SIGNATURES
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 thereunto duly authorized.
Date: May 14, 1999 TEAM, INC.
By: Philip J. Hawk
-----------------------------------
Chairman of the Board and Chief
Executive Officer
By: Ted Owen
-----------------------------------
Vice President
Chief Financial Officer and
Secretary
