PRO FORMA CONSOLIDATED BALANCE SHEET
FEBRUARY 29, 2004
(UNAUDITED)
| Team, Inc. | Thermal Solutions, Inc. | Pro Forma Adjustments | Pro Forma Consolidated | |||||||||||||
ASSETS | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 887,000 | $ | 457,000 | $ | — | $ | 1,344,000 | ||||||||
Accounts receivable | 20,655,000 | 3,704,000 | — | 24,359,000 | ||||||||||||
Inventories | 9,581,000 | 222,000 | — | 9,803,000 | ||||||||||||
Prepaid expenses and other current assets | 1,922,000 | 115,000 | — | 2,037,000 | ||||||||||||
Total Current Assets | 33,045,000 | 4,498,000 | — | 37,543,000 | ||||||||||||
Property, Plant and Equipment: | ||||||||||||||||
Land and buildings | 7,386,000 | — | — | 7,386,000 | ||||||||||||
Machinery and equipment | 25,029,000 | 5,639,000 | (2,507,000 | )(1) | 28,161,000 | |||||||||||
| 32,415,000 | 5,639,000 | (2,507,000 | ) | 35,547,000 | ||||||||||||
Less accumulated depreciation and amortization | 19,040,000 | 2,507,000 | (2,507,000 | )(1) | 19,040,000 | |||||||||||
| 13,375,000 | 3,132,000 | — | 16,507,000 | |||||||||||||
Goodwill and other intangibles | 10,049,000 | — | 5,810,000 | (1) | 15,859,000 | |||||||||||
Other assets | 296,000 | 25,000 | — | 321,000 | ||||||||||||
Total Assets | $ | 56,765,000 | $ | 7,655,000 | $ | 5,810,000 | $ | 70,230,000 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current Liabilities: | ||||||||||||||||
Current portion of long-term debt | $ | 1,482,000 | $ | 172,000 | $ | — | $ | 1,654,000 | ||||||||
Accounts payable | 3,835,000 | 686,000 | — | 4,521,000 | ||||||||||||
Accrued liabilities | 4,284,000 | 216,000 | 475,000 | (2) | 4,975,000 | |||||||||||
Income taxes payable | 742,000 | — | — | 742,000 | ||||||||||||
Short term notes | — | 500,000 | (500,000 | )(3) | — | |||||||||||
Total Current Liabilities | 10,343,000 | 1,574,000 | (25,000 | ) | 11,892,000 | |||||||||||
Long-term debt | 9,515,000 | — | 7,796,000 | (3) | 17,311,000 | |||||||||||
Other long-term liabilities | 811,000 | — | — | 811,000 | ||||||||||||
Minority interest | 228,000 | — | — | 228,000 | ||||||||||||
Total Liabilities | 20,897,000 | 1,574,000 | 7,771,000 | 30,242,000 | ||||||||||||
Stockholders’ Equity: | ||||||||||||||||
Common stock | 2,604,000 | 769,000 | (682,000 | )(4) | 2,691,000 | |||||||||||
Additional paid-in capital | 34,660,000 | — | 4,033,000 | (4) | 38,693,000 | |||||||||||
Retained earnings | 3,626,000 | 6,059,000 | (6,059,000 | )(4) | 3,626,000 | |||||||||||
Accumulated other comprehensive gain (loss) | 10,000 | — | — | 10,000 | ||||||||||||
Treasury stock at cost | (5,032,000 | ) | (747,000 | ) | 747,000 | (4) | (5,032,000 | ) | ||||||||
Total Stockholders’ Equity | 35,868,000 | 6,081,000 | (1,961,000 | ) | 39,988,000 | |||||||||||
Total Liabilities and Stockholders’ Equity | $ | 56,765,000 | $ | 7,655,000 | $ | 5,810,000 | $ | 70,230,000 | ||||||||
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PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 2003
(UNAUDITED)
| Team, Inc. | Thermal Solutions, Inc. | Pro Forma Adjustments | Pro Forma Consolidated | ||||||||||
Revenues | $ | 91,876,000 | $ | 16,247,000 | $ | — | $ | 108,123,000 | |||||
Operating expenses | 54,684,000 | 11,320,000 | — | 66,004,000 | |||||||||
Gross margin | 37,192,000 | 4,927,000 | — | 42,119,000 | |||||||||
Selling, general and administrative expenses | 29,183,000 | 3,884,000 | 250,000 | (1) | 33,317,000 | ||||||||
Non-cash G&A compensation cost | 115,000 | — | — | 115,000 | |||||||||
Other expense (income) | 150,000 | — | — | 150,000 | |||||||||
Earnings before interest and taxes | 7,744,000 | 1,043,000 | (250,000 | ) | 8,537,000 | ||||||||
Interest expense, net | 601,000 | 54,000 | 289,000 | (2) | 944,000 | ||||||||
Earnings before income taxes | 7,143,000 | 989,000 | (539,000 | ) | 7,593,000 | ||||||||
Provision for income taxes | 2,741,000 | — | 171,000 | (3) | 2,912,000 | ||||||||
Net income | $ | 4,402,000 | $ | 989,000 | $ | (710,000 | ) | $ | 4,681,000 | ||||
Net income per common share: | |||||||||||||
Basic | $ | 0.57 | $ | 0.59 | |||||||||
Diluted | $ | 0.53 | $ | 0.54 | |||||||||
Weighted average number of shares outstanding: | |||||||||||||
Basic | 7,707,000 | — | 288,000 | (4) | 7,995,000 | ||||||||
Diluted | 8,369,000 | — | 288,000 | (4) | 8,657,000 | ||||||||
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PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED FEBRUARY 29, 2004
(UNAUDITED)
| Team, Inc. | Thermal Solutions, Inc. | Pro Forma Adjustments | Pro Forma Consolidated | ||||||||||
Revenues | $ | 75,862,000 | $ | 10,666,000 | $ | — | $ | 86,528,000 | |||||
Operating expenses | 45,580,000 | 7,268,000 | — | 52,848,000 | |||||||||
Gross Margin | 30,282,000 | 3,398,000 | — | 33,680,000 | |||||||||
Selling, general and administrative expenses | 23,524,000 | 2,812,000 | 188,000 | (1) | 26,524,000 | ||||||||
Non-cash G&A compensation cost | 94,000 | — | — | 94,000 | |||||||||
Earnings before interest and taxes | 6,664,000 | 586,000 | (188,000 | ) | 7,062,000 | ||||||||
Interest expense, net | 396,000 | 18,000 | 239,000 | (2) | 653,000 | ||||||||
Earnings before income taxes | 6,268,000 | 568,000 | (427,000 | ) | 6,409,000 | ||||||||
Provision for income taxes | 2,374,000 | — | 54,000 | (3) | 2,428,000 | ||||||||
Net income | $ | 3,894,000 | $ | 568,000 | $ | (481,000 | ) | $ | 3,981,000 | ||||
Net income per common share: | |||||||||||||
Basic | $ | 0.51 | $ | 0.50 | |||||||||
Diluted | $ | 0.47 | $ | 0.46 | |||||||||
Weighted average number of shares outstanding: | |||||||||||||
Basic | 7,629,000 | — | 288,000 | (4) | 7,917,000 | ||||||||
Diluted | 8,326,000 | — | 288,000 | (4) | 8,614,000 | ||||||||
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NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Balance Sheet
The pro forma adjustments to the consolidated balance sheet reflect the following:
| (1) | Allocation of purchase price of Thermal Solutions: |
Cash and borrowings | $ | 7,796,000 | |
Common stock issued | 4,120,000 | ||
Transaction costs | 475,000 | ||
| 12,391,000 | |||
Fair value of net assets acquired | 6,581,000 | ||
Excess purchase price to be allocated to goodwill and covenant not to compete | $ | 5,810,000 | |
The purchase accounting adjustments to reflect the fair value of assets and liabilities was based on management’s evaluation as of this filing date and are subject to change pending final evaluation of the assets and liabilities. At this time, the net book value of property, plant and equipment is estimated to approximate fair value. It is not expected that the final allocation of purchase price will produce materially different results from those presented herein.
| (2) | To accrue for transaction costs incurred, but not paid, as of the closing of the transaction. |
| (3) | To reflect the borrowings made by the Company of $7,796,000 to finance the transaction and the payoff of Thermal Solutions’ outstanding note payable in the amount of $500,000. |
| (4) | To reflect the elimination of Thermal Solutions’ equity and the issuance of 288,413 shares of the Company’s $.30 par value common stock (with a market price of $14.286 at the closing date). |
Statement of Operations
| (1) | To record amortization expense on the portion of purchase price allocated to an intangible covenant not to compete agreement over a five year life ($1,250,000 total valuation). |
| (2) | To eliminate Thermal Solutions’ historical interest expense on debt repaid and forgiven at the closing of the transaction and to record interest expense at 4.4%, which approximates the interest rate in effect during the periods presented, on the $7,796,000 borrowed to purchase Thermal Solutions. |
| (3) | To record the tax effect of Thermal Solutions’ income and the taxable pro forma adjustments at the effective rate of 38%. |
| (4) | To record Team, Inc. stock issued in connection with the acquisition of Thermal Solutions. |
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