<PAGE> 1
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 24, 1999
------------------------
National TechTeam, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as
specified in its charter)
Delaware 0-16284 38-2774613
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
835 Mason Street. Suite 200 Dearborn, MI 48224
- --------------------------------------------------------------------------------
(Address of principal executive offices) (City, State) (Zip Code)
Registrant's telephone number, including area code (313) 277-2277
-----------------------------
- --------------------------------------------------------------------------------
(Former name of former address, if changed since last report.)
1
<PAGE> 2
ITEM 5. OTHER EVENTS.
On February 24, 1999, the Company issued the press release attached as Exhibit
2.1 to this Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
2.1 Press release dated on February 24, 1999 "NATIONAL TECHTEAM, INC. ANNOUNCES
REVENUES AND RESULTS OF OPERATIONS FOR THE FOURTH QUARTER AND CALENDER YEAR
1998"
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 hereunto duly authorized.
NATIONAL TECHTEAM, INC.
Dated: March 1, 1999 BY: /s/ Lawrence A. Mills
----------------------------
Lawrence A. Mills
Vice President, Chief
Financial Officer, and
Treasurer
2
<PAGE> 3
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Press release dated on February 24, 1999 "NATIONAL TECHTEAM, INC. ANNOUNCES
REVENUES AND RESULTS OF OPERATIONS FOR THE FOURTH QUARTER AND CALENDAR YEAR
1998"
</TABLE>
<PAGE> 1
EXHIBIT 2.1
[TECH TEAM LETTERHEAD]
FOR IMMEDIATE RELEASE-February 24, 1999
- ---------------------------------------
National TechTeam, Inc.
835 Mason Street, Suite 200
Dearborn, Michigan 48124 NASDAQ/NM - "TEAM"
------------------
CONTACT:
NATIONAL TECHTEAM, INC.
Harry A. Lewis
President and
Chief Executive Officer
(313) 277-2277
NATIONAL TECHTEAM, INC. ANNOUNCES REVENUES AND RESULTS
OF OPERATIONS FOR THE FOURTH QUARTER AND CALENDAR YEAR 1998
$3.2 MILLION AFTER TAX LOSS PRINCIPALLY DUE TO LEGAL SETTLEMENT AND ACCOUNTING
ADJUSTMENTS
DEARBORN, MICHIGAN, February 24, 1999...NATIONAL TECHTEAM Inc., Nasdaq symbol
("TEAM"), today reported revenues and results of operations for the fourth
quarter and calendar year ending December 31, 1998. For the fourth quarter 1998,
TechTeam reported record revenues of $33,572,564, a 44% increase over the
$23,297,707 reported for the fourth quarter 1997, and 1998 revenues of
$117,472,918, an increase of 44% over the $81,326,935 reported in calendar year
1997. The Company reported a net loss for the fourth quarter 1998 of
$(3,591,136), or $(0.26) per share, and a net loss for calendar year 1998 of
$(3,185,978), or $(0.20) per share, including $4.9 million in accounting
adjustments and class action lawsuit related expenses. Also in the fourth
quarter, the Company adjusted previously reported earnings by $2.4 million.
Corporate Services revenues increased 8% to $75,973,270 for calendar year 1998
from $70,276,143 for calendar year 1997 as a result of new business with new and
existing customers. Corporate Services revenues decreased 2% to $19,633,289 in
the fourth quarter 1998 from $20,070,548 in the fourth quarter 1997. The OEM
Call Center Services line contributed significantly to overall revenue growth
for the year and quarter. OEM Call Center Services revenues increased 146% to
$27,164,559 for calendar year 1998 from $11,050,792 for calendar year 1997.
Revenues increased 203% to $9,782,301 in the fourth quarter of 1998 from
$3,227,159 in the fourth quarter 1997. Both increases are attributable to
increased services for the Company's joint venture. Additionally, as a result of
the acquisition of TechTeam Capital Group in January 1998, TechTeam reported
revenues from TechTeam Capital Group of $14,335,089 for calendar year 1998 and
$4,156,974 in the fourth quarter of 1998.
Harry A. Lewis, President and Chief Executive Officer, said, "While we are proud
of our record revenue increases and the growth potential of our businesses, our
number one priority is to achieve sustained and predictable future operating
profits. It's become clear to us that our rapid growth - both internal and
through acquisitions - exceeded the ability of our previous reporting systems to
keep pace. We have changed our reporting systems and intensified the scrutiny of
our internal functions, in conjunction with our outside auditors. In addition,
we have recently hired a General Counsel and a Director of Financial Review to
augment our due diligence procedures and a C.P.A. for tax, treasury and
accounting review. We believe these and other necessary steps, including
management changes, will help clear away roadblocks to improve our operating
profit and realize enhanced shareholder value."
-more-
<PAGE> 2
Pre-tax accounting adjustments in the fourth quarter were related to several
items:
o Elimination of $.5 million in 1997 income from the company's OEM call
center services joint venture from TechTeam's 1998 financial results
stemming from a year end 1998 audit of the joint venture's books.
Beginning January 1999, TechTeam will receive a minimum of $600,000 per
year as income from the joint venture's CSP business. This income will
be recognized at a rate of $50,000 per month over the year.
o Adjustments totaling $1.1 million related to accounting errors for
amounts recorded for services provided to and earnings of the joint
venture.
o Adjustments of assets acquired at the time of TechTeam's merger with
Compuflex Inc. The adjustments, recommended by TechTeam's auditors,
resulted in $.5 million in charges to TechTeam's 1998 results.
o Adjustments of $.8 million for TechTeam's self-funded health insurance.
The adjustments were related to "Incurred But Not Reported" claims and
incorrect recording of insurance payments. The adjustments were related
to the second and third quarters of 1998.
o Adjustments to the goodwill recorded in the 1997 purchase of
WebCentric Communications, Inc. and Drake Technologies, Inc. The
adjustments resulted in a $.7 million charge to TechTeam's 1998
Results.
o Other estimate revisions aggregating approximately $.5 million.
In addition, as announced on December 24, 1998, TechTeam reached an agreement in
principle to settle all of the consolidated class action lawsuits that were
brought against the Company and certain of its current and former officers and
directors. In connection with this settlement, the Company recorded a pre-tax
charge in the fourth quarter 1998 of $3.2 million for legal and settlement
expenses. The settlement is subject to certain contingencies, including, but not
necessarily limited to, final court approval.
National TechTeam has a strong balance sheet with total assets of over $118
million, a book value of $6.27 per share, over $61 million of working capital,
and total shareholders equity of approximately $85 million. The Company has a
blue chip customer base, little debt and approximately 13.5 million shares
outstanding.
This press release contains statements that are forward looking. These
statements are based on current assumptions and expectations that are subject to
numerous risks and uncertainties. Actual results may vary significantly because
of factors such as customer demand for the Company's services; interest rates;
events having broad economic impact, such as: overall market conditions;
technological shifts; competition from other service providers and its effect on
pricing; life cycles; costs and timing of new projects; the effectiveness of
cost cutting and measures to improve operating efficiency; contractual terms and
conditions; litigation, including the SEC investigation involving the Company;
and other issues discussed in the Company's most recent Form 10-Q; and other
events and circumstances that cannot be predicted in terms of outcome or
magnitude. Given the uncertainties, risks and the possibility that the
underlying expectations or assumptions may prove incorrect, actual future
results may vary materially from the forward looking statements. The Company
undertakes no obligation to release publicly any revision to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
-more-
<PAGE> 3
NATIONAL TECHTEAM, INC. is a leading provider of information technology
outsourcing support services to large national and multi-national corporations,
government agencies and service organizations. The Company offers its services
through three global units: (i) CORPORATE SERVICES, which provides corporations
with help desk support, technical staffing, systems integration, and
instructor-led and computer-based training; (ii) OEM CALL CENTER SERVICES, which
provides end user customers of its clients with inbound telephone support for
their computer products; and (iii) TECHTEAM CAPITAL GROUP, which consists
primarily of leasing computer-related hardware and integrated services to
corporate customers.
National TechTeam is traded under the symbol "TEAM".
<TABLE>
<CAPTION>
NATIONAL TECHTEAM, INC.
FOURTH QUARTER RESULTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Quarter Ended December 31 1998 1997
------------------------- ----- ----
<S> <C> <C>
Revenues $33,572,564 $23,297,707
Income/(Loss) Before Tax Provisions (5,015,577) (293,033)
Tax Provisions (1,424,441) (127,168)
Net Income/(Loss) (3,591,136) (165,865)
Earnings/(Loss) Per Share
Basic (0.26) (0.01)
Diluted (0.26) (0.01)
Weighted Average Number of Common
Shares and Common Share
Equivalents Outstanding
Basic 13,949,544 15,762,867
Diluted 13,991,935 16,364,514
Excludes the effect of adjustments which should have been recorded in
previous quarters in 1998. Such adjustments would have reduced second and
third quarter income before tax provisions by $472,000 ($0.02 per share after
tax) and $1,769,000 ($0.08 per share after tax), respectively.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Calendar Year 1998 1997
------------- ---- ----
<S> <C> <C>
Revenues $117,472,918 $81,326,935
Income/(Loss) Before Tax Provisions (3,497,993) (2,831,085)
Tax Provisions (312,015) (873,242)
Net Income/(Loss) (3,185,978) (1,957,843)
Earnings/(Loss) Per Share
Basic (0.20) (0.12)
Diluted (0.20) (0.12)
Weighted Average Number of Common
Shares and Common Share
Equivalents Outstanding
Basic 15,913,226 15,663,716
Diluted 16,020,441 15,663,716
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
###
<PAGE> 4
National TechTeam, Inc.
Supplementary Data for Quarterly Press Release
Fourth Quarter 1998
<TABLE>
<CAPTION>
Fourth Quarter
---------------------------------------------------------------
1998
Over/(Under)
1998 1997 1997
Revenues ------------- ------------- -------------
<S> <C> <C> <C>
Corporate Services
Corporate help desk/call center services $ 8,850,741 $ 7,479,181 $ 1,371,560
Technical staffing 5,987,640 6,832,817 (845,177)
Systems integration 3,398,653 3,858,197 (459,544)
Training programs 1,396,255 1,900,353 (504,098)
------------ ------------ ------------
19,633,289 20,070,548 (437,259)
OEM Call Center Services 9,782,301 3,227,159 6,555,142
TechTeam Capital Group 4,156,974 - 4,156,974
------------ ------------ ------------
Total revenues $ 33,572,564 $ 23,297,707 $ 10,274,857
============ ============ ============
Gross profit
Amount $ 3,173,714 $ 2,185,534 $ 988,180
Percentage 9.5% 9.4% 0.1%
Earnings before interest, taxes, depreciation
and amortization
Amount $ (4,804,061) $ 404,279 $ (5,208,340)
Percentage (14.3)% 1.7% (16.0)%
Sales, General and Administrative
Amount $ 5,006,933 $ 4,277,288 $ 729,645
Percentage 14.9% 18.4% (3.4)%
Interest expense
Amount $ 316,272 $ 69,492 $ 246,780
Percentage 0.9% 0% 0.6%
Interest income
Amount $ 339,203 $ 897,530 $ (558,327)
Percentage 1.0% 3.9% (2.8)%
Income before tax provisions
Amount $ (5,015,577) $ (293,033) $ (4,722,544)
Percentage (14.9)% (1.3)% (13.7)%
Tax provisions
Amount $ (1,424,441) $ (127,168) $ (1,297,273)
Effective tax rate
Federal 30.7% 28.2% 2.5%
============ ============ ============
Other (3.3)% (22.5)% 19.2%
============ ============ ============
Total 28.4% 5.7% 22.7%
============ ============ ============
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Year to Date
---------------------------------------------------------------
1998
Over/(Under)
1998 1997 1997
Revenues ------------- ------------- -------------
<S> <C> <C> <C>
Corporate Services
Corporate help desk/call center services 30,057,485 $ 25,723,610 $ 4,333,875
Technical staffing 25,524,315 25,010,844 513,471
Systems integration 13,697,839 12,536,713 1,161,126
Training programs 6,693,631 7,004,976 (311,345)
------------- ------------- -------------
75,973,270 70,276,143 5,697,127
OEM Call Center Services 27,164,559 11,050,792 16,113,767
TechTeam Capital Group 14,335,089 - 14,335,089
------------- ------------- -------------
Total revenues $ 117,472,918 $ 81,326,935 $ 36,145,983
============= ============= =============
Gross profit
Amount $ 15,344,075 $ 8,520,317 $ 6,823,758
Percentage 13.1% 10.5% 2.6%
Earnings before interest, taxes, depreciation
and amortization
Amount $ 3,867,686 $ 747,760 $ 3,119,926
Percentage 3.3% 0.9% 2.4%
Sales, General and Administrative
Amount $ 15,576,420 $ 14,320,465 $ 1,255,955
Percentage 13.3% 17.6% (4.3)%
Interest expense
Amount $ 1,484,443 $ 69,492 $ 1,414,951
Percentage 1.3% 0.1% 1.2%
Interest income
Amount $ 1,845,014 $ 3,038,555 $ (1,193,541)
Percentage 1.6% 3.7% (2.2)%
Income before tax provisions
Amount $ (3,497,993) $ (2,831,085) $ (666,908)
Percentage (3.0)% (3.5)% 0.5%
Tax provisions
Amount $ (312,015) $ (873,242) $ 561,227
Effective tax rate
Federal 24.0% 37.5% (13.5)%
============= ============= =============
Other (19.8)% (18.7)% (1.1)%
============= ============= =============
Total 8.9% 18.8% (9.9)%
============= ============= =============
<CAPTION>
Fourth Quarter Year to Date
1998 1998
------------- --------------
Percentage of Business by Sector
Automotive 31.1% 39.4%
OEM support 29.1% 23.1%
Transportation services 4.9% 5.7%
Financial services 3.9% 4.0%
Government 7.3% 5.4%
Insurance 5.8% 2.7%
All Other 17.8% 19.6%
------------- ---------------
100% 100%
============= ===============
</TABLE>
