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 NOVEMBER 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
--------------------- ----------------------------
Commission file number 0-9950
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TEAM, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 74-1765729
- ------------------------------------------ -----------------------------------
(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
---------------
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 January 11, 1999, there were 7,573,352 shares of the Registrant's common
stock outstanding.
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TEAM, INC.
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -- 1
November 30, 1998 (Unaudited) and May 31, 1998
Consolidated Condensed Statements of Operations (Unaudited) -- 2
Three Months Ended
November 30, 1998 and 1997
Six Months Ended
November 30, 1998 and 1997
Consolidated Condensed Statements of Cash Flows (Unaudited)-- 3
Six Months Ended
November 30, 1998 and 1997
Notes to (Unaudited) Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis 7
of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
NOVEMBER 30, MAY 31,
ASSETS 1998 1998
------------- -------------
Current Assets:
Cash and cash equivalents $ 1,030,000 $ 1,355,000
Accounts receivable, net of allowance for doubtful
accounts of $237,000 and $247,000 10,062,000 9,564,000
Materials and supplies 8,672,000 6,801,000
Prepaid expenses and other current assets 908,000 862,000
------------- -------------
Total Current Assets 20,672,000 18,582,000
Property, Plant and Equipment:
Land and buildings 9,808,000 6,735,000
Machinery and equipment 15,528,000 11,746,000
------------- -------------
25,336,000 18,481,000
Less accumulated depreciation and amortization 12,590,000 11,833,000
------------- -------------
12,746,000 6,648,000
Goodwill 3,580,000 0
Other Assets 1,596,000 1,850,000
------------- -------------
Total Assets $ 38,594,000 $ 27,080,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 425,000 $ 286,000
Accounts payable 1,779,000 1,416,000
Other accrued liabilities 4,438,000 3,483,000
Current income taxes payable 190,000 348,000
------------- -------------
Total Current Liabilities 6,832,000 5,533,000
Long-term Debt and Other Obligations 11,590,000 5,966,000
Stockholders' Equity:
Preferred stock, cumulative, par value $100 per share,
500,000 shares authorized, none issued 0 0
Common stock, par value $.30 per share, 30,000,000 shares
authorized, 7,550,052 and 6,093,442 shares issued at
November 30, 1998 and May 31, 1998, respectively 2,265,000 1,828,000
Additional paid-in capital 30,852,000 27,098,000
Accumulated deficit (12,848,000) (13,248,000)
Treasury stock at cost, 9,700 shares (97,000) (97,000)
------------- -------------
Total Stockholders' Equity 20,172,000 15,581,000
------------- -------------
Total Liabilities and Stockholders' Equity $ 38,594,000 $ 27,080,000
============= =============
See notes to unaudited consolidated condensed financial statements.
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TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
Revenues $ 13,892,000 $ 11,717,000 $ 25,260,000 $ 21,946,000
Operating expenses 8,142,000 6,587,000 14,634,000 12,639,000
------------- ------------- ------------- -------------
Gross Margin 5,750,000 5,130,000 10,626,000 9,307,000
Selling, general and administrative expenses 5,302,000 4,215,000 9,543,000 7,998,000
Interest 210,000 104,000 305,000 235,000
------------- ------------- ------------- -------------
Income before income taxes 238,000 811,000 778,000 1,074,000
Provision for income taxes 131,000 283,000 379,000 439,000
------------- ------------- ------------- -------------
Net income $ 107,000 $ 528,000 $ 399,000 $ 635,000
============= ============= ============= =============
Net income per common share:
Basic $ 0.01 $ 0.09 $ 0.05 $ 0.11
============= ============= ============= =============
Diluted $ 0.01 $ 0.09 $ 0.05 $ 0.11
============= ============= ============= =============
Weighted average number of shares outstanding:
Basic 7,509,000 5,972,000 7,350,000 5,833,000
============= ============= ============= =============
Diluted 7,680,000 6,178,000 7,598,000 5,996,000
============= ============= ============= =============
See notes to unaudited consolidated condensed financial statements.
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TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
NOVEMBER 30,
--------------------------------
1998 1997
-------------- --------------
Cash Flows from Operating Activities:
Net income $ 399,000 $ 635,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,040,000 721,000
Gain on sale of assets (14,000) 0
Non-current deferred income taxes 0 349,000
Change in assets and liabilities, net of effects from purchase
of Climax Portable Machine Tools, Inc.:
(Increase) decrease:
Accounts receivable 466,000 (1,780,000)
Materials and supplies 253,000 (7,000)
Prepaid expenses and other current assets 51,000 (78,000)
Increase (decrease):
Accounts payable 172,000 357,000
Other accrued liabilities 166,000 22,000
Income taxes payable (158,000) (75,000)
-------------- --------------
Net cash provided by operating activities 2,375,000 144,000
Cash Flows From Investing Activities:
Capital expenditures (1,790,000) (541,000)
Cash received for disposal of property and equipment 74,000 5,000
Increase in other assets (374,000) (122,000)
Acquisition of Climax, net of cash and equivalents acquired (6,746,000) 0
Payments of Climax notes payable at acquisition date (2,893,000) 0
-------------- --------------
Net cash used in investing activities (11,729,000) (658,000)
Cash Flows From Financing Activities:
Payments under debt agreements and capital lease obligations (5,070,000) (2,327,000)
Proceeds from issuance of long-term debt 10,708,000 0
Issuance of common stock 3,391,000 2,101,000
-------------- --------------
Net cash provided by (used in) financing activities 9,029,000 (226,000)
-------------- --------------
Net increase (decrease) in cash and cash equivalents (325,000) (740,000)
Cash and cash equivalents at beginning of year 1,355,000 1,672,000
-------------- --------------
Cash and cash equivalents at end of period $ 1,030,000 $ 932,000
============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 235,000 $ 268,000
============== ==============
Income taxes paid $ 731,000 $ 167,000
============== ==============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In connection with the acquisition of Climax Portable Machine Tools, Inc., the
Company issued 200,000 shares of its common stock with an assigned value of
$4.00 per share. During the six months ended November 30, 1998, the Company
received a $35,000 note receivable (in addition to $12,000 cash) in
connection with the sale of land
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 consolidated condensed balance sheet at May 31, 1998 is
derived from the May 31, 1998 audited consolidated financial statements.
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,
1998.
2. Dividends
No dividends were paid during the first six months of fiscal 1999
or 1998. 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.
3. Acquisition
Effective August 31, 1998 (the "Effective Date"), the Company
acquired all of the outstanding capital stock of Climax Portable Machine
Tools, Inc., an Oregon corporation ("Climax"), in exchange for cash in
the amount of $6.4 million and 200,000 newly-issued shares of the
Company's common stock, $0.30 par value per share (the "Common Stock").
Additionally, at the acquisition date, the Company refinanced the
majority of Climax's notes payable in the amount of $2.9 million.
Pursuant to the purchase agreement and based on the approximate market
value of the Common Stock, a value of $4.00 per share was assigned to the
Common Stock issued to the former shareholders of Climax. The Company
also entered into employment agreements with three of the former
shareholders, pursuant to which such persons were granted options to
purchase up to an aggregate of 50,000 shares of Common Stock at an
exercise price of $4.125 per share.
The acquisition was accounted for using the purchase method of
accounting, and accordingly, the consolidated financial statements
subsequent to the Effective Date reflect the purchase price, including
transaction costs. As the acquisition was effective August 31, 1998, the
consolidated results of operations for the Company for the three months
ended November 30, 1998 include the results for Climax for the period
from September 1, 1998 to November 30, 1998. The purchase price was
allocated to the assets and liabilities of Climax based on their
estimated fair values. Based on preliminary purchase accounting, the
goodwill associated with the Climax acquisition approximated $3.6
million, which is being amortized on a straight-line basis over forty
years.
In order to finance the acquisition of the Climax shares, future
acquisitions, and operations the Company closed a credit facility with
NationsBank, N.A. of Houston on August 26, 1998 in the amount of
$24,000,000. See Note 5.
Climax designs and manufactures portable, metal cutting machine
tools for on-site maintenance and repair purposes.
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The unaudited pro forma consolidated results of operations of the
Company are shown below as if the acquisition had occurred at the
beginning of the fiscal periods indicated. These results are not
necessarily indicative of the results which would actually have occurred
if the purchase had taken place at the beginning of the periods, nor are
they necessarily indicative of future results.
Six Months Ended
November 30,
-------------------------------
1998 1997
-------------- --------------
Net sales $ 27,591,000 $ 27,543,000
Net income $ 397,000 $ 719,000
Earnings per share:
Basic $ 0.05 $ 0.12
Diluted $ 0.05 $ 0.12
4. Long-Term Debt and Other Obligations
Long-term debt and other obligations consist of:
November 30, May 31,
1998 1998
---------------------------
Revolving credit $ 3,520,000 $ 2,500,000
Term notes 6,369,000 1,693,000
Capital lease obligations 284,000 340,000
Compensation agreements 1,343,000 1,418,000
Other 499,000 301,000
------------ ------------
12,015,000 6,252,000
Less current portion 425,000 286,000
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Total $ 11,590,000 $ 5,966,000
============ ============
Effective August 26, 1998, the Company entered into a new credit
facility with a new primary lender in the amount of $24,000,000. This new
facility provides for (i) a $12,500,000 revolving loan, (ii) $9,500,000
in term loans for business acquisitions and (iii) a $2,000,000 mortgage
loan to refinance existing real estate indebtedness. Amounts borrowed
under the revolving credit loan are due August 28, 2001. Amounts borrowed
against the term loans are due August 8, 2003. Amounts outstanding under
this facility bear interest at a marginal rate over the LIBOR rate or
prime rate, depending upon the amount of funded debt to cash flow. The
effective rate on outstanding borrowings under the new agreement is
approximately 7%. In October 1998, the Company finalized the mortgage loan
and borrowed $1.8 million to refinance the existing real estate.
Additionally, in October 1998, the Company entered into an interest rate
swap transaction on the $4.5 million term loan, exchanging a floating
LIBOR rate of 5.3% at the time of the swap for a fixed LIBOR rate of 5.19%
for a period of three years. In December 1998, the Company executed
interest rate swap transactions for two years with respect to the $1.8
million mortgage loan and for $2 million of amounts outstanding under the
revolver. At the time of the December swaps, the floating LIBOR was 5.25%.
The fixed swap rates received in exchange are at 5.13%. At November 30,
1998, $3,520,000 in revolving loans and $6,369,000 in term loans
(including the mortgage loan) were outstanding under the facility. A
previously existing $10,000,000 revolving credit agreement that was due
December 31, 1999, and bore interest at a rate not to exceed the bank's
prime rate plus 0.5 percent, was terminated.
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Loans under the Company's bank credit facility are secured by
substantially all of the assets of the Company. The terms of the
agreement require the maintenance of certain financial ratios and limit
investments, liens, leases and indebtedness, among other things. At
November 30, 1998, the Company was in compliance with all credit facility
covenants.
5. Earnings Per Share
The following table is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share computations:
Three months ended November 30, 1998 Three months ended November 30, 1997
------------------------------------- ---------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ------------ ------------- -----------
Basic EPS:
Net income $ 107,000 7,509,000 $ 0.01 $ 528,000 5,972,000 $ 0.09
Effect of Dilutive Securities:
Options -- 171,000 -- 206,000
----------- --------- ----------- ---------
Diluted EPS:
Net income $ 107,000 7,680,000 $ 0.01 $ 528,000 6,178,000 $ 0.09
=========== ========= =========== =========
Six months ended November 30, 1998 Six months ended November 30, 1997
------------------------------------- ---------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ------------ ------------- -----------
Basic EPS:
Net income $ 399,000 7,350,000 $ 0.05 $ 635,000 5,833,000 $ 0.11
Effect of Dilutive Securities:
Options -- 248,000 -- 163,000
----------- --------- ----------- ---------
Diluted EPS:
Net income $ 399,000 7,598,000 $ 0.05 $ 635,000 5,996,000 $ 0.11
=========== ========= =========== =========
6. Subsequent Events
On January 8, 1999, the Company reduced headquarters support staff
by approximately 20% (19 individuals). A one-time charge of $425,000 will
be made in the third quarter ending February 28, 1999, to provide for
severance and related costs associated with the staffing reduction.
Additionally, a one-time charge of $816,000 will be made in the third
quarter to fully provide for the future payments due to two former
officers under deferred compensation agreements that extend beyond the
period in which services are expected to be rendered. Payments pursuant to
that charge will be made through 2004.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 1998 COMPARED
TO THREE MONTHS ENDED NOVEMBER 30, 1997
Revenues for the quarter ended November 30, 1998 were $13.9 million compared to
$11.7 million for the corresponding period of the preceding year. The $2.2
million increase is primarily attributable to the inclusion of Climax Portable
Machine Tools, Inc in Team's operating results for the 1998 period. Climax did
not contribute to pre-tax income during the quarter, however, since profits on
$300 thousand of inter-company sales from Climax to Team were eliminated in
consolidation and because of less than expected third-party sales in the first
three months since acquisition.
Income before income taxes was $238 thousand for the 1998 quarter, a decrease of
$573 thousand from the $811 thousand of pre-tax income reported in the same
quarter of 1997. The decline in profitability for the quarter was directly
attributable to increased operating and general and administrative expenses when
compared to the same period of 1997, as well as $170 thousand of cost associated
with international activities primarily related to timing and startup costs.
Additionally, there was an increase in interest expense of $106 thousand
resulting from the additional debt incurred in connection with the Climax
acquisition. The Company has taken steps to reduce future costs through a
staffing reduction implemented in January 1999 as described in Note 6 to the
financial statements included in Item 1.
SIX MONTHS ENDED NOVEMBER 30, 1998 COMPARED
TO SIX MONTHS ENDED NOVEMBER 30, 1997
For the six months ended November 30, 1998, income before income taxes was $778
thousand or $296 less than the same period of 1997. The decline in pre tax
income is a result of the factors occurring in the second quarter, as discussed
above, which were somewhat mitigated by the strength of the operating results
of the first three months of the current fiscal year, when compared to the same
period of 1997. A summary of the six-month comparison is as follows:
Revenues--1998 revenues of $25.3 million were 15% greater than the $21.9
million reported in 1997. The increase is attributable to the Climax revenues
of $2.2 million included in the second quarter of 1998 as well as an increase
of first quarter industrial service revenues of $1.14 million over the same
period of 1997.
Gross Margins--For the six months ended November 30, 1998, the gross operating
margin was 42.1% of sales, which is consistent with the 42.4% achieved in the
same period of 1997. However, second quarter 1998 margins for Team's industrial
service group were 41.3% compared to 42.9% in the first quarter, reflecting the
reduced second quarter profitability discussed above. Operating margins from
Climax are consistent with Team's year to date results.
Selling, General and Administrative Expenses--For the six months ended November
30, 1998, Selling, General and Administrative expenses were 37.8% of revenues,
compared to 36.4% for the same period of 1997. This ratio is impacted by a
disproportionately high administrative cost (44% of revenues) of Climax in
the second quarter as a result of lower than expected sales.
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1998, the Company's working capital totaled $13.8 million, an
increase of $800 thousand since May 31, 1998. The Company has been able to
finance its working capital requirements primarily through its internally
generated cash flow and through borrowings under a revolving credit facility.
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As of November 30, 1998, cash and cash equivalents totaled $1.0 million, a
decrease of $325 thousand since May 31, 1998. This cash decrease is primarily
reflective of a change in cash management features associated with the
Company's new credit facility, whereby excess operating funds are automatically
used to reduce the amount outstanding under the revolving facility. See
"Consolidated Statements of Cash Flows" for additional detail.
Effective August 31, 1998, the company acquired all of the outstanding
capital stock of Climax Portable Machine Tools, Inc., an Oregon corporation
("Climax"), in exchange for cash in the amount of $6.4 million and 200,000
newly-issued shares of the Company's common stock, $0.30 par value per share
(the "Common Stock"). Additionally, at the acquisition date, the Company
refinanced the majority of Climax's notes payable in the amount of $2.9
million. Pursuant to the purchase agreement and based on the approximate market
value of the Common Stock, a value of $4.00 per share was assigned to the
Common Stock issued to the former shareholders of Climax.
In order to finance the acquisition of the Climax shares, the Company
closed a new credit facility with NationsBank, N.A on August 26, 1998 in the
amount of $24,000,000. The new facility provides for (i) a $12,500,000
revolving loan, (ii) $9,500,000 in term loans for business acquisitions and
(iii) a $2,000,000 mortgage loan to refinance existing real estate
indebtedness. Amounts borrowed under the revolving credit loan are due August
28, 2001. Amounts borrowed against the term loans are due August 8, 2003.
Amounts outstanding under the facility bear interest at a marginal rate over the
LIBOR rate or prime rate, depending upon the amount of funded debt to cash
flow. The effective rate on outstanding borrowings under the new agreement is
approximately 7%. In October 1998 the Company finalized the mortgage loan
and borrowed $1.8 million to refinance existing real estate. Additionally in
October 1998, the Company entered into an interest rate swap transaction on the
$4.5 million term loan, exchanging a floating LIBOR rate of 5.3% at the time of
the swap for a fixed LIBOR rate of 5.19% for a period of three years. In
December 1998, the Company executed interest rate swap transactions for two
years with respect to the $1.8 million mortgage loan and for $2 million of
amounts outstanding under the revolver. At the time of the December swaps, the
floating LIBOR was 5.25%. The fixed swap rates received in exchange are at
5.13%. At November 30, 1998, $3,520,000 in revolving loans and $6,369,000 in
term and mortgage loans were outstanding under the facility. At November 30,
approximately $5.5 million was available under the revolving credit facility.
In June 1998, the Company completed the sale of 1,200,000 shares of Team's
common stock for $2.75 per share to Houston Post Oak Partners ("Houston
Partners") in a private placement transaction. Houston Partners then owned
approximately 17% of the Company's outstanding common shares on a fully diluted
basis. Proceeds from the sale were used to reduce the Company's long-term debt.
YEAR 2000 COMPLIANCE
The Company, like other businesses, is facing the Year 2000 issue. Many
computer systems and equipment with embedded chips or processors use only two
digits to represent the calendar year. This could result in computational or
operational errors as dates are compared across the century boundary causing
possible disruptions in business operations. The year 2000 issue can arise at
any point in the Company's supply, manufacturing, processing, distribution, and
financial chains.
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State of Readiness--The Company began addressing the Year 2000 issue in 1997,
with an initial assessment of Year 2000 readiness. Based on the assessment, a
Year 2000 Plan was developed. By January 1998, a Year 2000 Plan had been
completed that included the following components:
1) Assessment of all systems for Year 2000 compliance,
2) Development of a schedule for replacement of non-compliant systems,
3) Obtaining manufacturers certification of Year 2000 compliance,
4) Developing a list of significant vendors/suppliers for surveying their
Year 2000 readiness efforts.
The Year 2000 issue is being addressed within the Company by its Year 2000
compliance team and progress is reported periodically to management. The
Company has committed resources to conduct risk assessment and to take
corrective action, where required, with a target date of becoming Year 2000
ready for the most critical systems by the third quarter of calendar year
1999.
The Company is currently engaged in a comprehensive project to upgrade its
information, technology, and manufacturing facilities computer hardware and
software to programs that will address the year 2000 problem. In connection
with this project, new hardware and packaged software have been recently
purchased from large vendors who have represented that the systems are already
Year 2000 compliant.
With respect to the plant systems, including automation and embedded chips
used in manufacturing operations, the manufacturing plant is in the process of
completing their inventory and assessment reviews. The Company is relying on
vendor certification and testing. Assessment and testing, with corrective
action as required, is expected to be completed by the third quarter of
calendar year 1999.
With respect to the external parties, including suppliers and customers,
the Company's Year 2000 compliance team is in the process of surveying the Year
2000 readiness efforts of critical external parties. Risk assessment is
expected to be completed by June 1999 and monitoring risk in this area will
continue into the third quarter of calendar year 1999, as many external parties
will not have completed their Year 2000 readiness efforts.
Cost--The total estimated cost for the Company's Year 2000 readiness efforts is
$835,000 which consist primarily of a new management information system that
will be implemented in February 1999. As of November 30, 1998 approximately
$460,000 of the $835,000 has been incurred.
Risks--The Company relies on third party suppliers for raw materials, water,
utilities, transportation and other key services. Interruption of supplier
operations due to Year 2000 issues could affect the Company's operations. While
the project team will evaluate the status of its major suppliers' Year 2000
readiness efforts and develop contingency plans to manage the risk, it can not
eliminate the potential for disruption due to third party failures.
The Company is also dependent upon its customers for sales and cash flow.
Year 2000 interruptions in the operations of its major customers could result
in reduced sales, increased inventory or receivable levels and cash flow
reductions. The Company is in the process of surveying its major customers'
Year 2000 readiness efforts to assess risk and develop plans with an intent to
minimize the impact on its operations.
The Company believes that it is taking all reasonable steps to ensure Year
2000 readiness. It's ability to meet the projected goals, including the costs
of addressing the Year 2000 issue and the dates upon which compliance will be
attained, depends on the Year 2000 readiness of its key suppliers and
customers, the completion of its final remediation and testing efforts and the
successful development and implementation of contingency plans. The Company
currently has not yet developed any contingency plans. These and other
unanticipated Year 2000 issues could have a material adverse effect on the
results of operations or financial condition.
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DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Certain 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 the
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 the forward-looking statements
contained herein will occur or that objectives will be achieved.
PART II -OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of Shareholders of the Company was held on October 16,
1998. At the meeting, Messrs. George W. Harrison and Sidney B. Williams were
reelected to serve as Class III Directors for a term of three years. Louis A.
Waters was elected to serve as a Class I Director for a term of one year. The
votes with respect to the election of each such director were as follows:
NAME FOR WITHHELD
- -------------------------------------------------------------------
Mr. George W. Harrison 5,793,623 522,260
- -------------------------------------------------------------------
Mr. Sidney B. Williams 5,730,781 585,102
- -------------------------------------------------------------------
Mr. Louis A. Waters 5,886,013 429,870
- -------------------------------------------------------------------
The three directors continuing in office until the expiration of their
respective terms are Messrs. William A. Ryan, Jack M. Johnson, Jr. and E.
Theodore Laborde.
The shareholders approved a proposed amendment to the articles of incorporation
to increase the number of authorized shares of Common Stock from 10,000,000 to
30,000,000 by the following vote:
FOR AGAINST ABSTAIN
- -------------------------------------------------------------------
5,650,271 644,995 20,617
- -------------------------------------------------------------------
The shareholders considered and approved the adoption of the 1998 Incentive
Stock Option Plan by the following vote:
FOR AGAINST ABSTAIN
- -------------------------------------------------------------------
3,856,270 394,144 61,095
- -------------------------------------------------------------------
The shareholders also approved the appointment of Deloitte & Touche as
independent certified public accountants to audit the Company's accounts for
the fiscal year ending May 31, 1999 by the following vote:
FOR AGAINST ABSTAIN
- -------------------------------------------------------------------
6,240,083 31,932 43,868
- -------------------------------------------------------------------
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
Exhibit
Number Description
- ------- -----------
3.1 Second Restated Articles of Incorporation of the Company, as
amended on October 23, 1998.
10.1 Employment Agreement by and between Philip J. Hawk and
Team, Inc. dated November 2, 1998.
10.2 Incentive Stock Option Award Agreement by and between
Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.3 Standard Restricted Stock Option Award Agreement by and
between Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.4 Price Vested Restricted Stock Option Award Agreement by and
between Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.5 Stock Purchase Agreement by and between Philip J. Hawk and
Team, Inc. dated November 2, 1998.
10.6 Employment Termination and Consulting Agreement by and between
Team, Inc. and William A. Ryan dated November 1, 1998.
27 Financial Data Schedule
(b) Reports on Form 8-K
A current report on Form 8-K dated August 26, 1998, as amended by a Form
8-K/A dated September 9, 1998, was filed during the quarter ended November 30,
1998, reporting under Items 2 and 7 thereof, the acquisition of all the
outstanding capital stock of Climax Portable Machine Tools, Inc. Item 7 of Form
8-K/A included the following financial statements:
(i) Consolidated Financial Statements of Climax Portable Machine Tools, Inc.
Independent Auditors' Report
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1997
and 1996
Consolidated Statements of Operations for the Years Ended December 31,
1997 and 1996
Consolidated Statements of Cash Flow for the Years Ended December 31,
1997 and 1996
Notes to Financial Statements
Interim Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet as of June 30, 1998
Consolidated Statement of Shareholders' Equity for the Six-Month
Period Ended June 30, 1998
Consolidated Statements of Operations for the Six-Month Periods
Ended June 30, 1998 and 1997
Consolidated Statements of Cash Flows for the Six-Month Periods Ended
June 30, 1998 and 1997
Notes to Financial Statements
(ii) Pro Forma Consolidated Financial Information of Team, Inc. (Unaudited)
Pro Forma Consolidated Financial Statements
Pro Forma Consolidated Statement of Operations - Year Ended May 31,
1998
Pro Forma Consolidated Statement of Operations - Three Months Ended
August 31, 1998
Notes to Pro Forma Consolidated Financial Statements
-11-
14
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: January 14, 1999
/s/PHILIP J. HAWK
---------------------------------------------
Philip J. Hawk
Chief Executive Officer and Director
/s/TED W. OWEN
---------------------------------------------
Ted W. Owen, Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
-12-
15
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1 Second Restated Articles of Incorporation of the Company, as
amended on October 23, 1998.
10.1 Employment Agreement by and between Philip J. Hawk and
Team, Inc. dated November 2, 1998.
10.2 Incentive Stock Option Award Agreement by and between
Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.3 Standard Restricted Stock Option Award Agreement by and
between Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.4 Price Vested Restricted Stock Option Award Agreement by and
between Philip J. Hawk and Team, Inc. dated November 2, 1998.
10.5 Stock Purchase Agreement by and between Philip J. Hawk and
Team, Inc. dated November 2, 1998.
10.6 Employment Termination and Consulting Agreement by and between
Team, Inc. and William A. Ryan dated November 1, 1998.
27 Financial Data Schedule