EX-99.1 2 a8-kexhibit991q3x2016earni.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1

NEWS
teama04.jpg


    
TEAM, INC.
For immediate release
13131 Dairy Ashford, Suite 600
Contact: Greg L. Boane (281) 388-5541
Sugar Land, TX 77478
 

TEAM, INC. REPORTS THIRD QUARTER 2016 RESULTS

SUGAR LAND, TX, November 1, 2016 - Team, Inc. (NYSE: TISI) (“Team” or the “Company”) today released financial results for the third quarter ended September 30, 2016. Team reported a net loss of $4.2 million ($0.14 loss per diluted share) for the current year quarter versus net income of $2.5 million ($0.12 earnings per diluted share) for the prior year quarter. Excluding certain non-routine items, adjusted net loss was $0.4 million ($0.01 adjusted loss per diluted share) for the current quarter versus adjusted net income of $5.1 million ($0.24 adjusted earnings per diluted share) for the prior year quarter. Revenues for the current quarter increased by 19% to $289.6 million compared to revenues of $243.6 million for the prior year quarter due primarily to the Furmanite acquisition. Adjusted net income (loss) excludes certain non-routine items that are not indicative of Team’s ongoing operating activities of $3.8 million (net of tax), or $0.13 per diluted share, for the current year quarter and $2.6 million (net of tax), or $0.12 per diluted share, for the prior year quarter, as detailed in the accompanying schedule.

Year-to-date revenues were $876.9 million, a 31% increase compared to revenues of $671.4 million for the prior year period. Net loss was $3.3 million ($0.12 loss per diluted share) compared to net income of $19.8 million ($0.92 earnings per diluted share) for the prior year. Year-to-date adjusted net income was $10.4 million ($0.38 adjusted earnings per diluted share), versus adjusted net income of $27.3 million ($1.27 adjusted earnings per diluted share) for the prior year. Adjusted net income excludes non-routine items of $13.7 million (net of tax), or $0.50 per diluted share, for the current year period and $7.5 million (net of tax), or $0.35 per diluted share in the prior year period, as detailed in the accompanying schedule.

“We continued to face market headwinds during the third quarter of 2016, which includes two of our seasonally weakest months of the year—July and August. Those two months were unusually soft this year, as we continued to experience headwinds from project deferrals, scope reductions and maintenance deferrals, coupled with the adverse impact on business of severe flooding in Louisiana. However, activity levels picked up sharply in the month of September. In fact, September was our strongest month of the year,” said Ted Owen, Team’s President and CEO. “Our strong finish to the quarter, and indeed our activity levels through the first month of the fourth quarter, gives us encouragement that we are seeing the first signs of more normalized market activity.”

“As importantly, with the increased activity levels in September, we have begun to see incremental improvements in profitability as our business integration initiatives gain traction. We are on track to complete our major ERP implementation in North America by the end of 2017 and we continue to make excellent progress toward the achievement of targeted merger-related synergies pertaining to the Qualspec and Furmanite acquisitions,” said Mr. Owen. “I couldn’t be more proud of the exceptional customer-focused company we are building across our three business units—TeamQualspec, TeamFurmanite, and Quest

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Integrity Group. We remain confident in our future, our market positioning and our goal to build the world’s premier industrial services company.”

GAAP Earnings and Non-GAAP Financial Measures

Certain non-routine items that management believes are not indicative of Team’s ongoing operating activities have been excluded from net income (loss) reported in accordance with generally accepted accounting principles in the United States (“GAAP”) when arriving at adjusted net income (loss), a non-GAAP financial measure. In the current quarter, the most significant non-routine items pertained to legal fees and professional fees for acquisition integration ($3.5 million) and non-capitalized ERP implementation costs ($2.3 million).

In the year-to-date period, the most significant non-routine items pertained to acquisition costs, which were primarily associated with the Furmanite transaction ($7.4 million), legal fees and professional fees for acquisition integration and changing the fiscal year end ($7.3 million), non-capitalized ERP implementation costs ($4.8 million) and the loss on the revaluation of contingent consideration ($2.2 million). Costs associated with the Furmanite transaction include $5.2 million incurred by the legacy Furmanite business primarily associated with change of control and severance payments.

A reconciliation of net income (loss) reported in accordance with GAAP to adjusted net income (loss) is contained in the accompanying schedule.

Earnings Conference Call

In connection with this earnings release, Team will hold its quarterly conference call on Wednesday, November 2, 2016 at 8:00 a.m. Central Time (9:00 a.m. Eastern). The call will be broadcast over the Web and can be accessed on Team’s website, www.teaminc.com. Individuals wishing to participate in the conference call by phone may call 888-699-2378 and use conference code 8256861 when prompted.

About Team, Inc.

Headquartered near Houston, Texas, Team Inc. is a leading provider of specialty industrial services, including inspection, mechanical services and engineering assessment, required in maintaining and installing high-temperature and high-pressure piping systems and vessels that are utilized extensively in the refining, petrochemical, power, pipeline and other heavy industries. Team offers these services across its 220 branch locations and more than 20 countries throughout the world. Team’s common stock is traded on the New York Stock Exchange under the ticker symbol “TISI”.

Non-GAAP Financial Measures

This press release presents information about the Company’s adjusted net income (loss) and adjusted net income (loss) per share, and the Company sometimes uses adjusted EBITDA, EBIT and adjusted EBIT, which are non-GAAP financial measures provided as supplemental to the results provided in accordance with GAAP. A reconciliation of each of the foregoing historical non-GAAP financial measures to the most directly comparable historical GAAP financial measure is provided below for each of the fiscal periods indicated.

Certain forward-looking information contained herein is being provided in accordance with the provisions of the Private Securities Litigation Reform Act of 1995.  We have made reasonable efforts to ensure that the information, assumptions and beliefs upon which this forward-looking information is based are current, reasonable and complete. Such forward-looking statements involve estimates, assumptions, judgments and uncertainties. There are known and unknown factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking information. Such known factors are detailed in

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




3

TEAM, INC. AND SUBSIDIARIES
SUMMARY OF OPERATING RESULTS
(in thousands, except per share data)
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Revenues
 
$
289,577

 
$
243,552

 
$
876,871

 
$
671,358

Operating expenses
 
212,871

 
173,931

 
635,490

 
472,216

Gross margin
 
76,706

 
69,621

 
241,381

 
199,142

 
 
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
80,749

 
62,242

 
236,612

 
162,030

Loss on revaluation of contingent consideration
 
—

 
522

 
2,184

 
522

Operating income (loss)
 
(4,043
)
 
6,857

 
2,585

 
36,590

 
 
 
 
 
 
 
 
 
Foreign currency (gain) loss
 
(98
)
 
606

 
(197
)
 
929

Loss on investment in Venezuela
 
—

 
—

 
—

 
1,177

Other expense (income), net
 
37

 
8

 
(2
)
 
7

Interest expense, net
 
3,211

 
2,397

 
9,554

 
3,538

Earnings (loss) from continuing operations before income taxes
 
(7,193
)
 
3,846

 
(6,770
)
 
30,939

 
 


 


 
 
 
 
Less: Provision (benefit) for income taxes
 
(2,656
)
 
1,299

 
(2,643
)
 
10,958

Income (loss) from continuing operations
 
(4,537
)
 
2,547

 
(4,127
)
 
19,981

 
 
 
 
 
 
 
 
 
Income from discontinued operations, net of income tax
 
316

 
—

 
828

 
—

Net income (loss)
 
(4,221
)
 
2,547

 
(3,299
)
 
19,981

Less: Income attributable to noncontrolling interest
 
—

 
—

 
—

 
213

Net income (loss) available to Team common shareholders
 
$
(4,221
)
 
$
2,547

 
$
(3,299
)
 
$
19,768

 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.15
)
 
$
0.13

 
$
(0.15
)
 
$
0.97

Discontinued operations
 
0.01

 
—

 
0.03

 
—

Net income (loss)
 
$
(0.14
)
 
$
0.13

 
$
(0.12
)
 
$
0.97

 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.15
)
 
$
0.12

 
$
(0.15
)
 
$
0.92

Discontinued operations
 
0.01

 
—

 
0.03

 
—

Net income (loss)
 
$
(0.14
)
 
$
0.12

 
$
(0.12
)
 
$
0.92

Weighted-average number of shares outstanding:
 
 
 
 
Basic
 
29,361

 
20,375

 
27,609

 
20,371

Diluted
 
29,361

 
21,445

 
27,609

 
21,430

 
 
 
 
 
 
 
 
 

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TEAM, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEET INFORMATION
SEPTEMBER 30, 2016 AND DECEMBER 31, 2015
(in thousands)
 
 
 
 
 
 
 
September 30,
 
December 31,
 
 
2016
 
2015
 
 
(unaudited)
 
 
 
 
 
 
 
Current assets
 
$
428,828

 
$
314,559

 
 
 
 
 
Property, plant and equipment, net
 
212,036

 
124,983

 
 
 
 
 
Other non-current assets
 
541,558

 
359,449

 
 
 
 
 
Total assets
 
$
1,182,422

 
$
798,991

 
 
 
 
 
Current liabilities
 
$
152,610

 
$
92,160

 
 
 
 
 
Long-term debt net of current maturities
 
368,831

 
351,383

 
 
 
 
 
Other non-current liabilities
 
112,930

 
17,302

 
 
 
 
 
Stockholders’ equity
 
548,051

 
338,146

 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
1,182,422

 
$
798,991



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TEAM, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED CASH FLOW INFORMATION
SEPTEMBER 30, 2016 AND SEPTEMBER 30, 2015
(in thousands)
 
 
 
Nine Months Ended
 
 
September 30,
 
 
2016
 
2015
 
 
(unaudited)
 
(unaudited)
 
 
 
 
 
Net income
 
$
(3,299
)
 
$
19,981

 
 
 
 
 
Depreciation, amortization and non-cash share-based compensation expense
 
42,104

 
24,578

 
 
 
 
 
Working capital changes
 
20,634

 
(24,337
)
 
 
 
 
 
Other items affecting operating cash flow
 
1,206

 
6,013

 
 
 
 
 
Net cash provided by operating activities
 
$
60,645

 
$
26,235

 
 
 
 
 
Capital expenditures
 
(35,865
)
 
(30,549
)
 
 
 
 
 
Cash used for business acquisitions, net
 
(48,382
)
 
(263,560
)
 
 
 
 
 
Proceeds from sale of assets
 
3,717

 
5,304

 
 
 
 
 
Other items affecting investing cash flow
 
5,666

 
(5,463
)
 
 
 
 
 
Net cash used in investing activities
 
$
(74,864
)
 
$
(294,268
)
 
 
 
 
 
Borrowings on debt, net
 
16,043

 
290,140

 
 
 
 
 
Deferred consideration payments
 
(694
)
 
(1,242
)
 
 
 
 
 
Contingent consideration payments
 
(1,816
)
 
—

 
 
 
 
 
Purchase of treasury stock
 
(7,593
)
 
(21,138
)
 
 
 
 
 
Purchase of noncontrolling interest
 
—

 
(5,934
)
 
 
 
 
 
Debt issuance costs
 
(759
)
 
(1,950
)
 
 
 
 
 
Cash associated with share-based payment arrangements, net
 
2,171

 
5,266

 
 
 
 
 
Net cash provided by financing activities
 
$
7,352

 
$
265,142

 
 
 
 
 
Effect of exchange rate changes
 
243

 
(2,989
)
 
 
 
 
 
Change in cash and cash equivalents
 
$
(6,624
)
 
$
(5,880
)
 
 
 
 
 

6

TEAM, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
(Unaudited)
The Company uses supplemental non-GAAP financial measures which are derived from the consolidated financial information including adjusted net income (loss); adjusted net income (loss) per share, earnings before interest and taxes (“EBIT”); adjusted EBIT; and adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) to supplement financial information presented on a GAAP basis. Adjusted net income (loss) and adjusted net income (loss) per share, each as defined by the Company, exclude the following items from net income (loss): acquisition costs associated with business combinations, non-routine legal costs, professional fees for acquired business integration and changing our fiscal year end, losses on the revaluation of contingent consideration, non-capitalized ERP implementation costs, losses on our investment in Venezuela, certain other non-routine items and the related income tax impacts. EBIT, as defined by the Company, excludes discontinued operations, income tax expense, interest charges and items of other (income) expense and therefore is equal to operating income reported in accordance with GAAP. Adjusted EBIT further excludes the following items: acquisition costs associated with business combinations, non-routine legal costs and professional fees for acquired business integration and changing our fiscal year end, losses on the revaluation of contingent consideration, non-capitalized ERP implementation costs and certain other non-routine items. Adjusted EBITDA further excludes from adjusted EBIT depreciation, amortization and non-cash share based compensation costs.
Management believes that excluding certain items from GAAP results allows management to better understand the consolidated financial performance from period to period and to better identify operating trends that may not otherwise be apparent. Moreover, the Company believes these non-GAAP financial measures will provide its stakeholders with useful information to help them evaluate operating performance. However, there are limitations to the use of the non-GAAP financial measures presented in this report. The Company’s non-GAAP financial measures may not be comparable to similarly titled measures of other companies who may calculate non-GAAP financial measures differently than Team does, limiting the usefulness of those measures for comparative purposes.

The non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity, prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis. Reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure are presented below. You are encouraged to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented.



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TEAM, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
 
 
 
 
 
 
 
Net income (loss):
 
 
 
 
 
 
 
 
Net income (loss) available to common shareholders
 
$
(4,221
)
 
$
2,547

 
$
(3,299
)
 
$
19,768

Non-routine acquisition costs
 
235

 
1,283

 
7,414

 
4,897

Non-routine legal, professional fees and other
 
3,510

 
866

 
7,327

 
2,210

Non-routine ERP costs
 
2,268

 
1,182

 
4,808

 
1,791

Non-routine loss on revaluation of contingent consideration
 
—

 
522

 
2,184

 
522

Non-routine fixed asset write-off
 
—

 
—

 
—

 
383

Non-routine loss on investment in Venezuela
 
—

 
—

 
—

 
1,177

Non-routine foreign currency loss
 
—

 
—

 
—

 
673

Tax impact of adjustments*
 
(2,225
)
 
(1,301
)
 
(8,031
)
 
(4,169
)
Adjusted net income (loss)
 
$
(433
)
 
$
5,099

 
$
10,403

 
$
27,252

 
 
 
 
 
 
 
 
 
Adjusted net income (loss) per common share:
 
 
 
 
 
 
 
 
Basic
 
$
(0.01
)
 
$
0.25

 
$
0.38

 
$
1.34

Diluted
 
$
(0.01
)
 
$
0.24

 
$
0.38

 
$
1.27

 
 
 
 
 
 
 
 
 
Adjusted EBITDA:
 
 
 
 
 
 
 
 
Operating income (loss) (“EBIT”)
 
$
(4,043
)
 
$
6,857

 
$
2,585

 
$
36,590

Non-routine acquisition costs
 
235

 
1,283

 
7,414

 
4,897

Non-routine legal, professional fees and other
 
3,510

 
866

 
7,327

 
2,210

Non-routine ERP costs
 
2,268

 
1,182

 
4,808

 
1,791

Non-routine loss on revaluation of contingent consideration
 
—

 
522

 
2,184

 
522

Non-routine fixed asset write-off
 
—

 
—

 
—

 
383

Adjusted EBIT
 
1,970

 
10,710

 
24,318

 
46,393

Depreciation and amortization
 
12,539

 
8,774

 
35,432

 
20,534

Non-cash share-based compensation costs
 
1,327

 
1,620

 
5,648

 
4,044

Adjusted EBITDA
 
$
15,836

 
$
21,104

 
$
65,398

 
$
70,971



*For the three and nine months ended September 30, 2016, the Company assumes a 37% tax rate in order to approximate our long-term effective tax rate.

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TEAM, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(in thousands)
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
Segment Data:
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
TeamQualspec
 
$
142,529

 
$
157,308

 
$
436,029

 
$
394,720

TeamFurmanite
 
131,787

 
69,596

 
392,062

 
220,051

Quest Integrity
 
15,261

 
16,648

 
48,780

 
56,587

 
 
$
289,577

 
$
243,552

 
$
876,871

 
$
671,358

 
 
 
 
 
 
 
 
 
Operating income (loss) (“EBIT”)
 
 
 
 
 
 
 
 
TeamQualspec
 
$
8,423

 
$
14,386

 
$
33,044

 
$
43,092

TeamFurmanite
 
5,983

 
3,249

 
25,004

 
17,141

Quest Integrity
 
399

 
724

 
2,863

 
8,729

Corporate and shared support services
 
(18,848
)
 
(11,502
)
 
(58,326
)
 
(32,372
)
 
 
$
(4,043
)
 
$
6,857

 
$
2,585

 
$
36,590

 
 
 
 
 
 
 
 
 
Adjusted EBIT
 
 
 
 
 
 
 
 
TeamQualspec
 
$
8,646

 
$
14,908

 
$
33,513

 
$
43,614

TeamFurmanite
 
6,605

 
3,249

 
27,883

 
17,524

Quest Integrity
 
992

 
1,590

 
4,279

 
10,939

Corporate and shared support services
 
(14,273
)
 
(9,037
)
 
(41,357
)
 
(25,684
)
 
 
$
1,970

 
$
10,710

 
$
24,318

 
$
46,393

Adjusted EBITDA
 
 
 
 
 
 
 
 
TeamQualspec
 
$
13,576

 
$
19,795

 
$
48,548

 
$
52,899

TeamFurmanite
 
12,310

 
5,386

 
42,932

 
23,573

Quest Integrity
 
2,366

 
3,052

 
8,219

 
15,282

Corporate and shared support services
 
(12,416
)
 
(7,129
)
 
(34,301
)
 
(20,783
)
 
 
$
15,836

 
$
21,104

 
$
65,398

 
$
70,971



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