Preliminary Second Quarter 2017 Results
Team's second quarter 2017 preliminary unaudited results are based on management's initial review of the results of operations for the quarter ended
"We are disappointed in our second quarter results as we continue to operate in a sluggish demand environment due to continuing soft end markets coupled with customer spending deferrals," said
"Because of the ongoing weak and uncertain macro environment in the industries in which we operate, Team has and will continue to take direct actions to reduce the overall cost structure of the Company. In addition to reducing discretionary spending, we are faced with the unfortunate, but necessary decision to eliminate certain employee positions. The resulting severance charges, which will be recorded in the third quarter of 2017, are expected to be approximately between
"While our recent results continue to disappoint us, we remain optimistic about our future," said Owen. "We believe that the soft end market environment for maintenance and turnaround spending by our customers is unsustainable and fully expect a much improved market environment by 2018. We continue to target the end of 2017 for the completion of the North American enterprise resource planning (ERP) implementation, the completion of the integrations of the Qualspec and Furmanite acquisitions, as well as the completion of several performance improvement initiatives that are underway, all of which are integral to the realization of our long-term performance goals," said Owen.
Amendment to Credit Facility
Team has negotiated an amendment to its credit agreement primarily conditioned upon the
completion of a financing transaction with net proceeds of not less than
As currently contemplated, the financial covenants, as amended, will require the Company, effective as of
|Fiscal Quarter Ending||Maximum Total Leverage Ratio|
|4.50 to 1.00|
|4.25 to 1.00|
|4.00 to 1.00|
|Fiscal Quarter Ending||Maximum Senior Secured Leverage Ratio|
|4.75 to 1.00|
|4.25 to 1.00|
|3.75 to 1.00|
|3.25 to 1.00|
|3.00 to 1.00|
As currently negotiated, the amendment to the Credit Facility will provide for payment of an amendment consent fee to those lenders executing the amendment. If we are unable to complete the amendment, we would not be in compliance with our current financial covenants as of
"Obviously, we have been concerned about tight financial covenants under our credit agreement for several quarters and have negotiated amendments over time to provide covenant relief. We believe the announced cost reduction initiatives and the completion of the current amendment to the credit agreement and contemplated financing transaction will allow the Company to operate in full compliance of our credit agreement for the foreseeable future," said Owen.
Cancellation of ATM Program
Additionally, the Company announced its intention to terminate its
GAAP and Non-GAAP Financial Measures
Certain non-routine items that management believes are not indicative of Team's ongoing operating activities have been excluded from net income (loss) reported in accordance with generally accepted accounting principles in
Non-GAAP Financial Measures
This press release presents information about the Company's Adjusted EBITDA and the Company sometimes uses EBIT and Adjusted EBIT, which are non-GAAP financial measures, provided as supplemental to the results provided in accordance with GAAP.
Certain forward-looking information contained herein is being provided in accordance with the provisions of the Private Securities Litigation Reform Act of 1995. We have made reasonable efforts to ensure that the information, assumptions and beliefs upon which this forward-looking information is based are current, reasonable and complete. Such forward-looking statements involve estimates, assumptions, judgments and uncertainties. There are known and unknown factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking information. Such known factors are detailed in the Company's Annual Report on Form 10-K and in
the Company's Quarterly Reports on Form 10-Q as filed with the
Non-GAAP Financial Measures
The Company uses supplemental non-GAAP financial measures which are derived from the consolidated financial information including earnings before interest and taxes ("EBIT"); Adjusted EBIT (defined below); and adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") to supplement financial information presented on a GAAP basis. EBIT, as defined by the Company, excludes discontinued operations, income tax expense, interest charges and items of other (income) expense and therefore is equal to operating income (loss) reported in accordance with GAAP. Adjusted EBIT further excludes the following items: acquisition costs associated with business combinations, non-routine legal costs associated with Quest Integrity patent defense litigation, professional fees for acquired business integration, gains and losses on the revaluation of contingent consideration, non-capitalized enterprise resource planning (ERP) implementation costs, and certain other non-routine items. Adjusted EBITDA further excludes from adjusted EBIT depreciation, amortization and non-cash share based compensation costs.
Management believes that excluding certain items from GAAP results allows management to better understand the consolidated financial performance from period to period and to better identify operating trends that may not otherwise be apparent. Moreover, the Company believes these non-GAAP financial measures will provide its stakeholders with useful information to help them evaluate operating performance. However, there are limitations to the use of the non-GAAP financial measures presented in this preliminary information. The Company's non-GAAP financial measures may not be comparable to similarly titled measures of other companies who may calculate non-GAAP financial measures differently than Team does, limiting the usefulness of those measures for comparative purposes.
The non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for net income (loss) as a measure of operating performance or to cash flows from operating activities as a measure of liquidity, prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis. A reconciliation of the above non-GAAP financial measures to the most comparable GAAP financial measure of operating income (loss) is presented below. You are encouraged to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented.
|RECONCILIATION OF NON-GAAP FINANCIAL MEASURES|
|(in thousands) (preliminary, unaudited)|
|Three Months Ended |
|Low Case||High Case||Reported|
|Adjusted EBIT and Adjusted EBITDA:|
|Operating income (loss) ("EBIT")||$||(8,700||)||$||(6,700||)||$||14,008|
|Non-routine acquisition costs||-||-||1,108|
|Non-routine legal, professional fees and other||3,150||3,150||1,522|
|Non-routine ERP costs||3,850||3,850||1,242|
|Non-routine gain on revaluation of contingent consideration||-||-||2,184|
|Depreciation and amortization||13,000||13,000||12,870|
|Non-cash share-based compensation costs||2,500||2,500||2,615|
Greg L. BoaneChief Financial Officer (281) 388-5541
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