1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended FEBRUARY 28, 2001
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
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Commission file number 0-9950
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TEAM, INC.
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(Exact name of registrant as specified in its charter)
Texas 74-1765729
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 Hermann Drive, Alvin, Texas 77511
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (281) 331-6154
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Indicate by checkmark 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
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On April 4, 2001, there were 7,826,934 shares of the Registrant's common stock
outstanding.
2
TEAM, INC.
INDEX
This amendment on Form 10-Q/A is being filed to give effect to the restatement
of the Company's financial statements, included in Item 1, as discussed in Note
9 thereto.
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -- 1
February 28, 2001 (Unaudited) and May 31, 2000
Consolidated Condensed Statements of Operations
(Unaudited) -- 2
Three Months and Nine Months Ended
February 28, 2001 and 2000
Consolidated Condensed Statements of Cash Flows
(Unaudited) -- 3
Three Months and Nine Months Ended
February 28, 2001 and 2000
Notes to Unaudited Consolidated Condensed
Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3 Quantitative and Qualitative Disclosure about
Market Risk 12
PART II. OTHER INFORMATION
Item 5. Other information 12
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
FEBRUARY 28, MAY 31,
2001 2000
------------ ------------
(As restated, Note 9)
ASSETS
Current Assets:
Cash and cash equivalents $ 676,000 $ 327,000
Accounts receivable, net of allowance for doubtful
accounts of $333,000 and $251,000 13,503,000 13,580,000
Inventories 8,082,000 7,821,000
Prepaid expenses and other current assets 989,000 913,000
------------ ------------
Total Current Assets 23,250,000 22,641,000
Property, Plant and Equipment, net of accumulated
depreciation of $13,835,000 and $15,076,000 12,063,000 13,249,000
Goodwill, net of accumulated amortization
of $579,000 and $373,000 10,410,000 10,616,000
Other Assets 1,427,000 1,878,000
------------ ------------
Total Assets $ 47,150,000 $ 48,384,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,550,000 $ 1,611,000
Accounts payable 1,750,000 1,979,000
Other accrued liabilities 2,950,000 3,040,000
Income taxes payable 726,000 1,102,000
------------ ------------
Total Current Liabilities 6,976,000 7,732,000
Long-term debt 14,970,000 15,728,000
Other long-term liabilities 1,488,000 1,787,000
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, 500,000 shares authorized, none issued
Common stock, par value $.30 per share, 30,000,000 shares
authorized, 8,285,054 and 8,256,954 shares issued at
February 28, 2001 and May 31, 2000, respectively 2,486,000 2,477,000
Additional paid-in capital 32,152,000 32,103,000
Accumulated deficit (9,609,000) (11,319,000)
Unearned compensation (10,000) (27,000)
Treasury stock at cost, 436,320 and 9,700 shares (1,303,000) (97,000)
------------ ------------
Total Stockholders' Equity 23,716,000 23,137,000
------------ ------------
Total Liabilities and Stockholders' Equity $ 47,150,000 $ 48,384,000
============ ============
See notes to unaudited consolidated condensed financial statements.
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TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28(29), FEBRUARY 28(29),
-------------------------------- --------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- --------------
(As restated, Note 9)
Revenues $ 18,656,000 $ 16,503,000 $ 54,977,000 $ 48,250,000
Operating expenses 11,343,000 9,765,000 33,157,000 27,766,000
-------------- -------------- -------------- --------------
Gross Margin 7,313,000 6,738,000 21,820,000 20,484,000
Selling, general and administrative expenses 6,273,000 5,810,000 18,344,000 18,015,000
Other expense (income), net 82,000 -- (278,000) 0
-------------- -------------- -------------- --------------
Earnings before interest and taxes 958,000 928,000 3,754,000 2,469,000
Interest 382,000 414,000 1,272,000 1,222,000
-------------- -------------- -------------- --------------
Earnings before income taxes 576,000 514,000 2,482,000 1,247,000
Provision (benefit) for income taxes (43,000) 156,000 773,000 494,000
-------------- -------------- -------------- --------------
Net income $ 619,000 $ 358,000 $ 1,709,000 $ 753,000
============== ============== ============== ==============
Net income per common share:
Basic and diluted $ 0.08 $ 0.04 $ 0.21 $ 0.09
============== ============== ============== ==============
Weighted average number of shares outstanding:
Basic 7,893,000 8,247,000 8,167,000 8,235,000
============== ============== ============== ==============
Diluted 8,068,000 8,247,000 8,272,000 8,282,000
============== ============== ============== ==============
See notes to unaudited consolidated condensed financial statements.
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TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED
FEBRUARY 28(29),
2001 2000
------------ ------------
(As restated, Note )
Cash Flows from Operating Activities:
Net income $ 1,709,000 $ 753,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, amortization and other 2,108,000 2,222,000
Other income (360,000)
Allowance for doubtful accounts and other 100,000
Equity in losses of unconsolidated subsidiaries 93,000
Change in assets and liabilities
(Increase) decrease:
Accounts receivable (90,000) (1,990,000)
Inventories (261,000) 896,000
Prepaid expenses and other current assets (29,000) (240,000)
Increase (decrease):
Accounts payable (229,000) 715,000
Other accrued liabilities (90,000) (640,000)
Income taxes payable (376,000) 415,000
------------ ------------
Net cash provided by operating activities 2,575,000 2,131,000
------------ ------------
Cash Flows From Investing Activities:
Capital expenditures (1,325,000) (1,086,000)
Additions to rental and demo machines (464,000)
Disposal of property and equipment 1,652,000 49,000
Other 177,000 (947,000)
------------ ------------
Net cash provided by (used in) investing activities 40,000 (1,984,000)
------------ ------------
Cash Flows From Financing Activities:
Payments under debt agreements and other long-term obligations (1,351,000) (607,000)
Proceeds from issuance of long-term debt 233,000
Repurchase of common stock (1,206,000)
Issuance of common stock 58,000 135,000
------------ ------------
Net cash used in financing activities (2,266,000) (472,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents 349,000 (325,000)
Cash and cash equivalents at beginning of year 327,000 1,035,000
------------ ------------
Cash and cash equivalents at end of period $ 676,000 $ 710,000
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,318,000 $ 1,209,000
============ ============
Income taxes paid $ 1,203,000 $ 264,000
============ ============
See notes to unaudited consolidated condensed financial statements.
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TEAM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
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, 2000.
New Accounting Standards
In June 1999, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133-an
amendment of FASB No. 133", which effectively delays the application of
SFAS No. 133 for one year, to fiscal years beginning after June 15, 2000.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities - an amendment of
FASB Statement No. 133" which amends and supercedes various sections of
SFAS No. 133. Management is currently studying SFAS No. 133 and its
amendments for their possible impact on the consolidated financial
statements when they are adopted in June 2001.
2. Dividends and Stock Repurchases
No dividends were paid during the nine months ended February 28,
2001 or 2000. 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.
On July 13, 2000, the Board of Directors approved a stock repurchase
plan of up to 10% of the outstanding common stock of the Company. Stock
repurchases must be made on the open market and are subject to certain
regulatory restrictions which, generally, limit the number of shares that
can be acquired on a daily basis and limits the price per share that can
be paid. As a part of the stock repurchase program, in December 2000, the
Company reacquired a 200,000-share block that was part of 650,000 shares
of common stock formerly owned by Armstrong International, Inc. All of the
Armstrong shares were sold in a privately negotiated transaction between
Armstrong, several individual buyers, and Team at a price of $2.81 per
share. As of February 28, 2001, 426,620 shares of common stock had been
reacquired at an average price of $2.82 per share.
The stock repurchase program was suspended in April 2001, as a
result of the announcement of a proposed cash tender offer to reacquire an
additional 1.2 million shares. (See Part II, Item 5).
3. Earnings Per Share
There is no significant difference, for any of the periods
presented, in the amount of net income (numerator) used in the computation
of basic and diluted earnings per share. With respect to the number of
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weighted average shares outstanding (denominator), diluted shares reflects
only the pro forma exercise of options to acquire common stock to the
extent that the options' exercise prices are less than the average market
price of common shares during the period.
4. Inventories
Inventories consists of:
February 28, May 31,
2001 2000
------------ ------------
Raw materials $ 797,000 $ 947,000
Finished goods and work in progress 7,285,000 6,874,000
------------ ------------
Total $ 8,082,000 $ 7,821,000
============ ============
5. Long-Term Debt
Long-term debt consists of:
February 28, May 31,
2001 2000
------------ ------------
Revolving loan $ 7,020,000 $ 6,620,000
Term and mortgage notes 9,393,000 10,504,000
Capital lease obligations 107,000 215,000
------------ ------------
16,520,000 17,339,000
Less current portion 1,550,000 1,611,000
------------ ------------
Total $ 14,970,000 $ 15,728,000
============ ============
Effective November 30, 2000, the maturity date of the revolving loan
was extended by one year to September 30, 2002.
6. Other income
On November 30, 2000, the Company sold rental property for $1.575
million in cash (net). The property was carried as a corporate asset
unrelated to either of the Company's operating segments. The transaction
resulted in a gain of $440,000, which is the significant component of
other income for the nine months ended February 28, 2001.
On February 27, 2001, the Company completed the sale of
substantially all of the assets and operations of a small operating
subsidiary located in the United Kingdom ("UK"). The loss on disposal of
the business of $82 thousand is reflected as a reduction in the line item
"other income" for the three months and nine months ended February 28,
2001. The operations of the UK subsidiary were not material to the
Company's business.
7. Income taxes
The UK subsidiary (see note 6) had incurred losses since the early
1990's; however, no tax benefit had been recognized since the
utilization of such benefits could not be assured prior to the
liquidation of the subsidiary. With the sale of the subsidiary, the
Company will be able to effectively utilize the benefit of the losses in
its fiscal year 2001 Federal income tax return. Accordingly, a tax
benefit of $400,000 was recognized in the three months ended February
28, 2001. Such amount will reduce cash Federal income taxes payable for
the fiscal year 2001.
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8. Industry Segment Information
The Company discloses certain information about its operating
segments where operating segments are defined as "components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance." Generally, financial
information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments.
The Company has two reportable segments: industrial services and
equipment sales and rentals. The industrial services segment includes
services consisting of leak repair, hot tapping, emissions control
monitoring, field machining, and mechanical inspection. The equipment
sales and rental segment consists of the Climax business.
The Company evaluates performance based on earnings before interest
and income taxes. Inter-segment sales are eliminated in the operating
measure used by the company to evaluate segment performance and has been
eliminated in the following schedule. Interest is not allocated to the
segments.
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8. Industry Segment Information (Continued)
THREE MONTHS ENDED FEBRUARY 28, 2001
Industrial Equipment Corporate
Services Sales & Rentals & Other Total
------------ --------------- ------------ ------------
Revenues $ 16,144,000 $ 2,512,000 $ 0 $ 18,656,000
============ ============ ============ ============
Earnings before interest & taxes 1,864,000 183,000 (1,089,000) 958,000
Interest 0 0 382,000 382,000
------------ ------------ ------------ ------------
Earnings before income taxes 1,864,000 183,000 (1,471,000) 576,000
============ ============ ============ ============
Depreciation and amortization 414,000 180,000 91,000 685,000
============ ============ ============ ============
Capital expenditures 240,000 5,000 13,000 258,000
============ ============ ============ ============
Identifiable assets $ 31,321,000 $ 12,214,000 $ 3,615,000 $ 47,150,000
============ ============ ============ ============
THREE MONTHS ENDED FEBRUARY 29, 2000
Industrial Equipment Corporate
Services Sales & Rentals & Other Total
------------ --------------- ------------ ------------
Revenues $ 13,806,000 $ 2,697,000 $ 0 $ 16,503,000
============ ============ ============ ============
Earnings before interest & taxes 1,729,000 194,000 (995,000) 928,000
Interest 0 0 414,000 414,000
------------ ------------ ------------ ------------
Earnings before income taxes 1,729,000 194,000 (1,409,000) 514,000
============ ============ ============ ============
Depreciation and amortization 435,000 177,000 99,000 711,000
============ ============ ============ ============
Capital expenditures 397,000 114,000 0 511,000
============ ============ ============ ============
Identifiable assets $ 31,385,000 $ 11,473,000 $ 5,686,000 $ 48,544,000
============ ============ ============ ============
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8. Industry Segment Information (continued)
NINE MONTHS ENDED FEBRUARY 28, 2001
Industrial Equipment Corporate
Services Sales & Rentals & Other Total
------------ --------------- ------------ ------------
Revenues $ 48,270,000 $ 6,707,000 $ 54,977,000
Earnings (loss) before interest
& taxes 6,541,000 (274,000) (2,513,000) 3,754,000
Interest -- -- 1,272,000 1,272,000
------------ ------------ ------------ ------------
Earnings (loss) before income taxes 6,541,000 (274,000) (3,785,000) 2,482,000
============ ============ ============ ============
Depreciation and amortization 1,236,000 586,000 333,000 2,155,000
============ ============ ============ ============
Capital expenditures 1,160,000 147,000 18,000 1,325,000
============ ============ ============ ============
Identifiable assets $ 31,321,000 $ 12,214,000 $ 3,615,000 $ 47,150,000
============ ============ ============ ============
NINE MONTHS ENDED FEBRUARY 29, 2000
Industrial Equipment Corporate
Services Sales & Rentals & Other Total
------------ --------------- ------------ ------------
Revenues $ 40,528,000 $ 7,722,000 $ -- $ 48,250,000
============ ============ ============ ============
Earnings before interest & taxes 4,985,000 350,000 (2,866,000) 2,469,000
Interest -- -- 1,222,000 1,222,000
------------ ------------ ------------ ------------
Earnings before income taxes 4,985,000 350,000 (4,088,000) 1,247,000
============ ============ ============ ============
Depreciation and amortization 1,287,000 637,000 298,000 2,222,000
============ ============ ============ ============
Capital expenditures 808,000 252,000 26,000 1,086,000
============ ============ ============ ============
Identifiable assets $ 31,385,000 $ 11,473,000 $ 5,686,000 $ 48,544,000
============ ============ ============ ============
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9. Restatement
Subsequent to the issuance of its financial statements for the nine months
ended February 28, 2001, the Company determined that the significant portion of
post employment benefits granted to certain retired officers should have been
recorded prior to their retirement. The accompanying financial statements have
been restated to correct the accounting for such benefits. The effects of the
restatement are as follows (amounts in thousands, except per share amounts):
Three months ended February 28 (29),
--------------------------------------------------------------
2001 2000
----------------------------- -----------------------------
As Previously As Previously
Reported As Restated Reported As Restated
------------- ----------- ------------- -----------
Results of operations:
Selling, general and
administrative expenses $ 6,189 $ 6,273 $ 5,814 $ 5,810
Interest 373 382 404 414
Provision (benefit) for income taxes (8) (43) 159 156
Net income 677 619 361 358
Net income per common share:
Basic $ 0.09 $ 0.08 $ 0.04 $ 0.04
Diluted $ 0.08 $ 0.08 $ 0.04 $ 0.04
Nine months ended February 28 (29),
--------------------------------------------------------------
2001 2000
----------------------------- -----------------------------
As Previously As Previously
Reported As Restated Reported As Restated
------------- ----------- ------------- -----------
Results of operations:
Selling, general and
administrative expenses $ 18,244 $ 18,344 $ 18,027 $ 18,015
Interest 1,248 1,272 1,192 1,222
Provision for income taxes 820 773 502 494
Net income 1,786 1,709 763 753
Net income per common share:
Basic and diluted $ 0.22 $ 0.21 $ 0.09 $ 0.09
February 28, 2001 May 31, 2000
---------------------------- ---------------------------
As Previously As Previously
Reported As Restated Reported As Restated
------------- ----------- ------------- -----------
Financial Position:
Prepaid expense and other current assets $ 1,046 $ 989 $ 1,017 $ 913
Other long term liabilities 1,637 1,488 2,060 1,787
Accumulated deficit (9,701) (9,609) (11,488) (11,319)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's condensed financial statements for the nine months ended February
28, 2001 have been restated as discussed in Note 9 to the accompanying financial
statements. The information included in the following discussion gives effect to
that restatement.
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 2001 COMPARED
TO THREE MONTHS ENDED FEBRUARY 29, 2000
Revenues for the quarter ended February 28, 2001 were $18.7 million
compared to $16.5 million for the corresponding period of the preceding year, an
increase of 13%. Operating margins (shown as "gross margin" in the Condensed
Statements of Operations) declined to 39% in the 2001 quarter compared to 41% in
the 2000 quarter and net income increased to $619 thousand, or $0.08 per share
as compared to $358 thousand ($0.04 per share) in the 2000 quarter.
The industrial services business segment, which represents about 87% of
consolidated revenues, continued its strong year over year growth. Services
segment revenues were $16.1 million in the 2001 quarter compared to $13.8
million in the 2000 quarter, an increase of 17%. Management believes that the
Company's service revenues are related, in part, to the operating margins
experienced by its customers--particularly in the refining, pipeline and
petrochemical industries. Generally, as those customers' margins improve, more
funds are expended for the specialized industrial services offered by the
Company. The Company experienced improved demand for its services in the 2001
quarter as compared to the 2000 quarter because of the generally good business
conditions of its refining, pipeline and petro-chemical customers.
While Industrial Services revenues were up 17%, operating profits for that
segment (earnings before interest and taxes) were up by only 8%--$1.9 million in
the 2001 quarter versus $1.7 million in the 2000 quarter. Operating profit in
the 2001 quarter was negatively impacted by the liquidation of the Company's
operating subsidiary in the United Kingdom, which resulted in a pre-tax loss of
$161 thousand during the quarter, including $82 thousand (reported on the
consolidated statement of earnings as other expense) associated with the loss on
disposal of its assets. (The United Kingdom subsidiary was not material to the
overall services segment, with revenues of only $115 thousand for the 2001
quarter). Industrial Service Segment operating profit was also negatively
impacted in the quarter by cost increases for employee benefits (primarily
medical insurance) and generally rising utility costs.
The Equipment Sales and Rental Segment (the "Climax" business) reported
significantly improved results compared to the first two quarters of the current
fiscal year, but was still slightly behind the same quarter of 2000. Revenues
were $2.5 million for the quarter compared to $2.7 million for the same quarter
of 2000. Operating profit in the 2001 quarter was $183 thousand compared to $194
thousand in the 2000 quarter. Operating margins in the Climax business actually
improved over the 2000 levels (45.5% versus 43.5%). That improvement is a result
of aggressive efforts to bring cost levels down to existing sales rates. (The
operating margin was only 39% for the second quarter of the current fiscal
year). While management is pleased with the results of the cost reduction effort
that have been realized in the third quarter, the focus is on strengthening
sales, which are running below prior year levels.
The consolidated results for the 2001 quarter reflect a tax benefit of $43
thousand compared to tax expense of $156 thousand in the 2000 quarter. The
current quarter's net tax benefit reflects the recognition of a $400 thousand
tax benefit that is associated with the liquidation of the UK subsidiary. This
tax benefit will directly reduce cash taxes payable for fiscal year 2001 and
arises because of cumulative losses--which had not previously been tax
affected--since the acquisition of the UK company by Team in the early 1990's.
(The 2000 quarter's tax expense was also net of a one-time tax benefit of $150
thousand associated with Climax tax refunds relating to pre-acquisition
periods).
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NINE MONTHS ENDED FEBRUARY 28, 2001 COMPARED
TO THE NINE MONTHS ENDED FEBRUARY 29, 2000
Revenues for the nine months ended February 28, 2001 were $55.0 million as
compared to $48.3 million for the corresponding period of the preceding year, an
increase of 14%. Operating margins declined to 40% in the 2001 period compared
to 43% in the nine month period ended in 2000. Net income for the nine months of
2001 was $1.7 million ($.21 per share) compared to $753 thousand ($.09 per
share) in the 2000 period, an increase of 134%.
The growth in revenues is attributable to increased demand in the Services
segment, which was offset by declining revenues in the Climax business. For the
nine-month period, services segment revenues were $48.3 million, or $7.8 million
higher (19%) than the $40.5 million in same period of 2000. For the nine months,
revenues from the newest service lines (inspection, field-machining, and
technical bolting) were $10.8 million or 34% higher than the previous year.
Revenues from the more established service lines were 16% higher than the same
period of 2000 ($37.5 million compared to $32.4 million).
Overall operating margins for the nine month period in 2001 declined from
2000 percentages for the reasons described in the current and prior quarter's
analysis--new service lines earned lower operating margins than the more mature
services, operating cost increases in the third quarter, and, for the reasons
discussed below, Climax margins were substantially less than 2000.
Notwithstanding the reduced margins, the Services segment achieved
significant operating leverage on the 19% increase in revenues for the nine
months ended February 28, 2001. Operating profit was $6.5 million for the 2001
period compared to $5.0 million in the 2000 period--an increase of 31%.
The Climax business has experienced two consecutive quarters of sluggish
performance in the first half of the current year, followed by substantially
improved results in the third quarter, as discussed above. For the nine months
ended February 28 2001, revenues were $6.7 million, or $1 million less than the
$7.7 million achieved in the same period of 2000. The 13% reduction in revenues,
coupled with higher product costs, resulted in a decline in operating margins
from approximately 45% in the 2000 period to 41% in the 2001 period. The
combination of falling revenues and margins resulted in an operating loss of
$274 thousand in the 2001 period compared to a profit of $350 thousand in the
2000 period. As discussed above, there was a significant turnaround in operating
results in the third quarter and management is cautiously optimistic about the
near term outlook for this business segment.
In the second quarter, of the current year, the Company realized a gain on
the sale of real estate of $440 thousand that was unrelated to either of its
operating segments. The gain is included in "other income, net" in the
consolidated condensed statement of operations. Also included in that line item
in the 2001 period is the $82 thousand expense (discussed in the three month
analysis) associated with the liquidation of the Company's UK subsidiary.
The nine month provision for income taxes of $773 thousand in the 2001
period and $494 thousand in the 2000 period reflects the third quarter
recognition of tax benefits discussed in the three month analysis.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 2001, the Company's liquid working capital (cash and
accounts receivable, less current liabilities) totaled $7.2 million, an increase
of approximately $1.0 million since May 31, 2000. The Company utilizes excess
operating funds to automatically reduce the amount outstanding under the
revolving credit facility. At February 28, 2001, the outstanding balance under
the revolving credit facility was $7.0 million and approximately $4.8 million
was available to borrow under the facility.
As of April 4, 2001, the Company has re-acquired 448,420 thousand shares
of its common stock for a total consideration of approximately $1.3 million.
Financing of the stock-buy back has come from operating cash flows and the
revolving credit facility. On April 4, 2001, the Company announced its intention
to make a cash
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tender offer for up to 1.2 million additional shares at $3.00 per share. The
tender is expected to commence near the end of April 2001 and will be financed
under the existing credit facility.
In the opinion of management, cash flow from operations, cash balances and
available borrowings will be sufficient for the foreseeable future to finance
anticipated working capital requirements, capital expenditures, debt service
requirements, and to finance the proposed cash tender offer to re-acquire
shares.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Any forward-looking information contained herein is being provided in
accordance with the provisions of the Private Securities Litigation Reform Act.
Such information is subject to certain assumptions and beliefs based on current
information known to the Company and is subject to factors that could result in
actual results differing materially from those anticipated in any
forward-looking statements contained herein. Such factors include domestic and
international economic activity, interest rates, market conditions for the
Company's customers, regulatory changes and legal proceedings, and the Company's
successful implementation of its internal operating plans. Accordingly, there
can be no assurance that any forward-looking statements contained herein will
occur or those objectives will be achieved.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company holds certain floating-rate obligations. The exposure of these
obligations to increases in short-term interest rates is limited by interest
rate swap agreements entered into by the Company. There were no material
quantitative or qualitative changes during the first nine months of fiscal 2001
in the Company's market risk sensitive instruments.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
A. ANNOUNCEMENT OF PROPOSED CASH TENDER OFFER
On April 4, 2001, the Company announced that its Board of Directors has
proposed a cash tender offer to purchase up to 1.2 million shares of the
Company's common stock at a price of $3.00 per share. Commencement of the tender
offer is expected to commence in early May 2001 after completion of all
regulatory filings and preparation of required information statements. The
Company had previously announced a stock repurchase program of up to 10% of its
outstanding stock. Pursuant to that program, which has now been suspended as a
result of the proposed tender offer, the Company reacquired 448,420 shares on
the open market
B. DISCUSSIONS WITH SEC STAFF REGARDING TIMING OF EXPENSE RECOGNITION IN
FY 1999.
The Company previously disclosed in the original filing of Form 10-Q for
the period ended February 28, 2001, that it was involved in discussions with the
staff of the SEC Division of Corporate Finance about the appropriate timing of
expense recognition associated with post employment payments to former officers.
As described in Note 9, the Company has now determined that the appropriate
accounting should have been to recognize the substantial portion of the expense
in FY 1990 through 1995, as opposed to FY 1996 through FY 1999 when most of the
expense was recorded. Accordingly, the Company has restated its prior financial
statements and has amended its annual report on Form 10-K for the year ended
May 31, 2000.
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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: May 8, 2001
/s/ TED W. OWEN
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Ted W. Owen, Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
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