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Team, Inc. Reports Third Quarter 2016 Results
Year-to-date revenues were
"We continued to face market headwinds during the third quarter of 2016, which includes two of our seasonally weakest months of the year—July and August. Those two months were unusually soft this year, as we continued to experience headwinds from project deferrals, scope reductions and maintenance deferrals, coupled with the adverse impact on business of severe flooding in
"As importantly, with the increased activity levels in September, we have begun to see incremental improvements in profitability as our business integration initiatives gain traction. We are on track to complete our major ERP implementation in
GAAP Earnings 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
In the
year-to-date period, the most significant non-routine items pertained to acquisition costs, which were primarily associated with the Furmanite transaction (
A reconciliation of net income (loss) reported in accordance with GAAP to adjusted net income (loss) is contained in the accompanying schedule.
Earnings Conference Call
In connection with this earnings release, Team will hold its quarterly conference call on
About
Headquartered near
Non-GAAP Financial Measures
This press release presents information about the Company's adjusted net income (loss) and adjusted net income (loss) per share, and the Company sometimes uses adjusted EBITDA, EBIT and adjusted EBIT, which are non-GAAP financial measures provided as supplemental to the results provided in accordance with GAAP. A reconciliation of each of the foregoing historical non-GAAP financial measures to the most directly comparable historical GAAP financial measure is provided below for each of the fiscal periods indicated.
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
SUMMARY OF OPERATING RESULTS | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Revenues | $ | 289,577 | $ | 243,552 | $ | 876,871 | $ | 671,358 | ||||||||
Operating expenses | 212,871 | 173,931 | 635,490 | 472,216 | ||||||||||||
Gross margin | 76,706 | 69,621 | 241,381 | 199,142 | ||||||||||||
Selling, general and administrative expenses | 80,749 | 62,242 | 236,612 | 162,030 | ||||||||||||
Loss on revaluation of contingent consideration | — | 522 | 2,184 | 522 | ||||||||||||
Operating income (loss) | (4,043 | ) | 6,857 | 2,585 | 36,590 | |||||||||||
Foreign currency (gain) loss | (98 | ) | 606 | (197 | ) | 929 | ||||||||||
Loss on investment in | — | — | — | 1,177 | ||||||||||||
Other expense (income), net | 37 | 8 | (2 | ) | 7 | |||||||||||
Interest expense, net | 3,211 | 2,397 | 9,554 | 3,538 | ||||||||||||
Earnings (loss) from continuing operations before income taxes | (7,193 | ) | 3,846 | (6,770 | ) | 30,939 | ||||||||||
Less: Provision (benefit) for income taxes | (2,656 | ) | 1,299 | (2,643 | ) | 10,958 | ||||||||||
Income (loss) from continuing operations | (4,537 | ) | 2,547 | (4,127 | ) | 19,981 | ||||||||||
Income from discontinued operations, net of income tax | 316 | — | 828 | — | ||||||||||||
Net income (loss) | (4,221 | ) | 2,547 | (3,299 | ) | 19,981 | ||||||||||
Less: Income attributable to noncontrolling interest | — | — | — | 213 | ||||||||||||
Net income (loss) available to Team common shareholders | $ | (4,221 | ) | $ | 2,547 | $ | (3,299 | ) | $ | 19,768 | ||||||
Basic earnings (loss) per share: | ||||||||||||||||
Continuing operations | $ | (0.15 | ) | $ | 0.13 | $ | (0.15 | ) | $ | 0.97 | ||||||
Discontinued operations | 0.01 | — | 0.03 | — | ||||||||||||
Net income (loss) | $ | (0.14 | ) | $ | 0.13 | $ | (0.12 | ) | $ | 0.97 | ||||||
Diluted earnings (loss) per share: | ||||||||||||||||
Continuing operations | $ | (0.15 | ) | $ | 0.12 | $ | (0.15 | ) | $ | 0.92 | ||||||
Discontinued operations | 0.01 | — | 0.03 | — | ||||||||||||
Net income (loss) | $ | (0.14 | ) | $ | 0.12 | $ | (0.12 | ) | $ | 0.92 | ||||||
Weighted-average number of shares outstanding: | ||||||||||||||||
Basic | 29,361 | 20,375 | 27,609 | 20,371 | ||||||||||||
Diluted | 29,361 | 21,445 | 27,609 | 21,430 | ||||||||||||
SUMMARY CONSOLIDATED BALANCE SHEET INFORMATION | ||||||||
(in thousands) | ||||||||
2016 | 2015 | |||||||
(unaudited) | ||||||||
Current assets | $ | 428,828 | $ | 314,559 | ||||
Property, plant and equipment, net | 212,036 | 124,983 | ||||||
Other non-current assets | 541,558 | 359,449 | ||||||
Total assets | $ | 1,182,422 | $ | 798,991 | ||||
Current liabilities | $ | 152,610 | $ | 92,160 | ||||
Long-term debt net of current maturities | 368,831 | 351,383 | ||||||
Other non-current liabilities | 112,930 | 17,302 | ||||||
Stockholders' equity | 548,051 | 338,146 | ||||||
Total liabilities and stockholders' equity | $ | 1,182,422 | $ | 798,991 | ||||
SUMMARY CONSOLIDATED CASH FLOW INFORMATION | ||||||||
(in thousands) | ||||||||
Nine Months Ended | ||||||||
2016 | 2015 | |||||||
(unaudited) | (unaudited) | |||||||
Net income | $ | (3,299 | ) | $ | 19,981 | |||
Depreciation, amortization and non-cash share-based compensation expense | 42,104 | 24,578 | ||||||
Working capital changes | 20,634 | (24,337 | ) | |||||
Other items affecting operating cash flow | 1,206 | 6,013 | ||||||
Net cash provided by operating activities | $ | 60,645 | $ | 26,235 | ||||
Capital expenditures | (35,865 | ) | (30,549 | ) | ||||
Cash used for business acquisitions, net | (48,382 | ) | (263,560 | ) | ||||
Proceeds from sale of assets | 3,717 | 5,304 | ||||||
Other items affecting investing cash flow | 5,666 | (5,463 | ) | |||||
Net cash used in investing activities | $ | (74,864 | ) | $ | (294,268 | ) | ||
Borrowings on debt, net | 16,043 | 290,140 | ||||||
Deferred consideration payments | (694 | ) | (1,242 | ) | ||||
Contingent consideration payments | (1,816 | ) | — | |||||
Purchase of treasury stock | (7,593 | ) | (21,138 | ) | ||||
Purchase of noncontrolling interest | — | (5,934 | ) | |||||
Debt issuance costs | (759 | ) | (1,950 | ) | ||||
Cash associated with share-based payment arrangements, net | 2,171 | 5,266 | ||||||
Net cash provided by financing activities | $ | 7,352 | $ | 265,142 | ||||
Effect of exchange rate changes | 243 | (2,989 | ) | |||||
Change in cash and cash equivalents | $ | (6,624 | ) | $ | (5,880 | ) | ||
Non-GAAP Financial Measures
(Unaudited)
The Company uses supplemental non-GAAP financial measures which are derived from the consolidated financial information including adjusted net income (loss); adjusted net income (loss) per share, earnings before interest and taxes ("EBIT"); adjusted EBIT; and adjusted earnings before interest, taxes,
depreciation and amortization ("adjusted EBITDA") to supplement financial information presented on a GAAP basis. Adjusted net income (loss) and adjusted net income (loss) per share, each as defined by the Company, exclude the following items from net income (loss): acquisition costs associated with business combinations, non-routine legal costs, professional fees for acquired business integration and changing our fiscal year end, losses on the revaluation of contingent consideration, non-capitalized ERP implementation costs, losses on our investment in
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 report. 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 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. Reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure are 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, except per share data) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Net income (loss): | ||||||||||||||||
Net income (loss) available to common shareholders | $ | (4,221 | ) | $ | 2,547 | $ | (3,299 | ) | $ | 19,768 | ||||||
Non-routine acquisition costs | 235 | 1,283 | 7,414 | 4,897 | ||||||||||||
Non-routine legal, professional fees and other | 3,510 | 866 | 7,327 | 2,210 | ||||||||||||
Non-routine ERP costs | 2,268 | 1,182 | 4,808 | 1,791 | ||||||||||||
Non-routine loss on revaluation of contingent consideration | — | 522 | 2,184 | 522 | ||||||||||||
Non-routine fixed asset write-off | — | — | — | 383 | ||||||||||||
Non-routine loss on investment in | — | — | — | 1,177 | ||||||||||||
Non-routine foreign currency loss | — | — | — | 673 | ||||||||||||
Tax impact of adjustments* | (2,225 | ) | (1,301 | ) | (8,031 | ) | (4,169 | ) | ||||||||
Adjusted net income (loss) | $ | (433 | ) | $ | 5,099 | $ | 10,403 | $ | 27,252 | |||||||
Adjusted net income (loss) per common share: | ||||||||||||||||
Basic | $ | (0.01 | ) | $ | 0.25 | $ | 0.38 | $ | 1.34 | |||||||
Diluted | $ | (0.01 | ) | $ | 0.24 | $ | 0.38 | $ | 1.27 | |||||||
Adjusted EBITDA: | ||||||||||||||||
Operating income (loss) ("EBIT") | $ | (4,043 | ) | $ | 6,857 | $ | 2,585 | $ | 36,590 | |||||||
Non-routine acquisition costs | 235 | 1,283 | 7,414 | 4,897 | ||||||||||||
Non-routine legal, professional fees and other | 3,510 | 866 | 7,327 | 2,210 | ||||||||||||
Non-routine ERP costs | 2,268 | 1,182 | 4,808 | 1,791 | ||||||||||||
Non-routine loss on revaluation of contingent consideration | — | 522 | 2,184 | 522 | ||||||||||||
Non-routine fixed asset write-off | — | — | — | 383 | ||||||||||||
Adjusted EBIT | 1,970 | 10,710 | 24,318 | 46,393 | ||||||||||||
Depreciation and amortization | 12,539 | 8,774 | 35,432 | 20,534 | ||||||||||||
Non-cash share-based compensation costs | 1,327 | 1,620 | 5,648 | 4,044 | ||||||||||||
Adjusted EBITDA | $ | 15,836 | $ | 21,104 | $ | 65,398 | $ | 70,971 | ||||||||
*For the three and nine months ended
SEGMENT INFORMATION | ||||||||||||||||
(in thousands) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Segment Data: | ||||||||||||||||
Revenues: | ||||||||||||||||
TeamQualspec | $ | 142,529 | $ | 157,308 | $ | 436,029 | $ | 394,720 | ||||||||
TeamFurmanite | 131,787 | 69,596 | 392,062 | 220,051 | ||||||||||||
Quest Integrity | 15,261 | 16,648 | 48,780 | 56,587 | ||||||||||||
$ | 289,577 | $ | 243,552 | $ | 876,871 | $ | 671,358 | |||||||||
Operating income (loss) ("EBIT") | ||||||||||||||||
TeamQualspec | $ | 8,423 | $ | 14,386 | $ | 33,044 | $ | 43,092 | ||||||||
TeamFurmanite | 5,983 | 3,249 | 25,004 | 17,141 | ||||||||||||
Quest Integrity | 399 | 724 | 2,863 | 8,729 | ||||||||||||
Corporate and shared support services | (18,848 | ) | (11,502 | ) | (58,326 | ) | (32,372 | ) | ||||||||
$ | (4,043 | ) | $ | 6,857 | $ | 2,585 | $ | 36,590 | ||||||||
Adjusted EBIT | ||||||||||||||||
TeamQualspec | $ | 8,646 | $ | 14,908 | $ | 33,513 | $ | 43,614 | ||||||||
TeamFurmanite | 6,605 | 3,249 | 27,883 | 17,524 | ||||||||||||
Quest Integrity | 992 | 1,590 | 4,279 | 10,939 | ||||||||||||
Corporate and shared support services | (14,273 | ) | (9,037 | ) | (41,357 | ) | (25,684 | ) | ||||||||
$ | 1,970 | $ | 10,710 | $ | 24,318 | $ | 46,393 | |||||||||
Adjusted EBITDA | ||||||||||||||||
TeamQualspec | $ | 13,576 | $ | 19,795 | $ | 48,548 | $ | 52,899 | ||||||||
TeamFurmanite | 12,310 | 5,386 | 42,932 | 23,573 | ||||||||||||
Quest Integrity | 2,366 | 3,052 | 8,219 | 15,282 | ||||||||||||
Corporate and shared support services | (12,416 | ) | (7,129 | ) | (34,301 | ) | (20,783 | ) | ||||||||
$ | 15,836 | $ | 21,104 | $ | 65,398 | $ | 70,971 | |||||||||
Contact:Source:Greg L. Boane (281) 388-5541
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Christopher Robinson, CFA, Vice President, Corporate Development and Investor Relations, Phone (281) 388-5551
TEAM, Inc., 13131 Dairy Ashford, Suite 600, Sugar Land, TX 77478, United States Of America