Document


 
UNITED STATES
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): August 6, 2019
 
 TEAM, Inc.
(Exact Name of Registrant as Specified in its Charter)
  
 
 
 
 
 
Delaware
 
001-08604
 
74-1765729
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
13131 Dairy Ashford, Suite 600
Sugar Land, Texas 77478
(Address of Principal Executive Offices and Zip Code)
Registrant’s telephone number, including area code: (281) 331-6154
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CF 240.14d-2(b))
 
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.30 par value
TISI
New York Stock Exchange







Indicate by check mark whether registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
 





Item 2.02 Results of Operations and Financial Condition.

On August 6, 2019, Team, Inc. (“we,” “our,” “us,” or the “Company”) disseminated a press release announcing unaudited financial results for our second quarter ended June 30, 2019. The press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information in this Item 2.02, including the attached exhibit, is being furnished, and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language of such filing. By furnishing the information in this Current Report on Form 8-K (“Form 8-K”) and the attached exhibit, we are making no admission as to the materiality of any information in this Form 8-K or the exhibit.

Forward Looking Statements

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, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each as filed with the Securities and Exchange Commission, and in other reports filed by the Company with the Securities and Exchange Commission from time to time. Accordingly, there can be no assurance that the forward-looking information contained herein, including projected cost savings, will occur or that objectives will be achieved. We assume no obligation to publicly update or revise any forward-looking statements made today or any other forward-looking statements made by the Company, whether as a result of new information, future events or otherwise, except as may be required by law.

Item 9.01 Financial Statements and Exhibits.

(d)        Exhibits. The following exhibit is furnished as part of Item 2.02 of this Current Report on Form 8-K:
 
 
 
 
Exhibit number
 
Description
 
 
99.1
 










SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
TEAM, Inc.
 
 
 
 
By:
/s/ Susan M. Ball
 
 
Susan M. Ball
 
 
Executive Vice President and Chief Financial Officer
Dated: August 6, 2019




Exhibit
Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13045750&doc=3
NEWS RELEASE

 
Contact:
 
Susan Ball
 
EVP & Chief Financial Officer
 
(281) 388-5521

TEAM, INC. REPORTS STRONG SECOND QUARTER
2019 RESULTS
Gross Margin of 30% Reaches Highest Margin Since 2015


Net income of $6.1 million, a $37.4 million improvement from Q2 2018
Adjusted EBITDA of $32.8 million or 10.4% adjusted EBITDA margin representing the highest level since 2016
Gross margin of 30% in Q2 2019 is the highest since 2015; compared with 28.3% for the same quarter last year
Operating cash flow of $5.6 million for the six months ended June 30, 2019; represents an improvement of $23.3 million compared to the six months ended June 30, 2018
Record quarterly revenue performance of $32.3 million by Quest Integrity, an increase of 23% over Q2 2018; Q2 2019 operating income improved 62.1% over Q2 2018, expected to deliver a third straight year of record revenues
Selling, general and administrative expenses decreased by $11.6 million in Q2 2019 compared to Q2 2018; lowest quarterly SG&A since 2016
OneTeam program generated a total of $11.6 million of savings for the six months ended June 30, 2019 and remains on track to achieve $20-$22 million of savings for full year 2019

SUGAR LAND, TX – August 6, 2019 – Team, Inc. (NYSE: TISI), a leading global provider of specialized industrial services, today reported its financial results for the quarter ended June 30, 2019.

Consolidated net income in the second quarter of 2019 was $6.1 million ($0.20 income per diluted share) compared to a net loss of $31.3 million ($1.04 loss per diluted share) in the second quarter of 2018. Adjusted EBITDA, a non-GAAP measure, was $32.8 million for the second quarter of 2019 compared to $30.4 million in the prior year quarter. (See the accompanying reconciliation of non-GAAP items at the end of this news release.)


1


Consolidated revenues for the second quarter of 2019 were $315.8 million compared to $343.9 million in the prior year quarter. This reduction resulted primarily from lower activity in our Inspection and Heat Treating (“IHT”) segment, partially offset by higher activity levels in our Quest Integrity segment.

“We are pleased with our current quarter performance, achieving the highest quarterly adjusted EBITDA since 2016,” said Amerino Gatti, Chief Executive Officer of Team. “Due to our ongoing OneTEAM transformation and integration program, gross margin of 30% exceeded the prior year’s quarter by 170 basis points and 550 basis points sequentially which demonstrates our commitment to profitable revenue management. Second quarter SG&A was the lowest since 2016 and decreased 12.4% from Q2 2018. The year-over-year reduction in SG&A further reflects the successful implementation of our cost savings plan.”

“Quest Integrity continued its positive momentum, reporting record revenues of $32.3 million in the second quarter and, for the first time, delivering more than $10 million in adjusted EBITDA in a quarter. EBITDA margins expanded by 630 basis points to 32% and the segment remains on track for its third straight record revenue year. Quest continues to expand into both existing and new global markets by leveraging differentiated technologies, strong domain expertise and fully integrated asset specialized solutions all of which are critical for our clients.”

“Our focus on safety, quality and project execution are driving disciplined margin expansion and cash flow. Even as macro conditions fluctuate, our end-market activity supports a stronger second half than first half of the year. We remain optimistic about our outlook and are on track to achieve improvements in adjusted EBITDA, gross margins, and free cash flow over the prior year,” Mr. Gatti, concluded.

Second quarter 2019 reported results include certain net charges not indicative of Team’s core operating activities, including: $2.7 million of costs related to our OneTEAM program and $1.0 million of certain legal, professional fees and other non-recurring costs. Net of tax, these items totaled $2.9 million ($0.10 per diluted share).

Excluding these items, adjusted net income, a non-GAAP measure, was $9.0 million, or $0.30 adjusted net income per diluted share for the second quarter of 2019 compared to adjusted net loss of $4.4 million, or $0.15 adjusted net loss per diluted share for the same quarter in 2018. Our adjusted measure of operating income, Adjusted EBIT, was $16.7 million in the second quarter compared to $9.8 million in the prior year comparable quarter.

Adjusted net income or loss, Adjusted EBIT, Adjusted EBITDA and free cash flow are non-GAAP financial measures that exclude certain items that are not indicative of Team’s core operating activities. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures is at the end of this release.


2


Segment Results

The following table illustrates the composition of the Company’s revenue and operating income (loss) for the quarters ended June 30, 2019 and 2018 (in thousands):
 
Three Months Ended
June 30,
Increase (Decrease)
 
2019
 
2018
 
$
%
 
(unaudited)
 
(unaudited)
 
 
 
Revenues by business segment:
 
 
 
 
 
 
IHT
$
138,658

 
$
168,673

 
$
(30,015
)
(17.8
)%
MS
144,897

 
148,978

 
(4,081
)
(2.7
)%
Quest Integrity
32,274

 
26,238

 
6,036

23.0
 %
Total
$
315,829

 
$
343,889

 
$
(28,060
)
(8.2
)%
Operating income (loss):
 
 
 
 
 
 
IHT
$
9,497

 
$
13,281

 
$
(3,784
)
(28.5
)%
MS
20,317

 
10,582

 
9,735

92.0
 %
Quest Integrity
9,324

 
5,751

 
3,573

62.1
 %
Corporate and shared support services
(26,134
)
 
(27,815
)
 
1,681

6.0
 %
Total
$
13,004

 
$
1,799

 
$
11,205

622.8
 %

Quest Integrity continued its strong growth with a 23.0% year-over-year improvement in revenue and a 62.1% increase in operating income. Decreased activity levels in IHT were associated with volumes being negatively impacted across Canada and parts of the United States. Also, decreases of revenue due to discontinued underperforming businesses in our IHT and MS segments in late 2018 significantly impacted revenues as compared to the same period in 2018.

Cash and Total Liquidity

Consolidated cash and cash equivalents was $12.8 million at June 30, 2019. We had approximately $56 million of available borrowing capacity with total liquidity of $69 million at June 30, 2019.

Revision of Prior Period Financial Statements

As noted in the previously issued 2018 Form 10-K, the Company identified errors in its previously issued 2018 unaudited condensed consolidated financial statements. These prior period errors are related to the measurement of valuation allowances on deferred tax assets. The prior period condensed consolidated financial statements and other affected prior period financial information have been revised to correct these errors. The effect of correcting the errors increased our income tax benefit and favorably impacted our net loss by $1.1 million for the three months ended June 30, 2018 and $6.7 million for the six months ended June 30, 2018. Based on an analysis of quantitative and qualitative factors, the Company determined the related impacts were not material to its previously filed annual or interim consolidated financial statements, and therefore, amendments of previously filed reports are not required.



3


Outlook for 2019

The Company anticipates that it will generate more than $30.0 million of free cash flow for 2019 with capital expenditures of approximately $30.0 million to $33.0 million.

Non-GAAP Financial Measures

The non-GAAP measures in this press release are provided to enable investors, analysts and management to evaluate Team’s performance excluding the effects of certain items that management believes impact the comparability of operating results between reporting periods. These measures should be used in addition to, and not in lieu of, results prepared in conformity with generally accepted accounting principles (GAAP). A reconciliation of each of the non-GAAP financial measures to the most directly comparable historical GAAP financial measure is contained in the accompanying schedule for each of the fiscal periods indicated.

Conference Call and Webcast Details

Team, Inc. will host a conference call on Wednesday, August 7, 2019 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) to review its second quarter 2019 results.

By Phone: Dial 1-888-699-2378 inside the U.S. or 1-847-852-4067 outside the U.S. at least 10 minutes before the call. A telephone replay will be available through August 15 by dialing 1-855-859-2056 inside the U.S. or 404-537-3406 outside the U.S. using the Conference ID 8067998#.

By Webcast: The call will be broadcast over the web and can be accessed on Team’s website, www.teaminc.com under Investor Relations. Please log on at least 10 minutes in advance to register and download any necessary software. A replay will be available shortly after the call.

About Team, Inc.

Headquartered near Houston, Texas, Team, Inc. (NYSE: TISI) is a leading global provider of specialized industrial services, including inspection, engineering assessment and mechanical repair and remediation required in maintaining and installing high-temperature and high-pressure piping systems and vessels that are utilized extensively in the refining, petrochemical, power, pipeline, aerospace and other heavy industries. Team offers these services across over 200 locations and more than 20 countries throughout the world. For more information, please visit www.teaminc.com.

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, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, each as filed with the

4


Securities and Exchange Commission, and in other reports filed by the Company with the Securities and Exchange Commission from time to time. Accordingly, there can be no assurance that the forward-looking information contained herein, including projected cost savings will occur or that objectives will be achieved. We assume no obligation to publicly update or revise any forward-looking statements made today or any other forward-looking statements made by the Company, whether as a result of new information, future events or otherwise, except as may be required by law.

###

5


TEAM, INC. AND SUBSIDIARIES
SUMMARY OF CONSOLIDATED OPERATING RESULTS
(in thousands, except per share data)
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2019
 
20181
 
2019
 
20181
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Revenues
 
$
315,829

 
$
343,889

 
$
585,428

 
$
646,274

Operating expenses
 
221,232

 
246,707

 
424,884

 
473,558

Gross margin
 
94,597

 
97,182

 
160,544

 
172,716

Selling, general and administrative expenses
 
81,593

 
93,174

 
163,860

 
182,833

Restructuring and other related charges, net
 

 
2,411

 
208

 
2,411

Gain on revaluation of contingent consideration
 

 
(202
)
 

 
(202
)
Operating income (loss)
 
13,004

 
1,799

 
(3,524
)
 
(12,326
)
Interest expense, net
 
7,586

 
7,631

 
15,011

 
15,228

Loss on convertible debt embedded derivative
 

 
29,330

 

 
24,783

Other expense, net
 
313

 
285

 
255

 
332

Income (loss) before income taxes
 
5,105

 
(35,447
)
 
(18,790
)
 
(52,669
)
Less: Provision (benefit) for income taxes
 
(997
)
 
(4,106
)
 
(664
)
 
(9,064
)
Net income (loss)
 
$
6,102

 
$
(31,341
)
 
$
(18,126
)
 
$
(43,605
)
 
 
 
 
 
 
 
 
 
Income (Loss) per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.20

 
$
(1.04
)
 
$
(0.60
)
 
$
(1.45
)
Diluted
 
$
0.20

 
$
(1.04
)
 
$
(0.60
)
 
$
(1.45
)
 
 
 
 
 
 
 
 
 
Weighted-average number of shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
30,270

 
30,003

 
30,250

 
29,989

Diluted
 
30,467

 
30,003

 
30,250

 
29,989

___________________
1
As revised. See Revision of Prior Period Financial Statements in this press release for additional information.


6


TEAM, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEET INFORMATION
(in thousands)
 
 
 
 
 
June 30,
 
December 31,
 
2019
 
2018
 
(unaudited)
 
 
 
 
 
 
Cash and cash equivalents
$
12,750

 
$
18,288

 
 
 
 
Other current assets
339,468

 
336,668

 
 
 
 
Property, plant and equipment, net
192,819

 
194,794

 
 
 
 
Other non-current assets
486,840

 
428,071

 
 
 
 
Total assets
$
1,031,877

 
$
977,821

 
 
 
 
Current portion of long-term debt and finance lease obligations
$
279

 
$
569

 
 
 
 
Other current liabilities
147,047

 
139,382

 
 
 
 
Long-term debt and finance lease obligations net of current maturities
363,491

 
356,814

 
 
 
 
Other non-current liabilities
73,961

 
23,956

 
 
 
 
Stockholders’ equity
447,099

 
457,100

 
 
 
 
Total liabilities and stockholders’ equity
$
1,031,877

 
$
977,821




7


TEAM INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED CASH FLOW INFORMATION
(in thousands)
 
 
 
 
 
Six Months Ended June 30,
 
 
2019
 
20181
 
 
(unaudited)
 
(unaudited)
 
 
 
 
 
Net loss
 
$
(18,126
)
 
$
(43,605
)
 
 
 
 
 
Depreciation and amortization expense
 
24,650

 
32,434

 
 
 
 
 
Provision for doubtful accounts
 
889

 
5,567

 
 
 
 
 
Deferred income taxes
 
2,466

 
(10,410
)
 
 
 
 
 
Loss on convertible debt embedded derivative
 

 
24,783

 
 
 
 
 
Non-cash compensation cost
 
6,082

 
7,006

 
 
 
 
 
Working capital changes
 
(12,984
)
 
(34,910
)
 
 
 
 
 
Other items affecting operating cash flows
 
2,593

 
1,388

 
 
 
 
 
Net cash provided by (used in) operating activities
 
5,570

 
(17,747
)
 
 
 
 
 
Capital expenditures
 
(14,396
)
 
(12,082
)
 
 
 
 
 
Proceeds from disposal of assets
 
782

 
1,463

 
 
 
 
 
Other items affecting investing cash flow
 
89

 
(483
)
 
 
 
 
 
Net cash used in investing activities
 
(13,525
)
 
(11,102
)
 
 
 
 
 
Borrowings on Credit Facility, net
 
3,341

 
21,168

 
 
 
 
 
Debt issuance costs on Credit Facility
 

 
(855
)
 
 
 
 
 
Cash associated with share-based payment arrangements, net
 
(351
)
 
(225
)
 
 
 
 
 
Other items affecting financing cash flows
 
(549
)
 
(1,106
)
 
 
 
 
 
Net cash provided by financing activities
 
2,441

 
18,982

 
 
 
 
 
Effect of exchange rate changes
 
(24
)
 
(1,389
)
 
 
 
 
 
Net change in cash and cash equivalents
 
$
(5,538
)
 
$
(11,256
)
 
 
 
 
 
___________________
1
As revised. See Revision of Prior Period Financial Statements in this press release for additional information.


8


TEAM, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(in thousands)
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Revenues
 
 
 
 
 
 
 
 
IHT
 
$
138,658

 
$
168,673

 
$
265,714

 
$
320,092

MS
 
144,897

 
148,978

 
266,423

 
281,879

Quest Integrity
 
32,274

 
26,238

 
53,291

 
44,303

 
 
$
315,829

 
$
343,889

 
$
585,428

 
$
646,274

 
 
 
 
 
 
 
 
 
Operating income (loss) (“EBIT”)
 
 
 
 
 
 
 
 
IHT
 
$
9,497

 
$
13,281

 
$
11,218

 
$
20,021

MS
 
20,317

 
10,582

 
25,851

 
13,100

Quest Integrity
 
9,324

 
5,751

 
10,968

 
6,845

Corporate and shared support services
 
(26,134
)
 
(27,815
)
 
(51,561
)
 
(52,292
)
 
 
$
13,004

 
$
1,799

 
$
(3,524
)
 
$
(12,326
)
 
 
 
 
 
 
 
 
 
Adjusted EBIT
 
 
 
 
 
 
 
 
IHT
 
$
9,523

 
$
14,248

 
$
11,346

 
$
21,037

MS
 
20,349

 
10,921

 
25,968

 
13,938

Quest Integrity
 
9,324

 
5,784

 
10,968

 
6,878

Corporate and shared support services
 
(22,462
)
 
(21,111
)
 
(42,499
)
 
(41,003
)
 
 
$
16,734

 
$
9,842

 
$
5,783

 
$
850

Adjusted EBITDA
 
 
 
 
 
 
 
 
IHT
 
$
13,924

 
$
18,973

 
$
20,249

 
$
30,567

MS
 
25,867

 
19,865

 
36,900

 
32,160

Quest Integrity
 
10,323

 
6,750

 
12,888

 
8,843

Corporate and shared support services
 
(17,353
)
 
(15,181
)
 
(33,522
)
 
(31,280
)
 
 
$
32,761

 
$
30,407

 
$
36,515

 
$
40,290





9


TEAM, INC. AND SUBSIDIARIES
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 diluted share, earnings before interest and taxes (“EBIT”); adjusted EBIT (defined below); adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) and free cash flow to supplement financial information presented on a GAAP basis. Adjusted net income (loss) and adjusted net income (loss) per diluted share, each as defined by the Company, exclude the following items from net income (loss): costs associated with our OneTEAM transformation program, acquisition costs associated with business combinations, legal costs associated with Quest Integrity patent defense litigation, professional fees for acquired business integration, gains (losses) on the revaluation of contingent consideration, restructuring and other related charges (credits), executive severance/transition costs, non-capitalized Enterprise Resource Planning (“ERP”) implementation costs, gains (losses) on our convertible debt embedded derivative, and certain other items that management does not believe are indicative of core operating activities and the related income tax impacts. We also exclude the income tax impacts of certain special income tax items including the effects of certain tax legislation changes. The identification of these special tax items is judgmental in nature, and their calculation is based on various assumptions and estimates. EBIT, as defined by the Company, excludes income tax expense (benefit), 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: costs associated with our OneTEAM transformation program, acquisition costs associated with business combinations, legal costs associated with Quest Integrity patent defense litigation, professional fees for acquired business integration, gains (losses) on the revaluation of contingent consideration, restructuring and other related charges (credits), executive severance/transition costs, non-capitalized ERP implementation costs and certain other items that management does not believe are indicative of core operating activities. Adjusted EBITDA further excludes from adjusted EBIT depreciation, amortization and non-cash share based compensation costs. Free cash flow is defined as net cash provided by (used in) operating activities minus capital expenditures.
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 liquidity measure of free cash flow does not represent a precise calculation of residual cash flow available for discretionary expenditures.
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. 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.


10


TEAM, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
20184
 
2019
 
20184
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
 
 
 
 
 
 
 
Net income (loss):
 
 
 
 
 
 
 
 
Net income (loss)
 
$
6,102

 
$
(31,341
)
 
$
(18,126
)
 
$
(43,605
)
Professional fees, legal and other1
 
3,730

 
5,834

 
9,099

 
10,880

ERP costs
 

 

 

 
87

Restructuring and other related charges, net2
 

 
2,411

 
208

 
2,411

Gain on revaluation of contingent consideration
 

 
(202
)
 

 
(202
)
Loss on convertible debt embedded derivative
 

 
29,330

 

 
24,783

Tax impact of adjustments and other net tax items3
 
(783
)
 
(10,464
)
 
(1,954
)
 
(10,628
)
Adjusted net income (loss)
 
$
9,049

 
$
(4,432
)
 
$
(10,773
)
 
$
(16,274
)
 
 
 
 
 
 
 
 
 
Adjusted net income (loss) per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.30

 
$
(0.15
)
 
$
(0.36
)
 
$
(0.54
)
Diluted
 
$
0.30

 
$
(0.15
)
 
$
(0.36
)
 
$
(0.54
)
 
 
 
 
 
 
 
 
 
Adjusted EBIT and Adjusted EBITDA:
 
 
 
 
 
 
 
 
Operating income (loss) (“EBIT”)
 
$
13,004

 
$
1,799

 
$
(3,524
)
 
$
(12,326
)
Professional fees, legal and other1
 
3,730

 
5,834

 
9,099

 
10,880

ERP costs
 

 

 

 
87

Restructuring and other related charges, net2
 

 
2,411

 
208

 
2,411

Gain on revaluation of contingent consideration
 

 
(202
)
 

 
(202
)
Adjusted EBIT
 
16,734

 
9,842

 
5,783

 
850

Depreciation and amortization
 
 
 
 
 
 
 
 
Amount included in operating expenses
 
6,319

 
6,673

 
12,650

 
13,773

Amount included in SG&A expenses
 
6,060

 
9,306

 
12,000

 
18,661

Total depreciation and amortization
 
12,379

 
15,979

 
24,650

 
32,434

Non-cash share-based compensation costs
 
3,648

 
4,586

 
6,082

 
7,006

Adjusted EBITDA
 
$
32,761

 
$
30,407

 
$
36,515

 
$
40,290

 
 
 
 
 
 
 
 
 
Free Cash Flow:
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
 
$
(2,058
)
 
$
(19,898
)
 
$
5,570

 
$
(17,747
)
Capital expenditures
 
(7,786
)
 
(6,595
)
 
(14,396
)
 
(12,082
)
Free Cash Flow
 
$
(9,844
)
 
$
(26,493
)
 
$
(8,826
)
 
$
(29,829
)
____________________________________
1
For the three and six months ended June 30, 2019, includes $2.7 million and $5.9 million, respectively, associated with the OneTEAM program (exclusive of restructuring costs). For the three and six months ended June 30, 2018, includes $4.1 million and $7.5 million, respectively, associated with the OneTEAM program (exclusive of restructuring costs).
2
Relates to restructuring costs incurred associated with the OneTEAM program.
3
Represents the tax effect of the adjustments at an assumed marginal tax rate of 21% for the three months and six ended June 30, 2019 and 28% for the three and six months ended June 30, 2018.
4
As revised. See Revision of Prior Period Financial Statements in this press release for additional information.

11


TEAM, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued)
(in thousands)
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
 
 
 
 
 
 
 
Adjusted EBIT and Adjusted EBITDA by Segment:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
IHT
 
 
 
 
 
 
 
 
Operating income
 
$
9,497

 
$
13,281

 
$
11,218

 
$
20,021

Professional fees, legal and other1
 

 
(1
)
 

 
48

Restructuring and other related charges, net2
 
26

 
968

 
128

 
968

Adjusted EBIT
 
9,523

 
14,248

 
11,346

 
21,037

Depreciation and amortization
 
4,401

 
4,725

 
8,903

 
9,530

Adjusted EBITDA
 
$
13,924

 
$
18,973

 
$
20,249

 
$
30,567

 
 
 
 
 
 
 
 
 
MS
 
 
 
 
 
 
 
 
Operating income
 
$
20,317

 
$
10,582

 
$
25,851

 
$
13,100

Professional fees, legal and other1
 

 
8

 

 
507

Restructuring and other related charges, net2
 
32

 
331

 
117

 
331

Adjusted EBIT
 
20,349

 
10,921

 
25,968

 
13,938

Depreciation and amortization
 
5,518

 
8,944

 
10,932

 
18,222

Adjusted EBITDA
 
$
25,867

 
$
19,865

 
$
36,900

 
$
32,160

 
 
 
 
 
 
 
 
 
Quest Integrity
 
 
 
 
 
 
 
 
Operating income
 
$
9,324

 
$
5,751

 
$
10,968

 
$
6,845

Restructuring and other related charges, net2
 

 
33

 

 
33

Adjusted EBIT
 
9,324

 
5,784

 
10,968

 
6,878

Depreciation and amortization
 
999

 
966

 
1,920

 
1,965

Adjusted EBITDA
 
$
10,323

 
$
6,750

 
$
12,888

 
$
8,843

 
 
 
 
 
 
 
 
 
Corporate and shared support services
 
 
 
 
 
 
 
 
Operating loss
 
$
(26,134
)
 
$
(27,815
)
 
$
(51,561
)
 
$
(52,292
)
Professional fees, legal and other1
 
3,730

 
5,827

 
9,099

 
10,325

ERP costs
 

 

 

 
87

Restructuring and other related charges (credits), net2
 
(58
)
 
1,079

 
(37
)
 
1,079

Gain on revaluation of contingent consideration
 

 
(202
)
 

 
(202
)
Adjusted EBIT
 
(22,462
)
 
(21,111
)
 
(42,499
)
 
(41,003
)
Depreciation and amortization
 
1,461

 
1,344

 
2,895

 
2,717

Non-cash share-based compensation costs
 
3,648

 
4,586

 
6,082

 
7,006

Adjusted EBITDA
 
$
(17,353
)
 
$
(15,181
)
 
$
(33,522
)
 
$
(31,280
)
___________________
1
For the three and six months ended June 30, 2019, includes $2.7 million and $5.9 million, respectively, associated with the OneTEAM program (exclusive of restructuring costs). For the three and six months ended June 30, 2018, includes $4.1 million and $7.5 million, respectively, associated with the OneTEAM program (exclusive of restructuring costs).
2
Relates to restructuring costs incurred associated with the OneTEAM program.


12