1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ____________________ August 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission file number 1-8604
----------------------------------------------------------
TEAM, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Texas 74-1765729
- ------------------------------------ --------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
1001 Fannin, Suite 4656, Houston, Texas 77002
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (713) 659-3600
-----------------------------
-------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
On September 29, 1995, there were 5,159,842 shares of the Registrant's common
stock outstanding.
2
TEAM, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -- 3
August 31, 1995 and May 31, 1995
Consolidated Statements of Earnings -- 4
Three Months Ended
August 31, 1995 and 1994
Consolidated Statements of Cash Flows -- 5
Three Months Ended
August 31, 1995 and 1994
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
3
ITEM 1. FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AUGUST 31, MAY 31,
1995 1995
--------------- ---------------
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 2,292,000 $ 3,154,000
Accounts receivable, net of allowance for doubtful
accounts of $204,000 and $204,000 . . . . . . . . . . . . . . . 9,152,000 8,408,000
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . 6,462,000 6,641,000
Prepaid expenses and other current assets . . . . . . . . . . . 865,000 1,374,000
----------- -----------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . 18,771,000 19,577,000
Net Assets of Discontinued Operations . . . . . . . . . . . . . . . . -- 124,000
Property, Plant and Equipment:
Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . 6,896,000 6,889,000
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . 10,977,000 10,864,000
----------- -----------
17,873,000 17,753,000
Less accumulated depreciation and amortization . . . . . . . . . . 11,989,000 11,641,000
----------- -----------
5,884,000 6,112,000
Military Housing Projects:
Restricted cash and other assets . . . . . . . . . . . . . . . . . 1,972,000 2,897,000
Land and buildings, net of accumulated
depreciation of $5,075,000 and $4,710,000 . . . . . . . . . . . . 42,216,000 42,581,000
----------- -----------
44,188,000 45,478,000
Goodwill, Net of Accumulated Amortization . . . . . . . . . . . . . . 5,504,000 5,583,000
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,203,000 3,184,000
----------- -----------
$77,550,000 $80,058,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 1,309,000 $ 1,344,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 598,000 742,000
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . 2,764,000 2,705,000
Current income taxes payable . . . . . . . . . . . . . . . . . . . 126,000 -
----------- -----------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . 4,797,000 4,791,000
Long-term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,379,000 13,627,000
Military housing projects' Non-recourse Obligations:
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,253,000 39,722,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765,000 1,595,000
----------- -----------
40,018,000 41,317,000
Stockholders' Equity:
Preferred stock, cumulative, par value $100 per share,
500,000 shares authorized, none issued . . . . . . . . . . . . -- --
Common stock, par value $.30 per share, 10,000,000 shares
authorized and 5,169,542 shares issued . . . . . . . . . . . . 1,551,000 1,551,000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 24,992,000 24,992,000
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . (6,090,000) (6,123,000)
Treasury stock at cost, 9,700 shares . . . . . . . . . . . . . . (97,000) (97,000)
----------- -----------
20,356,000 20,323,000
----------- -----------
$77,550,000 $80,058,000
=========== ===========
See notes to consolidated financial statements 3
4
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED
---------------------------------
AUGUST 31, AUGUST 31,
1995 1994
-------------- -------------
Revenues:
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $12,117,000 $13,095,000
Military housing project lease revenues . . . . . . . . . . . . . 1,258,000 1,205,000
----------- ----------
13,375,000 14,300,000
Operating Costs and Expenses:
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . 6,373,000 6,773,000
Selling, general and administrative expenses . . . . . . . . . . 5,057,000 5,896,000
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,000 387,000
----------- ----------
11,755,000 13,056,000
Military Housing Project Costs and Expenses:
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . 556,000 450,000
General and administrative expenses . . . . . . . . . . . . . . . 53,000 147,000
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 839,000 858,000
----------- ----------
1,448,000 1,455,000
Earnings (Loss) from Continuing Operations before income taxes . . . 172,000 (211,000)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . 139,000 36,000
----------- ----------
Earnings (Loss) from Continuing Operations,
Net of Income Taxes . . . . . . . . . . . . . . . . . . . . . . . 33,000 (247,000)
Earnings from Discontinued
Operations, Net of Income Taxes . . . . . . . . . . . . . . . . . -- 11,000
----------- ----------
Net Earnings (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,000 $ (236,000)
=========== ===========
Net earnings (Loss) Per Common Share:
Earnings (Loss) from Continuing Operations . . . . . . . . . . . $ .01 $ (.05)
Earnings from Discontinued Operations . . . . . . . . . . . . . . -- .00
----------- -----------
Net Earnings (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ .01 $ (.05)
=========== ===========
Weighted average number of shares outstanding . . . . . . . . . . 5,160,000 5,160,000
============ ===========
See notes to consolidated financial statements 4
5
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
---------------------------------
AUGUST 31, AUGUST 31,
1995 1994
-------------- -------------
Cash Flows From Operating Activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . $ 33,000 $ (247,000)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . 912,000 1,024,000
Provision for doubtful accounts and notes receivable . . . -- 60,000
Loss on sale of assets . . . . . . . . . . . . . . . . . . 3,000 --
Change in assets and liabilities:
(Increase) decrease:
Accounts receivable . . . . . . . . . . . . . . . . (744,000) 783,000
Materials and supplies . . . . . . . . . . . . . . . 179,000 185,000
Prepaid expenses and other assets . . . . . . . . . 509,000 (126,000)
Increase (decrease):
Accounts payable . . . . . . . . . . . . . . . . . . (144,000) (2,119,000)
Other accrued liabilities . . . . . . . . . . . . . 59,000 (186,000)
Income taxes payable . . . . . . . . . . . . . . . . 126,000 (93,000)
----------- -----------
Net cash provided by (used in) operating activities . . . . . 933,000 (719,000)
Cash Flows From Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (145,000) (212,000)
Disposal of property and equipment . . . . . . . . . . . . . . . 4,000 11,000
Decrease (increase) in other assets . . . . . . . . . . . . . . . (121,000) 127,000
Decrease in net assets of discontinued operations . . . . . . . . 124,000 828,000
Decrease in military housing projects'
restricted cash and other assets . . . . . . . . . . . . . . . 925,000 1,369,000
Proceeds from sale of company . . . . . . . . . . . . . . . . . . -- 4,550,000
----------- -----------
Net cash provided by investing activities . . . . . . . . . . 787,000 6,673,000
Cash Flows From Financing Activities:
Payments under debt agreements
and capital lease obligations . . . . . . . . . . . . . . . . (1,283,000) (6,048,000)
Proceeds from issuance of long-term debt . . . . . . . . . . . . -- 175,000
Payments on military housing projects' non-recourse debt . . . . (469,000) (431,000)
Decrease in military housing projects'
other non-recourse obligations . . . . . . . . . . . . . . . . (830,000) (766,000)
----------- -----------
Net cash used in financing activities . . . . . . . . . . . . (2,582,000) (7,070,000)
----------- -----------
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . (862,000) (1,116,000)
Cash and cash equivalents at beginning of year . . . . . . . . . . . 3,154,000 3,728,000
----------- -----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . $ 2,292,000 $ 2,612,000
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest:
Operating interest . . . . . . . . . . . . . . . . . . . . $ 292,000 $ 470,000
Military housing projects . . . . . . . . . . . . . . . . 1,688,000 1,726,000
----------- -----------
$ 1,980,000 $ 2,196,000
=========== ===========
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,000 $ 139,000
=========== ===========
See notes to consolidated financial statements 5
6
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Method of Presentation
General
The interim financial statements are unaudited but, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of results for such
periods. The results of operations for any interim period are not
necessarily indicative of results for the full year. These financial
statements should be read in conjunction with the financial statements and
notes thereto contained in the Company's annual report for the fiscal year
ended May 31, 1995.
The August 31, 1994 financial statements have been restated to reflect the
Transportation Services segment as discontinued operations.
2. Dividends
No dividends were paid during the first quarter of fiscal 1996 or 1995.
Pursuant to the Company's Credit Agreement, the Company may not pay
quarterly dividends without the consent of its senior lender. Future
dividend payments will depend upon the Company's financial condition and
other relevant matters.
6
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's primary operations consist of industrial repair services,
environmental engineering and consulting, and air emission monitoring services.
The Company also owns three Federal Section 801 housing projects ("Military
Housing" segment), which are presently leased to the Departments of the Army,
Navy and Air Force pursuant to long-term lease agreements.
The following table sets forth for the periods indicated (i) the
percentage which certain items in the financial statements of the Company bear
to revenues and (ii) the percentage change in the dollar amount of such items
from period to period:
Three Months
Ended August 31,
-------------------------- % Increase/
1995 1994 (Decrease)
----- ----- -----------
Revenues:
Environmental services . . . . . . . . . . . 90.6% 91.6% (7.5)%
Military housing projects . . . . . . . . . . 9.4 8.4 4.4
----- -----
100.0 100.0 (6.5)
===== =====
Operating expenses . . . . . . . . . . . . . . 51.8 50.5 (4.1)
Selling, general and administrative . . . . . . 38.2 42.3 (15.4)
Interest expense . . . . . . . . . . . . . . . 8.7 8.7 (6.5)
----- -----
Total . . . . . . . . . . . . . . . . . . . . 98.7 101.5 (9.0)
Earnings (loss) from continuing
operations before income taxes . . . . . . . 1.3 (1.5) N/M
Provision for income taxes . . . . . . . . . . 1.0 0.2 N/M
----- -----
Earnings (loss) from continuing
operations net of income taxes . . . . . . . 0.3% (1.7)% N/M
===== ===== ===
[N/M = Not meaningful]
RESULTS OF OPERATIONS
Three Months Ended August 31, 1995 Compared to
Three Months Ended August 31, 1994
Primary Operations: For the three month period ended August 31, 1995, revenues
from the Company's environmental services business totaled $12.1 million, 7
percent lower than revenues of $13.1 million reported in the same period of the
prior fiscal year. This decrease resulted from lower revenues from the Company's
7
8
emissions monitoring and environmental consulting and engineering services,
primarily as a result of reduced reporting requirements by many of the
Company's customers, due to the slowdown in environmental regulatory activity.
In addition, some of the Company's customers have implemented internal
reporting for emissions control services.
Operating expenses in the Company's primary operations declined by 6 percent
from the first quarter of fiscal 1995, primarily due to lower personnel related
costs. Gross profit margins declined from 48.3 percent to 47.4 percent, as the
Company was not able to reduce costs sufficiently to offset the decline in
revenues. Selling, general and administrative expenses of $5.1 million in the
first quarter of fiscal 1996, were $839,000, or 14 percent lower than in the
prior year. The continuing impact of cost reduction programs implemented during
the prior fiscal year has resulted in lower personnel, insurance and general
expenses.
Interest expense of $325,000 in the first three months of fiscal 1996 was 16
percent lower than in the same period of fiscal 1995 due to reduced average
borrowing levels. Pre-tax income of $362,000 for the first quarter increased
significantly from 1995 first quarter pre-tax earnings of $39,000.
Military Housing Projects: For the three month period ended August 31, 1995,
revenues were $1.3 million, $53,000 higher than revenues in the prior year
period, due to increased maintenance revenues. The pre-tax loss from military
housing was $190,000, compared to a loss of $250,000 in the first quarter of
fiscal 1995. Reduced legal fees, associated with litigation with the general
contractor of the projects which was settled in March 1995, accounted for the
change.
For the first quarter of fiscal 1996, the Company recorded net income of
$33,000 compared to the net loss from continuing operations of $247,000 in the
same period last year. The Company's net loss for the first quarter of fiscal
1995 was $236,000, including net earnings from the operations of the Company's
discontinued transportation segment, which was sold in April 1995.
LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1995, the Company's working capital totaled $14.0 million, a
decrease of $0.8 million from working capital of $14.8 million at May 31, 1995.
The Company has been able to finance its working capital requirements through
its internally generated cash flow and the sale of discontinued businesses and
assets. In August 1995, the Company and its primary bank modified and extended
the terms of its credit agreement, which provides a total credit facility of
$15,950,000 consisting of a $3,950,000 term loan and a $12.0 million revolving
line of credit. The term loan is due December 1, 1996, and provides for
quarterly principal payments of $350,000 beginning September 30, 1995, with the
balance due at maturity. The revolving line of credit also expires on December
1, 1996. At August 31, 1995, amounts outstanding under the revolving line of
credit were $7.5 million.
For the fiscal first quarter, ending August 31, 1995, net cash provided from
operations totaled $933,000, resulting primarily from depreciation and
amortization of $912,000, lower inventories of $179,000 and reductions in
prepaid and other assets of $509,000. This was partially offset by higher
accounts receivable of $744,000. Capital expenditures totaled $145,000 during
the three month period ending August 31, 1995, primarily for the replacement of
equipment used in the Company's operations.
8
9
The Company reduced its revolving line of credit and other long-term debt by
$1.3 million during the first quarter of fiscal 1996. Payments on military
housing non-recourse debt were $469,000 during the quarter.
Management expects that capital expenditures for fiscal 1996 will be
approximately $1.5 million, as the Company plans to replace, upgrade and expand
its data collection, computer and other operating equipment. The Company also
intends to sell the military housing projects and is actively marketing the
properties, although there can be no assurance that any potential transaction
will be completed. Management intends to utilize the proceeds of such a sale, if
any, to further reduce bank debt and to increase available working capital.
9
10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated August 25, 1995
pursuant to "Item 5 - Other Events" relating to the election of Mr. William
A. Ryan as the Company's interim Chairman, President and Chief Executive
Officer effective August 25, 1995 to replace Mr. H. Wesley Hall.
10
11
SIGNATURE
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 thereto duly authorized.
TEAM, INC.
(Registrant)
Date: October 13, 1995
JOHN M. SLACK
---------------------------------
John M. Slack, Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
11
5
3-MOS
AUG-31-1995
AUG-31-1995
2,292,000
0
9,356,000
204,000
6,462,000
18,771,000
65,164,000
17,064,000
77,550,000
4,797,000
51,632,000
1,551,000
0
0
18,805,000
77,550,000
0
13,375,000
0
6,929,000
5,110,000
0
1,164,000
172,000
139,000
33,000
0
0
0
33,000
.01
.01
Property, plant and equipment consist of $17,873,000 for core operational fixed
assets and $47,291,000 for the military housing projects' land and buildings.
Accumulated depreciation consists of $11,989,000 for core fixed assets and
$5,075,000 for the military housing projects' land and buildings.
Bonds, mortgages and similar debt consists of $12,379,000 of long-term debt and
$39,253,000 of non-recourse debt pertaining to Certificates of Participation
financing the military housing projects.
