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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER 1-8604
TEAM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 74-1765729
(STATE OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
1001 FANNIN STREET, SUITE 4656, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 659-3600
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.30 par value American Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of August 15, 1995, 5,159,842 shares of the registrant's common stock
were outstanding, and the aggregate market value of common stock held by
nonaffiliates of the registrant (based upon the closing sales price of common
stock on the American Stock Exchange, Inc. on such date) was approximately
$10,972,431.
DOCUMENTS INCORPORATED BY REFERENCE
Part III. Portions of the Definitive Proxy Statement for the 1995 Annual
Meeting of Shareholders of Team, Inc. to be held November 1, 1995.
FORM 10-K INDEX
PART I
PAGE
----
Item 1. Business .......................................................... 2
Item 2. Properties ........................................................ 9
Item 3. Legal Proceedings ................................................. 9
Item 4. Submission of Matters to a Vote of Security Holders ............... 10
PART II
Item 5. Market for Team's Common Equity and Related Stockholder
Matters ........................................................... 11
Item 6. Selected Financial Data ........................................... 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... 13
Item 8. Consolidated Financial Statements ................................. 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............................... 35
PART III
Item 10. Directors and Executive and Other Officers of Team ................ 35
Item 11. Executive Compensation ............................................ 35
Item 12. Security Ownership of Certain Beneficial Owners
and Management .................................................... 35
Item 13. Certain Relationships and Related Transactions .................... 35
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ... 35
1
P A R T I.
ITEM 1. BUSINESS
(a)GENERAL DEVELOPMENT OF BUSINESS
Team, Inc. ("Team" or the "Company"), incorporated in 1973, is a professional
full service provider of environmental engineering, consulting, monitoring and
repair services. Environmental engineering, consulting and monitoring services,
primarily in air quality, together with on-stream leak repair and related
industrial services for piping systems and process equipment, are provided by
subsidiaries of the Company through its Environmental Services business segment.
The Company's Military Housing projects' segment owns three completed Federal
Section 801 housing projects which are presently leased to the Departments of
the Army, Navy and Air Force pursuant to long-term lease agreements. The
Company's Environmental Services segment is the core of Team's operations.
The Company, through its subsidiaries, operates in 43 locations throughout the
United States and one location in England. Additionally, certain environmental
services are offered internationally by the Company through 13 licensees
operating in 15 countries.
The Company believes that the aging of industrial plants should result in
increasing demand by the Company's customers for its industrial and
environmental services. Additionally, the Company intends to expand its business
by marketing more of its services to existing customers, marketing its services
to new customers and expanding geographically, both domestically and
internationally. Team may also increase its services through acquisitions or
internal development of new services and technologies.
In fiscal 1995, the Company's revenues were $55.7 million compared to $61.1
million in fiscal 1994. The loss from continuing operations net of income tax
benefit was $5.4 million in fiscal 1995, of which $4.1 million is attributed to
the write down of assets recorded in the second quarter, compared to earnings of
$0.4 million in fiscal 1994. The Company recorded a net operating loss on its
discontinued transportation segment of $0.5 million in fiscal 1995, and
recognized a loss on the sales of discontinued operations, net of income taxes,
of $13,000. This resulted in a net loss for the year of $6.0 million.
The Company has extended and revised its bank credit agreement which provides
a total credit facility of $15.95 million, consisting of a $3.95 million term
loan and a $12.0 million revolving line of credit. At May 31, 1995, $8.8 million
was borrowed under the Company's revolving line of credit, and $3.95 million was
due under the term loan. See Note (8) of Notes to Consolidated Financial
Statements for more detailed information concerning this credit facility and the
Company's other indebtedness.
The Company did not declare or pay a dividend in fiscal 1995. Pursuant to the
Company's Credit Agreement, the Company may not pay quarterly dividends without
the consent of its primary lender. Additionally, the declaration of future
dividends will depend on the Company's financial condition, market conditions
and other matters deemed relevant by the Board of Directors.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The following table sets forth a comparison of the relative percentage
contributions of each of the Company's business segments to revenues and
operating profit before allocation of the Company's corporate expenses and
amortization of goodwill:
2
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS (CONTINUED)
YEAR ENDED MAY 31,
-------------------------
1995 1994 1993
---- ---- ----
Revenues:
Environmental services ...................... 91% 93% 100%
Military housing projects ................... 9% 7% --
---- ---- ----
Total ................................... 100% 100% 100%
==== ==== ====
Operating profit (loss) before corporate
allocation and goodwill amortization:
Environmental services ...................... 187% 78% 100%
Military housing projects ................... (87%) 22% --
---- ---- ----
Total ................................... 100% 100% 100%
==== ==== ====
Additional financial information about the Company's industry segments for the
years ended May 31, 1995, 1994 and 1993 is set forth in Note (11) of Notes to
Consolidated Financial Statements.
(c) NARRATIVE DESCRIPTION OF BUSINESS
ENVIRONMENTAL SERVICES
GENERAL. Substantially all of the Company's environmental services are
provided through Team Environmental Services, Inc. These environmental services
consist of leak sealing and mechanical services, as well as environmental
engineering, consulting and monitoring services, primarily in air quality. The
Company is one of the leaders in the industry in providing on-stream repairs of
leaks in piping systems and related equipment. In conjunction with its leak
sealing services, the Company markets a line of products which includes both
standard and custom-designed clamps and enclosures for plant piping systems and
pipelines. Environmental engineering and consulting services include state and
federal air quality permitting, ambient air monitoring, emission inventory
reporting, source emissions testing, continuous emissions monitoring, air
dispersion modeling, compliance auditing and preparing of tracer studies and
risk management plans. The Company's monitoring services provide fugitive
emissions monitoring and reporting as required under the Clean Air Act and Title
III of the Superfund Amendments Reauthorization Act ("SARA"). The Company
provides these services for approximately 3,000 customers in the chemical,
petrochemical, refining, pulp and paper, power, steel and other industries.
Most of the revenues and operating profits from the Environmental Services
segment are provided by leak sealing services. In fiscal 1995, 1994 and 1993,
leak sealing services accounted for 53%, 53% and 56%, respectively, of the
Company's consolidated revenues. In fiscal 1995, 1994 and 1993, environmental
engineering, consulting and monitoring services accounted for 30%, 32% and 37%,
respectively, of the Company's consolidated revenues.
Team's Environmental Services segment operates through 43 domestic locations
in 24 states and one international operating location in Huddersfield, England;
however, not all services and products are presently offered by all operating
locations. Mechanical services are available on a national basis from certain of
the Company's locations, including the Company's Alvin, Texas location. In
addition, certain environmental services are offered by the Company
internationally through 13 licensees operating in 15 countries.
LEAK SEALING. The Company's leak sealing and other industrial services consist
of on-stream repairs of leaks in pipes, valves, flanges and other parts of
piping systems and related equipment primarily in the chemical, refining and
utility industries. The Company uses specially developed techniques, sealants
and equipment for repairs. Many of the Company's repairs are furnished as
interim measures which allow plant systems to continue operating until more
permanent repairs can be made during scheduled plant shutdowns.
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The Company's leak sealing services involve inspection of the leak by the
Company's field crew who records pertinent information about the faulty part of
the system and transmits the information to the Company's engineering department
for determination of appropriate repair techniques. Repair materials such as
clamps and enclosures are custom designed and manufactured at the Company's
facility in Alvin, Texas and delivered to the job site. The Company maintains an
inventory of raw materials and semi-finished clamps and enclosures to reduce the
time required to manufacture the finished product. Installations of the clamps
and enclosures for on-stream repair work are then performed by the field crew
using, in large part, materials and sealants that are developed and produced by
the Company.
The Company's non-destructive repair methods do not compromise the integrity
of its customers' process system and can be performed in temperatures ranging
from cryogenic to 1,700 degrees Fahrenheit and with pressures from vacuum to
6,000 pounds per square inch. The Company's sealants are specifically formulated
to repair over 300 various types of leaks.
The Company also offers live loading services, which are used to repair valves
and flanges while in continuous operation. The Company utilizes live loading
services through the installation of a spring-loaded assembly, which
automatically maintains constant pressure on valve packing material thereby
ensuring performance of the valve and preventing leakage.
Management attributes the success of its leak sealing division to be
substantially due to the quality and timely performance of its services, its
proprietary techniques and materials and its ability to repair leaks without
shutting down the customer's operating system. On-stream repairs can prevent a
customer's continued loss of energy or materials through leaks, thereby avoiding
costly energy and production losses that accompany equipment shutdowns, and also
lessen fugitive emissions escaping into the atmosphere.
The Company has continued to develop different types of standard and
custom-designed clamps, enclosures and other repair products which complement
the Company's existing industrial market for leak sealing services. The
Company's leak sealing services are supported by an in-house Quality
Assurance/Quality Control program that monitors the design and manufacture of
each product to assure materials traceability on critical jobs and to ensure
compliance with customers' requirements.
MECHANICAL. The Company's mechanical services consist primarily of hot tapping
and Line-stop(R) services. Hot tapping services involve utilizing special
equipment to cut a hole in a pipeline so that a new line can be connected onto
the existing line without interrupting operations. Hot tapping is frequently
used for making branch connections into piping systems while the production
process is operative. Line-stop(R) services permit the line to be depressurized
downstream so that maintenance work can be performed on the piping system. The
Company typically performs these services by mechanically cutting into the
pipeline and installing a device to stop the process flow. The Company also
utilizes a line freezing procedure when applicable to stop the process flow
using special equipment and techniques.
EMISSIONS MONITORING AND CONTROL. The Company also provides leak detection
services that include fugitive emissions identification, monitoring, data
maintenance and reporting services primarily for the chemical, refining and
utility industries. These services are designed to monitor and record emissions
from specific process equipment components as requested by the customer,
typically to assist the customer in establishing an ongoing maintenance program
and/or complying with the Clean Air Act, SARA and other present and/or future
environmental regulations. The Company prepares standard reports in conjunction
with EPA requirements or can custom-design these reports to its customers'
specifications.
Emissions data is electronically recorded at the customer's site via a data
capturing process utilizing computerized monitoring equipment. The data is then
transferred to the Company's central computer for data management. This
information is then processed by the Company's Teamware(R) software system,
which provides for internal quality checks and efficient data processing and
report generation. This system allows for a large number of reports to be
generated that are specific to a customer's needs. The Company maintains
customer data for compliance purposes
4
and for use in future reports that may be requested or required. The Company
also offers its customers a software package named Customware(TM), which
provides the transfer of monitoring data from the Company to the customer. This
gives the customer the ability to perform queries on the data to analyze the
results of monitoring and to maintain information for its maintenance
departments.
The 1990 Clean Air Act Amendments established a list of 189 toxic air
pollutants which should be monitored and pursuant to these Amendments,
regulations have been passed concerning many of these pollutants. The
Environmental Protection Agency ("EPA") has both proposed and issued final rules
and regulations to achieve a substantial percentage of the Clean Air Act's
goals, which were to be implemented over the next several years. Additionally,
both the Clean Air Act and Title III of the 1986 SARA established requirements
that facilities releasing toxic chemicals into the air, water or land must
report emissions to regulatory agencies or be subject to fines and penalties.
Affected facilities were expected to further increase their leak detection and
repair as well as other emission reduction programs. Due to the fact that the
implementation of certain of these rules and regulations has been delayed,
demand for emissions monitoring has not increased as expected. Should additional
legislation be enacted or the rules and regulations promulgated by the EPA
implemented, demand for emissions monitoring should increase. Customers are,
however, required to monitor and report their emissions on an ongoing basis.
ENVIRONMENTAL CONSULTING AND ENGINEERING. The Company offers a variety of
environmental consulting, ambient air and meteorological monitoring, assessment,
permitting and engineering services to a wide range of customers. The Company
utilizes sophisticated computer programs to augment preparation of air, water
and waste permits for its customers as required by each state, as well as the
Clean Air Act and Clean Water Act. The Company's computer skills and technical
and engineering capabilities are also utilized in providing atmospheric
dispersion modeling studies, ambient air monitoring and air emissions
inventories. The Company also provides air quality risk assessments of airborne
releases as required by federal and state regulations.
The Company provides various air emissions source testing services at customer
facilities in order to help its customers meet environmental requirements. Team
utilizes mobile testing vans to perform stack sampling and trial burn projects
in order to determine compliance. The Company's procedures comply with Federal
EPA standard methods and applicable state test protocols. The Company offers
certification analysis of continuous emissions monitoring systems that comply
with EPA methods and protocols. Team also performs emission testing and develops
quantitative analyses of emissions by using a variety of approved methods. These
studies provide baseline emission rates utilized in developing and maintaining
specific permit conditions.
The Company also provides additional environmental consulting services,
including environmental compliance evaluations and the preparation of
environmental impact statements, as well as water and site assessment services.
Procedures used by the Company in performing its environmental services comply
with specified EPA and state guidelines, methodologies and requirements. The
Company may expand its environmental engineering services through both internal
growth and acquisitions, depending on customer need as well as other factors.
MARKETING AND CUSTOMERS. Environmental services are marketed principally by
marketing and professional personnel based at the Company's various locations.
These services are provided through certain of the Company's 43 domestic
locations. The Company has developed a cross-marketing program to utilize its
sales personnel in offering many of the Company's services at its operating
locations. Management believes that this business segment's operating and office
locations are situated to facilitate timely response to customer needs, which is
an important feature of its services. No customer in this industry segment
accounted for 10% or more of consolidated Company revenues during any of the
last three fiscal years.
Generally, customers are billed on a time and materials basis although some
work may be performed pursuant to a fixed price bid. Emission control services
are typically billed based on the number of components monitored. Services are
usually performed pursuant to purchase orders issued under written customer
agreements. While some purchase orders provide for the performance of a single
job, others provide for services to be performed for a term of one year or less.
In addition, Team is a party to certain long term contracts. Substantially all
such agreements
5
may be terminated by either party on short notice. The agreements generally
specify the range of services to be performed and the hourly rates for labor.
While contracts have traditionally been entered into for specific plants or
locations, over the past few years, the Company has entered into several
regional or national contracts which cover multiple plants or locations.
The Company's leak sealing services are available 24 hours a day, seven days a
week. The Company typically provides various limited warranties for certain of
its repair services. To date, there have been no significant warranty claims
filed against the Company.
BUSINESS STRATEGY. The Company believes that the aging of its customers'
plants should result in increasing demand for its industrial and environmental
services. Additionally, the Company intends to expand its business by marketing
more of its services to existing customers, marketing its services to new
customers and expanding geographically, both domestically and internationally.
Team may also increase its services through acquisitions or internal development
of new services and technologies.
A variety of risks are inherent in this strategy. Marketing efforts may not
generate increases in revenues as expected; although management believes
sufficient qualified personnel are available in most areas, no assurance can be
made that such personnel will be available when needed; growth may require
additional capital that the Company may be unable to obtain; and the Company may
be unable to develop profitable new services and technologies or acquire
companies that provide such services on terms that permit an acceptable rate of
return. Additionally, weak economics in the markets served by the Company may
constrain market demand. In addition, although the Company has a diversified
customer base, a substantial portion of its business is dependent upon the
chemical and refining industry sectors. No assurance can be given that the
Company will be able to implement its business strategy for this segment.
COMPETITION. Competition in the Company's Environmental Services segment is
primarily on the basis of service, product performance and price. In general,
competition stems from other outside service contractors and customers' in-house
maintenance departments. Management believes it has a competitive advantage over
most outside service contractors because it offers a more complete line of
environmental air quality services than its competitors. In addition, Team
believes it has a competitive advantage over plant maintenance departments due
to its ability to perform quality leak sealing services on a timely basis, using
special techniques and materials, while the customers' equipment remains in
service. If, however, customers emphasize price over service and product
performance, the Company's competitive advantage may be impaired. Management
knows of one outside service contractor of a similar size with which the Company
generally competes for leak sealing business. Other principal competitors are
primarily regionally-based companies that compete within a certain geographical
area. With respect to environmental monitoring, engineering and consulting
services, management estimates that a large number of environmental firms, of
varying sizes, compete against the Company in various geographical areas.
MISCELLANEOUS. In general, the demand for the Company's environmental services
varies with the level of regulatory requirements, operations of its customers,
the energy or product cost savings that may result from the Company's services,
and, with regard to the Company's leak repair business, the length of time
between scheduled plant maintenance shutdowns. The Company often experiences
increased leak repair demand by customers in the winter due to the effect of
weather conditions on piping systems and decreased leak repair demand in the
late spring and summer due primarily to the timing of scheduled plant shutdowns.
To complement its leak sealing operations in the United States, the Company
has a wholly-owned subsidiary in the United Kingdom which operates as Team
Environmental Services, Ltd. In addition, to date the Company has entered into
license agreements in North America, South America and Australia, and in Europe
and the Mideast through Teaminc Europe, B.V., a joint venture between Team and a
Netherlands company, for the use of Team's leak sealing technology. Most
licensees are required to make a cash payment as initial consideration for the
grant by the joint venture of the license. All licensees are required to make
ongoing royalty payments, typically based on a percentage of its gross revenues
from licensed operations. To date, revenues to the Company under these
agreements have not been material. The Company is continuing to expand its leak
sealing business outside the
6
United States and expects to pursue similar license agreements for the use of
Company technology with other companies internationally. In addition, the
Company is expanding the technology it provides under such license agreements to
include certain other of its environmental services, such as fugitive emissions
monitoring.
From time-to-time in the operation of its environmental services, the Company
may handle small quantities of certain hazardous wastes or other hazardous
substances generated by its customers. Under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (the "Superfund Act"), the EPA
is authorized to take administrative and judicial action to either cause parties
who are responsible under the Superfund Act for cleaning up any unauthorized
release of hazardous substance to do so, or to clean up such hazardous
substances and to seek reimbursement of the costs thereof from the responsible
parties, who are jointly and severally liable for such costs under the Superfund
Act. The EPA may also bring suit for treble damages from responsible parties who
unreasonably refuse to voluntarily participate in such a clean up or funding
thereof. Responsible parties include anyone who owns or operates the facility
where the release occurred (either currently and/or at the time such hazardous
substances were disposed of), or who by contract arranges for disposal,
treatment, or transportation for disposal or treatment of a hazardous substance,
or who accepts hazardous substances for transport to disposal or treatment
facilities selected by such person from which there is a release. Management
believes that its risk of liability is minimized since its handling consists
solely of maintaining and storing small samples of materials for laboratory
analysis that are classified as hazardous. The Company does not currently carry
insurance to cover liabilities which the Company may incur under the Superfund
Act or similar environmental statutes due to its prohibitive costs.
MILITARY HOUSING PROJECTS
During fiscal 1992, subsidiaries of the Company were awarded contracts to
develop and construct four Federal Section 801 Military Housing projects,
aggregating 900 single family homes, for the Departments of the Army, Navy and
Air Force, which were subsequently assigned to another subsidiary of the
Company, First America Capital Corporation, and its subsidiaries. Metric
Constructors, Inc. was retained to act as general contractor for all projects. A
subsidiary of the Company, First America Development Corporation, acted as
project manager for all projects. Under the Section 801 Military Housing
Program, residential housing projects are constructed by the private sector for
lease to the United States government for a twenty-year term. Military personnel
and their families occupy the residences. Payments under such leases are subject
to annual Congressional appropriation for Army, Navy and Air Force family
housing. With the exception of the Pensacola project, the maintenance of the
projects is the responsibility of the Lessee. The Pensacola project is subject
to a separate maintenance agreement which is performed by a subsidiary of Team.
The costs of construction of these residential projects were financed in June
1992 through the sale of Certificates of Participation in lease payments to be
made by the United States government in connection with the rental of the units
(the "Certificates of Participation" or "Certificate(s)"). These Certificates
are non-recourse to the Company and its subsidiaries. The subsidiaries have,
however, executed mortgages on the properties in favor of the Trustee for the
Certificate holders which secure payment to the Certificate holders.
The 150-unit Military Housing project in Portales, New Mexico was completed
and a lease was entered into by the United States government on July 29, 1993.
The 300-unit Military Housing project located in Pensacola, Florida was
completed and the lease was entered into effective October 12, 1993. The
250-unit Military Housing project located near Ft. Bragg, North Carolina was
completed and the lease entered into effective November 1, 1993. The Company's
subsidiaries are receiving rent in accordance with the lease agreements. Rental
payments have been assigned to the Trustee and are used to repay principal and
interest on the Certificates of Participation as well as real estate taxes and
insurance premiums. Construction of the fourth project, located near Ft.
Stewart, Georgia, never commenced as a result of extensive delays in obtaining
necessary permits, easements and licenses. In fiscal 1993, the Company's
subsidiary filed a Claim and Request for Change Order with the United States
Army Corps of Engineers (the "Corps") for additional costs and expenses as a
result of these delays aggregating $4.7 million, approximately $1.4 million of
which relate to claims of the general contractor. The decision of the
Contracting Officer with respect to this claim was appealed to the Armed
Services Board of Contract Appeals. In November 1993, the
7
Company's subsidiary's right to proceed with construction of this project was
terminated by the Corps and the portion of the Certificates of Participation
attributable to the Ft. Stewart project was redeemed. The Company's subsidiary
has appealed the Corps' decision to terminate the contract to the Armed Services
Board of Contract Appeals.
The Company does not intend to develop any additional Military Housing
projects, and intends to sell these projects in the future. See Note (3) of
Notes to Consolidated Financial Statements for additional information regarding
the Military Housing projects.
DISCONTINUED OPERATIONS - SALE OF TRANSPORTATION
AND INFRASTRUCTURE SERVICES BUSINESSES
In April 1995 the Company completed the sale of substantially all of the
operating assets of its transportation services division. The transportation
services division was comprised of two subsidiaries, Hellums Services, Inc.
("Hellums") and Elsik, Inc. ("Elsik"). The businesses were purchased by two
privately-held Texas companies which are owned in part by former members of
Hellums and Elsik management. No officer or director of Team was a member of
this acquiring group.
In July 1994, the Company completed the sale of its discontinued
infrastructure services operations. The Company sold substantially all of the
assets and certain liabilities of Infrastructure Services, Inc. and its
subsidiaries to ISI Acquisition Corp., a Delaware corporation. ISI Acquisition
Corp. is owned by two privately-held Texas companies and former members of
Infrastructure Services, Inc. management. No officer or director of Team was a
member of this acquiring group.
Team believes that the sale of the discontinued transportation and
infrastructure services businesses will allow the Company to concentrate on the
expansion of its core business. The proceeds of the sales were used to reduce
short-and long-term debt, as well as to increase available working capital. See
Note (2) of Notes to Consolidated Financial Statements for further information.
General
EMPLOYEES. As of May 31, 1995, the Company and its subsidiaries had 606
employees in its operations, consisting of 250 salaried and 356 hourly
personnel. The Company's employees are not unionized. There have been no
employee work stoppages to date, and management believes its relations with
its employees are good.
INSURANCE. The Company carries insurance it believes to be appropriate for the
businesses in which it is engaged. Under its insurance policies, the Company has
per occurrence self-insured retention limits of $25,000 for general liability,
$100,000 for professional liability, $250,000 for automobile liability and
workers' compensation in most states. The Company has obtained fully insured
layers of coverage above such self-retention limits. Since its inception, the
Company has not been the subject of any significant liability claims not covered
by insurance arising from the furnishing of its services or products to
customers. However, because of the nature of the Company's business, there
exists the risk that in the future such liability claims could be asserted which
might not be covered by insurance.
REGULATION. Substantially all of the Company's business activities are subject
to federal, state and local laws and regulations. These regulations are
administered by various federal, state and local health and safety and
environmental agencies and authorities, including the Occupational Safety and
Health Administration ("OSHA") of the U.S. Department of Labor and the U.S.
Environmental Protection Agency. The Company's training programs are required to
meet certain OSHA standards. Expenditures relating to such regulations are made
in the normal course of the Company's business and are neither material nor
place the Company at any competitive disadvantage. The Company does not
currently expect to expend material amounts for compliance with such laws during
the ensuing two fiscal years.
8
PATENTS. While the Company is the holder of various patents, trademarks and
licenses, the Company does not consider such properties to be material to its
consolidated business operations.
ITEM 2. PROPERTIES
Team and its subsidiaries own real estate and office facilities in Alvin,
Texas for use in its Environmental Services segment totalling approximately
98,000 square feet of floor space. These facilities include administrative,
manufacturing and training centers. The Company's manufacturing facility and
training center are pledged as security for a long term note. See Note (8) of
Notes to Consolidated Financial Statements for information regarding the term
note. The Company and its subsidiaries also lease 39 office and/or plant and
shop facilities at separate locations in 23 states for use in its Environmental
Services segment. The Military Housing segment owns four separate properties in
New Mexico, North Carolina, Georgia and Florida aggregating approximately 286
acres. Three of such properties have been developed with military housing
projects and one property is undeveloped. As stated previously, these properties
are subject to mortgages in favor of the Trustee for the Certificate holders
which secure payment to the Certificate holders. See "Item 1(c) Military Housing
Projects." In addition, the Company leases its principal offices located in
Houston, Texas, and owns real property and office facilities in Houston, Texas
previously used in its discontinued infrastructure operations which are
currently being leased to a third party pursuant to a long-term lease agreement.
As of May 31, 1995, the Company owned or leased 227 light trucks which are
primarily repair service trucks used in performing environmental services and
148 passenger cars used by the Company's salesmen, managers, officers and other
employees primarily in sales, administrative and management functions relating
to its Environmental Services segment.
The Company believes that its property and equipment, as well as that of its
subsidiaries and affiliates, are adequate for its current needs, although
additional investments are expected to be made in additional property and
equipment for expansion, replacement of assets at the end of their useful lives
and in connection with corporate development activities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note (10) of Notes to Consolidated Financial Statements for information
regarding lease obligations on these properties.
ITEM 3. LEGAL PROCEEDINGS
As previously reported, the Texas Water Commission and the EPA have proposed
the cleanup of the Sheridan Disposal Services Site ("Sheridan Site") near
Hempstead, Texas. The Company is included in a large group of potentially
responsible parties to pay for cleanup costs of the Sheridan Site pursuant to
applicable Texas and Federal laws. On September 1, 1989, the Company executed a
De Minimus Settlement Agreement ("Settlement Agreement") with most of the
potentially responsible parties ("PRPs") to settle its potential liability for
clean up of the Sheridan Site in consideration for a $101,700 payment by the
Company. The EPA has approved the Settlement Agreement and has executed a
related Consent Decree. This Consent Decree has not yet been entered by the
Court. Upon entry of the Consent Decree, the Company's potential remediation
liability for the site will be formally settled.
Although the Company believes any other potential liability regarding the
Sheridan Site is remote, claims could be raised by two material generators for
whom the Company transported waste to the site. These parties are not at the
date hereof voluntarily participating in the PRPs group. It is possible that
claims for all or a portion of their allocated costs could be asserted by such
parties against the Company. If such an assertion is made, the Company will
vigorously contest such assertion and will also seek application of the
indemnity provisions of the De Minimus Settlement Agreement under which the
larger participating PRPs not able to settle on a de minimus basis have agreed
to certain indemnification of the de minimus parties, including the Company.
In addition to the above, the Company also previously owned a transporter
company that has been identified as a potentially responsible party at the
Sheridan Site. The shareholder who now owns this transporter company has
9
asserted that, to the extent it has any liability for the transportation of
waste materials to the Sheridan Site during the period that it was owned by the
Company, the liability should be that of the Company. This alleged liability
might also extend to the allocation of wastes to this transporter company for
participating and non-participating generators. The Company has refuted and
vigorously contests such assertions. At this time, it is not possible to
estimate reasonably the amount of potential Company liability for cleanup costs
at this site relative to the previously owned transporter company. The Company
has submitted appropriate information to its insurance carriers relating to this
matter. If it is determined that the Company has any liability, a portion
thereof may be covered by insurance; however, the Company's insurance carriers
have not confirmed coverage.
As previously reported, a subsidiary of the Company was committed, pursuant to
an agreement with the Corps, to construct a 200 unit federal housing project
near the Ft. Stewart Military Reservation located in Hinesville, Georgia.
Construction of this project never commenced as a result of extensive delays in
obtaining easements, licenses and permits necessary in order to develop the
project. In fiscal 1993, the Company filed a Claim and Request for Change Order
with the Corps for additional costs and expenses incurred as a result of these
delays, which is presently being appealed to the United States Armed Services
Board of Contract Appeals. During fiscal 1994, the Corps terminated the
Agreement, thereby cancelling the project. In February 1994, the Company
separately appealed the Corps' decision to terminate the Agreement, again with
the United States Armed Services Board of Contract Appeals. At this time, the
Company cannot predict the final outcome of its appeal of the Corps' decision to
cancel the project or of its claim for additional costs and expenses.
The Company and certain subsidiaries are also involved in various lawsuits and
subject to various claims and proceedings encountered in the normal conduct of
its business. In the opinion of management, while the final resolution of any
such litigation or other matters may have an impact on the Company's
consolidated financial results for a particular reporting period, any uninsured
losses that might arise from these lawsuits and proceedings would not have a
material adverse effect on the Company's consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1995.
10
P A R T II.
ITEM 5. MARKET FOR TEAM'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION
Team's common stock is traded on the American Stock Exchange, Inc. under the
symbol "TMI". The table below reflects the high and low sales prices of the
Company's common stock on the American Stock Exchange by fiscal quarter for the
fiscal years ended May 31, 1995 and 1994, respectively.
SALES PRICES
------------------------
HIGH LOW
--------- --------
FISCAL 1995
Quarter Ended:
August 31................................. $ 3 7/8 $ 2 1/2
November 30............................... 3 1/4 2 5/8
February 28............................... 3 1 5/8
May 31.................................... 1 15/16 1 1/2
FISCAL 1994
Quarter Ended:
August 31................................. $ 5 $ 4 3/8
November 30............................... 5 3 7/8
February 28............................... 5 1/8 3 1/4
May 31.................................... 5 3 7/8
There were 552 holders of record of Team's common stock as of August 15, 1995,
excluding beneficial owners of stock held in street name. Although exact
information is unavailable, the Company estimates there are approximately 2,300
additional beneficial owners based upon information gathered in connection with
proxy solicitation.
(c) DIVIDENDS
No dividends were declared or paid in fiscal 1995 or fiscal 1994. Pursuant to
the Company's Credit Agreement, the Company may not pay quarterly dividends
without the consent of its primary lender. Additionally, future dividend
payments will continue to depend on Team's financial condition, market
conditions and other matters deemed relevant by the Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of certain consolidated financial information
regarding the Company for the five years ended May 31, 1995. Prior year
information has been restated as a result of the Company selling substantially
all of the assets of its transportation services segment. See Note (2) of Notes
to Consolidated Financial Statements.
11
YEAR ENDED MAY 31,
------------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- ------- -------- --------
(In Thousands, Except Per Share Amounts)
Revenues .................................................. $ 55,730 $ 61,133 $63,716 $ 62,625 $ 56,342
======== ======== ======= ======== ========
Earnings (Loss) from Continuing Operations,
Net of Income Taxes ..................................... $ (5,448) $ 437 $ 604 $ 2,229 $ 3,131
Earnings (Loss) from Discontinued
Operations, Net of Income Taxes ......................... (513) 325 1,277 (2,025) (1,153)
Loss on Sales of Discontinued Operations,
Net of Income Taxes ..................................... (13) (1,081) -- (12,051) --
-------- -------- ------- -------- --------
Net Earnings (Loss) ....................................... $ (5,974) $ (319) $ 1,881 $(11,847) $ 1,978
======== ======== ======= ======== ========
Earnings (Loss) Per Common Share:
Primary:
Earnings (Loss) from
Continuing Operations ................................. $ (1.06) $ .09 $ .12 $ .44 $ .66
Earnings (Loss) from
Discontinued Operations ............................... (.10) .06 .25 (.40) (.24)
Loss on Sales of Discontinued Operations ................ (.00) (.21) -- (2.37) --
-------- -------- ------- -------- --------
Net Earnings (Loss) ..................................... $ (1.16) $ (.06) $ .37 $ (2.33) $ .42
======== ======== ======= ======== ========
Weighted Average Shares Outstanding ....................... 5,160 5,164 5,151 5,088 4,757
Fully Diluted:
Earnings (Loss) from
Continuing Operations ................................. $ (1.06) $ .09 $ .12 $ .44 $ .66
Earnings (Loss) from
Discontinued Operations ............................... (.10) .06 .25 (.40) (.24)
Loss on Sales of Discontinued Operations ................ (.00) (.21) -- (2.37) --
-------- -------- ------- -------- --------
Net Earnings (Loss) ..................................... $ (1.16) $ (.06) $ .37 $ (2.33) $ .42
======== ======== ======= ======== ========
Weighted Average Shares Outstanding ....................... 5,160 5,164 5,152 5,088 4,766
Funds Provided by Continuing Operations
(excluding Military Housing projects)
(Net Earnings (Loss) Plus Depreciation,
Amortization, Change in Non-current
Deferred Taxes and Writedown of Assets) ................. $ 2,391 $ 3,121 $ 2,833 $ 3,727 $ 4,948
Cash Dividend Declared
Per Common Share ........................................ $ .00 $ .00 $ .075 $ .14 $ .14
MAY 31,
1995 1994 1993 1992 1991
------- -------- ------- ------- -------
(In Thousands)
Total Assets ............................ $80,058 $103,114 $96,843 $65,515 $68,124
Long-term Debt .......................... 13,627 21,001 22,156 24,524 23,032
Non-recourse Debt ....................... 39,722 40,603 30,769 -- --
Stockholders' Equity .................... 20,323 26,297 26,608 25,022 35,675
Working Capital ......................... 14,786 10,472 7,790 10,655 15,234
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's primary operations consist of industrial repair services,
environmental engineering and consulting, and air emission monitoring services.
The Company also owns three Federal Section 801 housing projects ("Military
Housing" segment), which are presently leased to the Departments of the Army,
Navy and Air Force pursuant to long-term lease agreements. During the fiscal
year ended May 31, 1995, the Company sold its infrastructure and transportation
services businesses. The results of operations of these businesses are included
as discontinued operations.
The following table sets forth for the periods indicated (i) the percentage
which certain items in the financial statements of the Company bear to revenues
and (ii) the percentage change in the dollar amount of such items from period to
period:
PERCENTAGE
INCREASE/(DECREASE)
------------------
PERCENTAGE OF REVENUES YEAR ENDED
-------------------------------- MAY 31,
YEAR ENDED ------------------
MAY 31, 1995 1994
-------------------------------- VS. VS.
1995 1994 1993 1994 1993
----- ----- ----- ----- -----
Revenues:
Primary Operations ............................................ 91.2% 93.1% 100.0% (10.7%) (10.7%)
Military Housing projects ..................................... 8.8 6.9 -- 15.8% --
----- ----- ----- ----- -----
Total revenue ................................................... 100.0% 100.0% 100.0% (8.8%) (4.1%)
===== ===== ===== ===== =====
Operating expenses:
Primary Operations ............................................ 47.6% 47.2% 48.3% (8.1%) (6.3%)
Military Housing projects ..................................... 3.7 2.5 -- 36.9% n/a
Selling, general and administrative expenses:
Primary Operations ............................................ 40.7 40.5 46.7 (8.3%) (16.8%)
Military Housing projects ....................................... 2.1 0.7 -- 185.7% n/a
Interest:
Primary Operations ............................................ 2.7 2.5 2.5 (4.1%) (4.3%)
Military Housing projects ..................................... 6.1 5.0 -- 10.8% n/a
Writedown of assets:
Primary Operations ............................................ 2.5 -- -- n/a n/a
Military Housing projects ..................................... 8.7 -- -- n/a n/a
----- ----- ----- ----- -----
Earnings (loss) from continuing operations
before income taxes ........................................... (14.2) 1.6 2.5 n/a (37.4%)
Provision (benefit) for income taxes ............................ (4.3) 0.9 1.5 n/a (43.6%)
----- ----- ----- ----- -----
Earnings (loss) from continuing operations
net of income taxes ........................................... (9.9%) 0.7% 1.0% n/a (27.6%)
===== ===== ===== ===== =====
RESULTS OF OPERATIONS - CONTINUING OPERATIONS
Fiscal 1995 Compared to Fiscal 1994
PRIMARY OPERATIONS: For the fiscal year ended May 31, 1995, revenues from the
Company's environmental services business totaled $50.8 million, 11% lower than
revenues of $56.9 million reported in the prior fiscal year. Weakness in demand
for emissions monitoring and environmental consulting services resulted from
reduced regulatory activity as many of the Company's customers experienced
decreased reporting requirements. In addition, increased competition in leak
repair and emissions monitoring led to lower prices for some of the Company's
services. Leak repair revenues also were adversely affected by the relatively
mild weather experienced in the United States in the winter of 1994/95. Colder
weather often leads to higher demand for leak repair services due to the
contraction of piping systems in process plants.
13
Operating expenses in the Company's primary operations declined by 8% from
fiscal 1994 to fiscal 1995, primarily due to lower personnel related costs.
Gross profit margins declined from 49.3% to 47.3%, as the Company was not able
to reduce costs sufficiently to offset the decline in revenues. Selling, general
and administrative expenses were $22.7 million for fiscal year 1995, $2.1
million, or 8% lower than in the prior year. Management restructured its field
and corporate operations in response to the decline in revenues, resulting in
lower personnel, insurance and general expenses.
Interest expense of $1.5 million in fiscal 1995 was 4% lower than in fiscal
1994 due to reduced average borrowing levels. Including the effect of the $1.4
million write down of assets and other one-time charges recorded in the second
quarter of fiscal year 1995, the loss before taxes in the Company's primary
operations was $1.3 million, compared to pre-tax earnings of $1.7 million in the
prior year.
MILITARY HOUSING PROJECTS: For the year ended May 31, 1995, revenues were $4.9
million, $672,000 higher than rentals in the prior year, when rentals were
recorded for less than the full period, as all of the projects were fully
completed and occupied in November 1993. The pre-tax loss from Military Housing,
before the provisions for write down of assets, was $1.7 million, compared to a
loss of $755,000 in fiscal 1994. Higher legal fees, associated with litigation
with the general contractor of the projects, which was settled in March 1995,
and the Company's claim against the Department of the Army concerning the
terminated project at Ft. Stewart, Georgia, and increased depreciation expense
accounted for the change. In the second quarter of fiscal year 1995, the Company
recorded one-time provisions of $4.8 million to write-off certain deferred
expenses and reduce the carrying value of the Military Housing properties. The
resulting loss before taxes from Military Housing was $6.6 million in fiscal
1995 compared with a pre-tax loss of $755,000 in the prior year.
The net loss from continuing operations for the 1995 fiscal year was $5.4
million, of which $4.1 million is attributed to the write down of assets
recorded in the second quarter. This compares to net earnings from continuing
operations of $437,000 in fiscal 1994. Including net operating losses and losses
on the sale of discontinued operations, the net loss for fiscal year 1995 was
$6.0 million, compared to a net loss of $319,000 in the prior year.
Fiscal 1994 Compared to Fiscal 1993
PRIMARY OPERATIONS: Revenues in the Company's Environmental Services segment
for the year ended May 31, 1994 totaled $56.9 million, representing an 11%
decrease from revenues of $63.7 million for the prior fiscal year. The revenue
decrease was primarily attributable to increased price competition in leak
repair and emission monitoring which led to lower prices for some services,
together with cutbacks and delays in maintenance expenditures by the Company's
industrial customers.
During fiscal 1994, operating expenses decreased $1.9 million, or 6% from
prior year levels. Gross profit margins in the Company's environmental services
business declined from 51.7% in fiscal 1993 to 49.3% in fiscal 1994 as the
Company was not able to reduce costs to fully offset the decline in revenues
despite lower personnel expenses and cost savings achieved through the
consolidation of certain branch offices.
Selling, general and administrative expenses declined 17% or $5.0 million
during fiscal 1994 as compared to fiscal 1993. This decrease resulted primarily
from lower professional fees, compensation related expenses, insurance costs and
other miscellaneous charges.
Interest expense for the Company's primary operations decreased 4% from
approximately $1.6 million in fiscal 1993 to $1.5 million in fiscal 1994, as
lower average borrowing levels more than offset an increase in interest rates.
Earnings before income taxes from primary operations in fiscal 1994 was $1.7
million, an increase of 11% from fiscal 1993 pre-tax earnings of $1.6 million.
MILITARY HOUSING PROJECTS: Rental revenues from Military Housing commenced in
the second quarter of fiscal 1994, as the three projects were completed and
occupied. Rentals for the year totaled $4.2 million. Operating expenses during
the year were $1.5 million and consisted primarily of depreciation, insurance
and taxes. General and administrative costs were $419,000, of which
approximately 82% were legal expenses incurred in connection with litigation
with the general
14
contractor of the projects and the claim against the Department of the Army for
the terminated project at Ft. Stewart, Georgia. Interest expenses on the
Certificates of Participation were $3.1 million during fiscal 1994. The pre-tax
loss from Military Housing totaled $755,000 for fiscal 1994, the first year of
operation for the properties.
For the fiscal year ended May 31, 1994, net earnings from continuing
operations were $437,000, a decrease of 28% from net earnings of $604,000 in the
prior fiscal year. Including net earnings from the Company's discontinued
transportation services business and the loss on the sale of infrastructure
services recorded in fiscal 1994, the net loss for fiscal 1994 was $319,000,
compared to net earnings of $1.9 million recorded in the fiscal year ended May
31, 1993.
DISCONTINUED OPERATIONS
In April 1995, the Company sold the operating assets of two subsidiaries
comprising its transportation division, which provided liquid vacuum and hauling
services to the oil and gas industry in South Texas. The businesses were
purchased by private investors, including former members of the subsidiary
companies' management. Cash proceeds from the sale were approximately $3.7
million, most of which was used to reduce short and long-term debt. The Company
recognized a net gain on the sale of $444,000, which was recorded in the fourth
quarter of fiscal year 1995. The transportation services segment incurred a net
loss from operations of $513,000 in fiscal year 1995 and earned $325,000 and
$1.3 million in fiscal 1994 and fiscal 1993, respectively.
In July 1994, the Company completed the sale of substantially all of the
assets and certain liabilities of its discontinued infrastructure services
business to ISI Acquisition Corp., a Delaware corporation formed by two
privately-held Texas companies and former members of Infrastructure Services,
Inc.'s management, for $4.6 million in cash and a $1.7 million note. The Company
retained certain real estate which housed infrastructure services' principal
offices and subsequently has leased the property to an unrelated third party
pursuant to a long-term lease. In the second quarter of fiscal 1995, the Company
recorded an additional net loss of $457,000 related to certain accounts
receivable guaranteed by the Company at the time of the sale. Previous losses
related to the disposition and sale of the infrastructure services business of
$1.1 million and $12.1 million were recorded in fiscal 1994 and fiscal 1992,
respectively. Cash proceeds from the sale were used to reduce the Company's term
debt with its primary bank lender.
LIQUIDITY AND CAPITAL RESOURCES
At May 31, 1995, the Company's working capital totaled $14.8 million, an
increase of $4.3 million from working capital of $10.5 million a year earlier.
The Company has been able to finance its working capital requirements through
its internally generated cash flow, bank borrowings and the sale of discontinued
businesses and assets. In August 1995, the Company and its primary bank modified
and extended the terms of its credit agreement. The new agreement, as amended,
consists of a $3.95 million term loan, payable in quarterly installments of
$350,000 beginning in September 1995, with the balance due at the maturity date
of December 1, 1996, and a $12 million revolving line of credit due in December
1996. At May 31, 1995, amounts outstanding under the revolving line of credit
were $8.8 million and no additional amounts were available for borrowing under
the terms of the agreement. Subsequent to year end, the Company reduced
borrowings outstanding under the revolving line of credit by an additional $1.3
million.
For the fiscal year ended May 31, 1995, net cash provided from operations
totaled $719,000, resulting primarily from net income, excluding the $6.3
million non-cash write down of assets, depreciation and amortization of $4
million, and lower inventories and accounts receivable totaling $2.7 million.
This was partially offset by reductions in accounts payable of $3.1 million and
other accrued liabilities of $2.6 million. Net cash provided by investing
activities was $9.7 million during fiscal 1995, and was generated primarily as a
result of the sale of the infrastructure and transportation services businesses.
Capital expenditures totaled $523,000 during fiscal 1995, primarily for the
replacement of equipment used in the Company's operations. The Company reduced
its long-term debt by approximately 40%, or $9.9 million, during fiscal 1995.
Payments on Military Housing non-recourse debt were $881,000 during the year.
15
Management expects that capital expenditures for fiscal 1996 will be
approximately $1.5 million, as the Company plans to replace, upgrade and expand
its data collection, computer and other operating equipment. The Company also
intends to sell the Military Housing projects and is actively marketing the
properties, although there can be no assurance that any potential transaction
will be completed. Management intends to utilize the proceeds of such a sale, if
any, to increase available working capital and to further reduce Company bank
debt.
16
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders of Team, Inc.
Houston, Texas
We have audited the accompanying consolidated balance sheets of Team, Inc. and
its subsidiaries as of May 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended May 31, 1995. Our audits also included the
financial statement schedule listed in the Index at Item 14(a)(2). These
financial statements and the financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Team, Inc. and subsidiaries as of
May 31, 1995 and 1994, and the results of their operations and their cash flows
for each of the three years in the period ended May 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, the financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Houston, Texas
August 24, 1995
(September 13, 1995 as to Note 8)
17
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31,
-----------------------------------
1995 1994
------------ -------------
ASSETS
Current Assets:
Cash and cash equivalents ........................................................... $ 3,154,000 $ 3,728,000
Receivables ......................................................................... 8,408,000 10,791,000
Materials and supplies .............................................................. 6,641,000 7,941,000
Prepaid expenses and other current assets ........................................... 1,374,000 1,328,000
------------ -------------
Total Current Assets .............................................................. 19,577,000 23,788,000
Net Assets of Discontinued Operations ................................................. 124,000 11,933,000
Property, Plant and Equipment:
Land and buildings .................................................................. 6,889,000 6,775,000
Machinery and equipment ............................................................. 10,864,000 11,185,000
------------ -------------
17,753,000 17,960,000
Less accumulated depreciation and amortization ...................................... 11,641,000 10,600,000
------------ -------------
6,112,000 7,360,000
Military Housing Projects:
Restricted cash and other assets .................................................... 2,897,000 2,852,000
Land and buildings, net of accumulated
depreciation of $4,710,000 in 1995 and $1,262,000 in 1994 ........................ 42,581,000 45,920,000
------------ -------------
45,478,000 48,772,000
Goodwill, Net of Accumulated Amortization ............................................. 5,583,000 5,898,000
Other Assets .......................................................................... 3,184,000 5,363,000
------------ -------------
Total Assets ........................................................................ $ 80,058,000 $ 103,114,000
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ................................................... $ 1,344,000 $ 3,903,000
Accounts payable .................................................................... 742,000 3,800,000
Other accrued liabilities ........................................................... 2,705,000 4,718,000
Current income tax payable .......................................................... -- 895,000
------------ -------------
Total Current Liabilities ......................................................... 4,791,000 13,316,000
Deferred Income Taxes Payable ......................................................... -- 346,000
Long-term Debt ........................................................................ 13,627,000 21,001,000
Military Housing Projects' Non-recourse Obligations:
Debt ................................................................................. 39,722,000 40,603,000
Other ................................................................................ 1,595,000 1,551,000
------------ -------------
41,317,000 42,154,000
Stockholders' Equity:
Preferred stock, cumulative, par value $100 per share,
500,000 shares authorized, none issued ............................................ -- --
Common stock, par value $.30 Per share, 10,000,000 shares
authorized and 5,169,542 shares issued at
May 31, 1995 and 1994 ............................................................. 1,551,000 1,551,000
Additional paid-in capital .......................................................... 24,992,000 24,992,000
Accumulated deficit ................................................................. (6,123,000) (149,000)
Less treasury stock at cost, 9,700 shares at May 31, 1995 and 1994 .................. (97,000) (97,000)
------------ -------------
Total Stockholders' Equity ........................................................ 20,323,000 26,297,000
------------ -------------
Total Liabilities and Stockholders' Equity ........................................ $ 80,058,000 $ 103,114,000
============ =============
See notes to consolidated financial statements.
18
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED MAY 31,
-----------------------------------------------------
1995 1994 1993
------------ ------------ -----------
Revenues:
Operating revenue ................................................. $ 50,816,000 $ 56,891,000 $63,716,000
Military housing projects' lease revenue .......................... 4,914,000 4,242,000 --
------------ ------------ -----------
55,730,000 61,133,000 63,716,000
Operating Costs and Expenses:
Operating expenses ................................................ 26,525,000 28,870,000 30,794,000
Selling, general and administrative expenses ...................... 22,677,000 24,743,000 29,746,000
Interest .......................................................... 1,485,000 1,548,000 1,618,000
Writedown of assets ............................................... 1,421,000 -- --
------------ ------------ -----------
52,108,000 55,161,000 62,158,000
Military Housing Projects' Costs and Expenses:
Operating expenses ................................................ 2,061,000 1,505,000 --
General and administrative expenses ............................... 1,197,000 419,000 --
Interest .......................................................... 3,405,000 3,073,000 --
Writedown of assets ............................................... 4,832,000 -- --
------------ ------------ -----------
11,495,000 4,997,000 --
Earnings (Loss) from Continuing
Operations before Income Taxes .................................... (7,873,000) 975,000 1,558,000
Provision (Benefit) for Income Taxes .................................. (2,425,000) 538,000 954,000
------------ ------------ -----------
Earnings (Loss) from Continuing Operations,
Net of Income Taxes ............................................... (5,448,000) 437,000 604,000
Earnings (Loss) from Discontinued
Operations, Net of Income Taxes ................................... (513,000) 325,000 1,277,000
Loss on Sales of Discontinued Operations,
Net of Income Taxes ............................................... (13,000) (1,081,000) --
------------ ------------ -----------
Net Earnings (Loss) ................................................... $( 5,974,000) $ (319,000) $ 1,881,000
============ ============ ===========
Net Earnings (Loss) Per Common Share:
Earnings (Loss) from Continuing Operation ......................... (1.06) $ .09 $ .12
Earnings (Loss) from
Discontinued Operations ......................................... (.10) .06 .25
Loss on Sales of Discontinued Operations .......................... (.00) (.21) --
------------ ------------ -----------
Net Earnings (Loss) ............................................... $ (1.16) $ ( .06) $ .37
============ ============ ===========
Weighted Average Number
of Shares Outstanding ........................................... 5,160,000 5,164,000 5,151,000
============ ============ ===========
See notes to consolidated financial statements.
19
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
MAY 31,
--------------------------------------------------------
1995 1994 1993
------------ ------------ ------------
COMMON STOCK:
Balance at beginning of year ................................. $ 1,551,000 $ 1,551,000 $ 1,537,000
Stock option plans (45,000 shares in 1993) ................... -- -- 14,000
------------ ------------ ------------
Balance at end of year ....................................... $ 1,551,000 $ 1,551,000 $ 1,551,000
============ ============ ============
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of year ................................. $ 24,992,000 $ 24,992,000 $ 24,812,000
Excess of exercise price over par value
of shares issued under stock option plans .................. -- -- 89,000
Tax benefit of stock options exercised ....................... -- -- 91,000
------------ ------------ ------------
Balance at end of year ....................................... $ 24,992,000 $ 24,992,000 $ 24,992,000
============ ============ ============
RETAINED EARNINGS
(ACCUMULATED DEFICIT):
Balance at beginning of year ................................. $ (149,000) $ 170,000 $ (1,327,000)
Net earnings (Loss) .......................................... (5,974,000) (319,000) 1,881,000
Dividends ($.075 per share in 1993) .......................... -- -- (384,000)
------------ ------------ ------------
Balance at end of year ....................................... $ (6,123,000) $ (149,000) $ 170,000
============ ============ ============
TREASURY STOCK:
Balance at beginning of year ................................. $ ( 97,000) $ (105,000) $ --
Purchase of 10,400 shares .................................... -- -- (105,000)
Reissuance of 700 shares ..................................... -- 8,000 --
------------ ------------ ------------
Balance at end of year ....................................... $ (97,000) $ ( 97,000) $ (105,000)
============ ============ ============
See notes to consolidated financial statements.
20
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MAY 31,
--------------------------------------------------
1995 1994 1993
------------ ------------ ------------
Cash Flows From Operating Activities:
Earnings (loss) from continuing operations
net of income taxes ................................... $ (5,448,000) $ 437,000 $ 604,000
Adjustments to reconcile earnings (loss) from
continuing operations net of income taxes
to net cash provided by operating activities:
Writedown of assets ..................................... 6,253,000 -- --
Depreciation and amortization ........................... 3,957,000 3,585,000 2,434,000
Provision for doubtful accounts
and notes receivable ................................ 233,000 241,000 142,000
Noncurrent deferred income taxes ........................ (433,000) (137,000) (205,000)
Gain on sale of assets .................................. -- -- (15,000)
Change in assets and liabilities, net
of effects for purchase of companies:
(Increase) decrease:
Receivables ........................................... 1,755,000 867,000 1,095,000
Materials and supplies ................................ 986,000 644,000 (538,000)
Prepaid expenses and other assets ..................... (298,000) (384,000) 2,405,000
Increase (decrease):
Accounts payable ...................................... (3,058,000) (2,788,000) (1,312,000)
Other accrued liabilities ............................. (2,569,000) (287,000) 1,071,000
Income taxes payable .................................. (659,000) 579,000 (10,000)
------------ ------------ ------------
Net cash provided by operating activities ............... 719,000 2,757,000 5,671,000
------------ ------------ ------------
Cash Flows From Investing Activities:
Capital expenditures .................................... (413,000) (1,242,000) (823,000)
Disposal of property and equipment ...................... 28,000 60,000 17,000
Payment for purchase of company ......................... -- -- (290,000)
Decrease (increase) in other assets ..................... 231,000 (2,844,000) (2,221,000)
Decrease in net assets
of discontinued operations ........................... 1,786,000 3,478,000 5,701,000
Military Housing projects' capital expenditures ......... (110,000) (5,882,000) (37,946,000)
Increase in Military Housing projects'
restricted cash and other assets ..................... (45,000) (2,850,000) --
Proceeds from sale of companies ......................... 8,254,000 -- --
------------ ------------ ------------
Net cash provided by (used in)
investing activities ................................. 9,731,000 (9,280,000) (35,562,000)
------------ ------------ ------------
Cash Flows From Financing Activities:
Payments under debt agreements .......................... (10,101,000) (7,695,000) (4,137,000)
Principal payments under
capital lease obligations ............................. (290,000) (221,000) (217,000)
Proceeds from issuance of long-term debt ................ 204,000 6,804,000 1,950,000
(TABLE CONTINUED ON FOLLOWING PAGE)
See notes to consolidated financial statements.
21
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
YEAR ENDED MAY 31,
--------------------------------------------------
1995 1994 1993
------------ ------------ ------------
Proceeds from issuance of non-recourse debt ............. $ -- $ 10,248,000 $ 30,769,000
Payments on Military Housing
projects' non-recourse obligations ...................... (881,000) (414,000) --
Increase (decrease) in Military Housing
projects' other non-recourse obligations ............... 44,000 (149,000) 1,700,000
Proceeds from issuance of common stock .................. -- -- 103,000
Dividends paid to stockholders .......................... -- -- (384,000)
Reissuance (purchase) of treasury stock ................. -- 8,000 (105,000)
------------ ------------ ------------
Net cash provided by (used in)
financing activities .................................. (11,024,000) 8,581,000 29,679,000
------------ ------------ ------------
Net increase (decrease) in
cash and cash equivalents ............................. (574,000) 2,058,000 (212,000)
Cash and cash equivalents
at beginning of year .................................. 3,728,000 1,670,000 1,882,000
------------ ------------ ------------
Cash and cash equivalents at end of year ................ $ 3,154,000 $ 3,728,000 $ 1,670,000
============ ============ ============
Supplemental disclosures of information:
Interest paid during the period:
Operating interest ...................................... $ 1,667,000 $ 1,793,000 $ 1,762,000
Military Housing projects ............................... 3,433,000 1,779,000 --
------------ ------------ ------------
$ 5,100,000 $ 3,572,000 $ 1,762,000
Income taxes paid during the period ...................... $ 645,000 $ 260,000 $ 270,000
Income taxes refunded during the period .................. $ 875,000 $ -- $ --
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
During 1995, 1994 and 1993, equipment and software acquired under capital
lease obligations amounted to $254,000, $0 and $224,000, respectively.
During 1995, the Company received $1,700,000 in promissory notes in connection
with the sale of Infrastructure Services, Inc.
During 1993, the Company received $780,000 in promissory notes and 100,000
shares of common stock of Allied Waste Industries, Inc. in connection with the
sale of the assets of Allstate Vacuum & Tanks, Inc.
See notes to consolidated financial statements.
22
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Team, Inc. (the "Company") include
the financial statements of the Company and its subsidiaries. All significant
intercompany transactions have been eliminated.
MATERIALS AND SUPPLIES
Materials and supplies are stated at the lower of cost (first-in, first-out
method) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization of assets are computed by the
straight-line method over the following estimated useful lives:
CLASSIFICATION LIFE
------------------------------------------------- -----------
Buildings........................................ 20-25 years
Machinery and equipment.......................... 2-10 years
MILITARY HOUSING PROJECTS
Buildings are stated at cost less accumulated depreciation. Depreciation is
computed by the straight-line method over estimated useful lives of 10 to 40
years.
GOODWILL AND PATENTS
Goodwill and patents are carried at cost less accumulated amortization.
Goodwill represents the excess of cost over the fair value of the net assets of
businesses purchased. The cost of patents is amortized over 17 years while
goodwill cost is amortized over 20 to 25 years. The accumulated amortization of
goodwill was $1,304,000 and $989,000 at May 31, 1995 and 1994, respectively.
Management periodically assesses the valuation of its goodwill to determine if
an impairment reserve is necessary. No such reserve was considered necessary at
May 31, 1995.
REVENUE RECOGNITION
The Company recognizes revenue when services are rendered.
INCOME TAXES
The Company accounts for taxes on income using the asset and liability method
wherein deferred tax assets and liabilities are recognized for the future tax
consequences of temporary differences between the carrying amounts and tax bases
of assets and liabilities using enacted rates.
CONCENTRATION OF CREDIT RISK
The Company provides services to the chemical, petrochemical, refining, pulp
and paper, power and steel industries throughout the United States. Although the
Company has a diversified customer base, a substantial portion of its business
is dependent upon the chemical and refining industry sectors.
23
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
EARNINGS PER SHARE
Earnings per common and common equivalent share for fiscal 1995, 1994 and 1993
were computed using 5,160,000, 5,160,000 and 5,137,000 weighted average common
shares outstanding during the respective years plus 0, 4,000, and 14,000
weighted average shares applicable to common stock equivalents, respectively.
Common stock equivalents are based on the assumed issuance of common stock for
dilutive options and warrants, net of assumed repurchase of common shares based
on the treasury stock method.
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company considers all highly
liquid investments purchased with a maturity of three months or less to be cash
equivalents.
DIVIDENDS
No dividends were paid during the current or prior fiscal year. 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.
RESTATEMENT
The financial statements and related footnotes have been restated to reflect
the Transportation Services segment as discontinued operations. See Note (2).
2. DISCONTINUED OPERATIONS
In April 1995, the Company sold substantially all of the assets of its
Transportation Services segment and recognized a gain of $444,000 net of income
taxes of $287,000. Proceeds from this divestiture amounted to approximately $3.7
million and were used primarily to reduce the Company's long-term debt. As a
result of this sale, the Company is no longer in the transportation services
business and has restated prior financial statements to reflect this segment as
discontinued operations. A summary of the discontinued Transportation Services'
assets and liabilities as of May 31, 1995 and 1994 follows:
MAY 31,
----------------------------
1995 1994
---------- ----------
Assets:
Current assets ........................... $ 147,000 $2,366,000
Property and equipment, net .............. -- 2,689,000
Other long-term assets ................... -- 667,000
---------- ----------
147,000 5,722,000
Liabilities:
Current liabilities ...................... 23,000 39,000
---------- ----------
Net Assets ................................. $ 124,000 $5,683,000
========== ==========
24
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the results of discontinued transportation operations for each of
the three years ended May 31, 1995, 1994, and 1993 are as follows:
MAY 31,
------------------------------------------------------
1995 1994 1993
----------- ----------- -----------
Revenues ........................................................... $ 7,226,000 $10,507,000 $13,683,000
Costs and Expenses:
Operating expenses ............................................... 5,637,000 7,669,000 9,409,000
Selling, general and administrative expenses ..................... 1,655,000 2,150,000 2,111,000
Interest expense ................................................. 154,000 195,000 228,000
Writedown of assets .............................................. 550,000 -- --
----------- ----------- -----------
Earnings (loss) before taxes ....................................... (770,000) 493,000 1,935,000
Provision (benefit) for taxes ...................................... (257,000) 168,000 658,000
----------- ----------- -----------
Earnings (loss) after taxes ........................................ $ (513,000) $ 325,000 $ 1,277,000
=========== =========== ===========
In July 1994, the Company sold substantially all the assets of Infrastructure
Services, Inc. The purchase price consisted of $4,550,000 in cash and a
subordinated promissory note in the principal amount of $1,700,000. This note
bears interest at 9 percent per annum payable semi-annually and matures July
2002. A principal payment of $500,000 is due and payable in August 1997 and
principal payments of $120,000 are due and payable semi-annually thereafter. The
cash proceeds from the sale were used to reduce the Company's term loan with its
primary lender. In the fourth quarter of fiscal 1994, the Company recognized an
additional loss of $1,081,000 net of income tax benefit of $300,000 for the
disposition of this discontinued operation and in the second quarter of fiscal
1995 the Company recognized an additional loss of $457,000 net of income tax
benefit of $236,000 for the disposition of this discontinued operation. At May
31, 1994, net assets of the discontinued operations of approximately $6,250,000
consisted of the estimated net realizable value of the assets and liabilities
sold.
In April 1993, the Company sold the assets of Allstate Vacuum & Tanks, Inc.
and recognized a pre-tax gain of $355,000. This gain is included as discontinued
operations as of May 31, 1993.
3. MILITARY HOUSING PROJECTS
During fiscal 1992, the Company was awarded contracts to develop and construct
four residential military housing projects for the Departments of the Army, Navy
and Air Force which were assigned to a subsidiary of the Company, First America
Capital Corporation, and its subsidiaries. Another subsidiary of the Company,
First America Development Corporation, acted as on-site project manager. Under
the Military housing program, residential housing projects are constructed by
the private sector for lease to the United States government for a twenty-year
term. The costs of construction of these residential projects were financed in
June 1992 through the sale of approximately $52.5 million of Certificates of
Participation in lease payments to be made by the United States government in
connection with the rental of the units (the "Certificates of Participation").
These Certificates of Participation bear interest at the rate of 8.5 percent per
annum.
The 150-unit Military Housing project in New Mexico was completed and a lease
was entered into by the United States government on July 29, 1993. The 300-unit
Military Housing project located near Pensacola, Florida was completed and the
lease was entered into effective October 12, 1993. The 250-unit Military Housing
project located near Ft. Bragg, North Carolina was completed and the lease
entered into effective November 1, 1993. Construction of the fourth project,
located near Ft. Stewart, Georgia, never commenced as a result of extensive
delays in obtaining necessary permits, easements and licenses. In fiscal 1993,
the Company's subsidiary filed a Claim and Request for
25
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Change Order with the United States Army Corps of Engineers for additional costs
and expenses as a result of these delays aggregating $4.7 million, approximately
$1.4 million of which relate to claims of the general contractor. The decision
of the Contracting Officer with respect to this claim was appealed to the Armed
Services Board of Contract Appeals. In November 1993, the Company's subsidiary's
right to proceed with construction of this project was terminated by the Corps
and the portion of the Certificates of Participation attributable to the Ft.
Stewart project was redeemed. The Company's subsidiary has appealed the Corps'
decision to terminate the contract to the Armed Services Board of Contract
Appeals.
Payments due on the Certificates of Participation are made solely from rent
paid by the government and available interest earnings. Rent payments under the
lease agreements are held by the Trustee, United States Trust Company of New
York, as restricted cash and are sufficient to cover principal and interest on
the Certificates of Participation in full. The Government's obligation to make
these lease payments is subject to annual congressional appropriation. Although
this debt is non-recourse to the Company and its subsidiaries, the Company's
subsidiaries have executed mortgages in favor of the Trustee for the Certificate
holders encumbering each subsidiary's fee interest in the properties. Pursuant
to the mortgages, the Trustee has obtained a security interest in the projects
to secure payment to the Certificate holders. Annual principal installments on
this non-recourse debt are as follows: 1996, $957,000; 1997, $1,041,000; 1998,
$1,131,000; 1999, $1,229,000; 2000, $1,336,000 and thereafter, $34,028,000.
4. WRITEDOWN OF ASSETS
The loss from continuing operations includes pre-tax charges of $6,253,000,
primarily representing writedowns in the carrying value of certain of the
Company's assets. The charge included provisions of $4,832,000 to reduce the
carrying value of the military housing projects and related deferred expenses.
In addition, the Company recorded pre-tax charges of $1,421,000 to write down
the value of certain assets and to record provisions for certain deferred
charges and account receivable losses.
5. RECEIVABLES
Receivables consist of:
MAY 31,
------------------------------
1995 1994
----------- ------------
Trade accounts receivable ................. $ 7,691,000 $ 10,483,000
Current income tax receivable ............. 722,000 --
Other receivables ......................... 199,000 550,000
Allowance for doubtful accounts ........... (204,000) (242,000)
----------- ------------
Total .................................. $ 8,408,000 $ 10,791,000
=========== ============
26
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of:
MAY 31,
-------------------------
1995 1994
---------- ----------
Payroll and other compensation expenses .......... $1,172,000 $1,130,000
Retainage Payable ................................ -- 1,267,000
Insurance accruals ............................... 889,000 973,000
Other ............................................ 644,000 1,348,000
---------- ----------
Total ......................................... $2,705,000 $4,718,000
========== ==========
7. INCOME TAXES
The provisions (benefits) for federal and state income taxes attributable to
pre-tax earnings (loss) from continuing operations are as follows:
YEAR ENDED MAY 31,
-------------------------------------------
1995 1994 1993
----------- --------- -----------
Federal income taxes:
Current ..................... $(1,705,000) $ 999,000 $ 1,013,000
Deferred .................... (867,000) (540,000) (327,000)
State income taxes:
Current ..................... 68,000 177,000 268,000
Deferred .................... 79,000 (98,000) --
----------- --------- -----------
Total ....................... $(2,425,000) $ 538,000 $ 954,000
=========== ========= ===========
A reconciliation between income taxes related to earnings (loss) from
continuing operations before income taxes and income taxes computed by applying
the statutory federal income tax rate to such earnings follows:
YEAR ENDED MAY 31,
----------------------------------
1995 1994 1993
----------- -------- ----------
Earnings (loss) from continuing operations
before federal income taxes .............. $(7,873,000) $975,000 $1,558,000
=========== ======== ==========
Computed income taxes at statutory rate .... $(2,677,000) $332,000 $ 530,000
Goodwill amortization ...................... 147,000 117,000 128,000
State income taxes, net of federal tax
benefit .................................. 97,000 52,000 177,000
Other ...................................... 8,000 37,000 119,000
----------- -------- ----------
Total .................................. $(2,425,000) $538,000 $ 954,000
=========== ======== ==========
27
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the Company's deferred tax assets and liabilities were comprised of
the following:
YEAR ENDED MAY 31,
-----------------------------
1995 1994
----------- -----------
Basis differences for receivables .......... $ (47,000) $ (146,000)
Accelerated tax depreciation ............... (714,000) (1,185,000)
Other ...................................... -- (92,000)
----------- -----------
Total deferred tax liabilities ............. (761,000) (1,423,000)
=========== ===========
Accrued expenses ........................... 476,000 803,000
Basis differences for inventory ............ 53,000 80,000
Basis differences for other assets ......... -- 633,000
Net operating loss carryforward ............ 977,000 --
Other ...................................... 136,000 --
----------- -----------
Total deferred tax assets .................. 1,642,000 1,516,000
----------- -----------
Net deferred tax assets .................... $ 881,000 $ 93,000
=========== ===========
No valuation allowance was required for the deferred tax assets. Net deferred
tax assets (liabilities) are classified in the consolidated balance sheets as
follows:
YEAR ENDED MAY 31,
----------------------
1995 1994
-------- ---------
Prepaid expenses and other current assets .......... $793,000 $ 439,000
Other assets ....................................... 88,000 --
Deferred income taxes payable ...................... -- (346,000)
-------- ---------
Net deferred tax assets ............................ $881,000 $ 93,000
======== =========
The Company has a net operating loss carryforward of $2,578,000 at May 31,
1995, which is subject to expire in fiscal year 2010.
8. DEBT AND CREDIT ARRANGEMENTS
Long term debt consists of:
YEAR ENDED MAY 31,
------------------------------
1995 1994
----------- -----------
Term loan ................................ $ 3,950,000 $10,750,000
Revolving credit agreement ............... 8,817,000 10,031,000
Promissory note .......................... -- 1,944,000
Term note ................................ 1,558,000 1,630,000
Capital lease obligations ................ 275,000 311,000
Other .................................... 371,000 238,000
----------- -----------
..................................... 14,971,000 24,904,000
Less current portion ..................... 1,344,000 3,903,000
----------- -----------
Total ................................... $13,627,000 $21,001,000
=========== ===========
28
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Long-term debt:
Effective August 24, 1995, the Company extended and revised its bank credit
agreement. The revised agreement, as amended September 13, 1995, provides a
total credit facility of $15,950,000, consisting of a $3,950,000 term loan and a
$12,000,000 revolving line of credit. The term loan is due December 1, 1996, and
provides for quarterly principal payments beginning September 30, 1995, with the
remaining balance due at maturity. The revolving line of credit also expires on
December 1, 1996. Both the term loan and the revolving line of credit bear
interest at rates not exceeding the bank's prime rate of interest (9 percent at
May 31, 1995) plus one-half of one percent. A commitment fee of 0.375 percent is
payable on the daily average unused amount of the revolving line of credit, less
the aggregate amount of all outstanding letters of credit. At May 31, 1995, the
Company had a $650,000 letter of credit outstanding against the revolving line
of credit. Amounts outstanding under the revolving line of credit were
$8,817,000 at May 31, 1995, and no additional amounts were available for
borrowing under the terms of the agreement.
Loans under the Company's bank credit agreement 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, advances, liens,
leases and indebtedness, among other things.
In addition to the loans under the credit agreement with its primary lender,
the Company has a term note with a bank that is due June 15, 1999, bears
interest at prime plus 1.25 percent and provides for sixty-six installments, the
first six of which were interest only, the next fifty-nine of which will be even
monthly installments of principal and interest, and the final installment being
all unpaid principal and accrued interest. This loan is secured by land and
buildings.
Maturities of long-term debt are as follows:
YEAR ENDING MAY 31,
-------------------------------------------------------------
1996 ........................................................ $ 1,344,000
1997 ........................................................ 12,066,000
1998 ........................................................ 304,000
1999 ........................................................ 266,000
2000 ........................................................ 991,000
-----------
Total ....................................................... $14,971,000
===========
29
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. STOCK OPTIONS AND EMPLOYEE BENEFIT
PLANS AND SHAREHOLDER RIGHTS PLAN
Pursuant to the option plans, the Company has granted options to purchase
common stock to officers, directors and employees at prices equal to or greater
than market value of the common stock on the date of grant. The exercise price,
terms and other conditions applicable to each option granted under the Company's
plans are generally determined by the Compensation Committee at the time of
grant of each option and may vary. Transactions under all plans are summarized
below:
YEAR ENDED MAY 31,
--------------------------------
1995 1994 1993
-------- -------- --------
Shares under option, beginning of year ..... 559,750 396,300 419,150
Changes during the year:
Granted .................................. 65,400 182,900 71,200
Exercised ................................ -- -- (45,000)
Cancelled ................................ (113,100) (19,450) (49,050)
-------- -------- --------
Shares under option, end of year ........... 512,050 559,750 396,300
======== ======== ========
Average option price per share ............. $ 5.28 $ 5.64 $ 6.50
======== ======== ========
Exercisable at end of year ................. 398,350 351,900 305,400
======== ======== ========
Available for future grant ................. 555,950 503,250 616,700
======== ======== ========
Under the Team, Inc. Salary Deferral Plan contributions are made by qualified
employees, at their election, and matching Company contributions are made at
specified rates. Company contributions in fiscal 1995, 1994 and 1993 were
$214,000, $301,000 and $264,000, respectively.
Employer contributions for the Team, Inc. Employee Stock Ownership Plan are
determined at the discretion of the Company's Board of Directors. The Plan does
not allow for employee contributions. The Company's contributions to the Plan in
1994 were $125,000. No contributions were made in 1995 nor 1993.
On October 24, 1990, the Board of Directors of the Company adopted a
Shareholder Rights Plan ("Rights Plan"). Pursuant to the Rights Plan, the Board
of Directors declared a dividend distribution of one right ("Right") for each
outstanding share of the Company's common stock ("Common Stock"), and on each
share subsequently issued until separate Rights are distributed, or the Rights
expire or are redeemed.
Under the Rights Plan, each Right entitles the registered holder to purchase
from the Company a unit consisting of one-hundredth of a share (a "Unit") of
Series A Participatory Preferred Stock, $100.00 par value ("Preferred Stock") at
a purchase price of $100.00 per Unit, subject to adjustment. Under certain
circumstances, the Company may substitute an equivalent value of other
securities of the Company, property or cash or any combination thereof in lieu
of the Preferred Stock. Until exercisable, the Rights will not be transferrable
apart from the Common Stock. The Rights will be exercisable only after an
individual or group acquires or obtains the right to acquire 15 percent or more
of the outstanding shares of Common Stock or commencement of a tender offer or
exchange offer for 15 percent or more of the outstanding shares of Common Stock.
In the event the Company is acquired in a merger or other business combination
transaction, or more than 50 percent of the Company's assets, cash flow or
earning power is sold or transferred, each Right will entitle its holder to
receive, upon exercise of the Right, common stock of the acquiring company
having a market value at the time of such transactions equal to two times the
exercise price of the Right. In the event that an individual or group has
acquired,
30
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
or obtains the right to acquire 15 percent or more of the outstanding shares of
Common Stock, each holder of a Right would thereafter have the right to receive,
upon exercise of such Right, that number of shares of Common Stock having a
value of twice the exercise price of the Right. This right would not arise in
the event of a tender offer or exchange offer for all of the outstanding Common
Stock at a price and on terms which the Board of Directors determines to be fair
to and otherwise in the best interest of the Company and its shareholders.
The Company may redeem the Rights in whole, but not in part, at a price of
$.01 per Right (subject to adjustment) prior to the time they become
exercisable. The Rights will expire at the close of business on October 1, 2000,
unless earlier redeemed. At no time will the Rights have any voting rights.
10. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company's capital leases relate to certain office facilities, computer
equipment and software. Property, plant and equipment include assets under
capital lease in the amount of $831,000 and $876,000 at May 31, 1995 and 1994,
before accumulated amortization of $226,000 and $198,000, respectively. Other
assets includes software under capital lease in the amount of $164,000 and $0 at
May 31, 1995 and 1994, before accumulated amortization of $19,000 and $0,
respectively. The Company also has operating leases which relate to facilities
and transportation and other equipment which are leased over terms ranging from
one to five years with typical renewal options and escalation clauses. Rental
payments on operating leases with a term in excess of one year charged against
earnings were $1,735,000, $2,216,000 and $3,220,000 in 1995, 1994, and 1993,
respectively.
Minimum rental commitments for future periods are as follows:
OPERATING
YEAR ENDING MAY 31, CAPITAL LEASES LEASES TOTAL
----------------------------------------------------------------------- -------------- ---------- ----------
1996 .................................................................. $179,000 $1,215,000 $1,394,000
1997 .................................................................. 96,000 862,000 958,000
1998 .................................................................. 40,000 532,000 572,000
1999 .................................................................. -- 208,000 208,000
2000 .................................................................. -- 98,000 98,000
-------- ---------- ----------
Total minimum lease payments .......................................... 315,000 $2,915,000 $3,230,000
========== ==========
Less amount representing interest ................................... 40,000
--------
Present value of net minimum lease payments ........................... $275,000
========
LEGAL PROCEEDINGS
A subsidiary of the Company was committed, pursuant to an agreement with the
United States Army Corps of Engineers (the "Corps"), to construct a 200 unit
Federal housing project near the Ft. Stewart Military Reservation located in
Hinesville, Georgia. Construction of this project never commenced as a result of
extensive delays in obtaining easements, licenses and permits necessary in order
to develop the project. In fiscal 1993, the Company filed a Claim and Request
for Change Order with the Corps for additional costs and expenses incurred as a
result of these delays, which is presently being appealed. During fiscal 1994,
the Corps terminated the Agreement, thereby cancelling the project. The Company
has separately appealed the Corps' decision to terminate the Agreement. At this
time, the Company cannot predict the final outcome of its appeal of the Corps'
decision to cancel the project or of its claim for additional costs and
expenses.
31
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company and certain subsidiaries are also involved in various lawsuits and
subject to various claims and proceedings encountered in the normal conduct of
business. In the opinion of management, while the final resolution of any such
litigation or other matters may have an impact on the Company's consolidated
financial results for a particular reporting period, any uninsured losses that
might arise from these lawsuits and proceedings would not have a material
adverse effect on the Company's consolidated financial position.
11. INDUSTRY SEGMENT INFORMATION AND MAJOR CUSTOMERS
The following table sets forth: revenues, operating profit after corporate
allocation and amortization of goodwill, identifiable assets, capital
expenditures, and provision for depreciation and amortization attributable to
each of the Company's two industry segments of its continuing operations.
Identifiable assets are those assets used in each industry segment. Corporate
assets are principally cash, buildings, notes receivable and intangibles.
Intersegment transactions have been eliminated.
YEAR ENDED MAY 31,
-------------------------------------------------
1995 1994 1993
-------- --------- --------
(IN THOUSANDS)
Environmental services .............................................. $ 50,816 $ 56,891 $ 63,716
Military Housing projects ........................................... 4,914 4,242 --
-------- --------- --------
Total .............................................................. $ 55,730 $ 61,133 $ 63,716
======== ========= ========
Operating profit after corporate allocation
and amortization of goodwill:(1)
Environmental services .............................................. $ 3,342 $ 4,226 $ 4,896
Military Housing projects ........................................... (3,176) 2,318 --
General corporate ................................................... (3,149) (948) (1,720)
Interest expense .................................................... (4,890) (4,621) (1,618)
-------- --------- --------
Earnings before income taxes ...................................... $ (7,873) $ 975 $ 1,558
======== ========= ========
Identifiable assets at end of period:
Environmental services ............................................ $ 24,523 $ 28,971 $ 31,912
Military Housing projects ......................................... 45,934 53,569 42,581
General corporate ................................................. 9,601 20,574 22,395
-------- --------- --------
Total ........................................................... $ 80,058 $ 103,114 $ 96,888
======== ========= ========
Capital expenditures during period:
Environmental services ............................................ $ 640 $ 1,211 $ 980
Military Housing projects ......................................... 110 5,882 37,946
General corporate ................................................. 27 31 67
-------- --------- --------
Total ........................................................... $ 777 $ 7,124 $ 38,993
======== ========= ========
32
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Provision for depreciation and amortization:
Environmental services .................. $1,658 $1,709 $1,751
Military Housing projects ............... 1,449 1,262 --
General corporate ....................... 850 614 683
------ ------ ------
Total ................................. $3,957 $3,585 $2,434
====== ====== ======
(1) Included in 1995 operating profits are one-time charges representing
writedowns taken in the second quarter as follows:
Environmental services.............. $ 724
Military Housing projects........... 4,832
General Corporate................... 697
------
$6,253
======
For the three years ended May 31, 1995, there were no customers with sales
greater than 10 percent of consolidated revenues.
33
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The Company's consolidated results of operations by quarter for the fiscal
years ended May 31, 1995 and 1994 were as follows: (in thousands except per
share amounts)
FISCAL 1995
-----------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
Revenues ............................................... $ 14,300 $ 13,655 $ 14,393 $ 13,382
======== ======== ======== ========
Gross Profit ........................................... $ 7,077 $ 6,550 $ 6,985 $ 6,532
======== ======== ======== ========
Earnings (Loss) from Continuing
Operations, Net of Income Taxes ...................... $ (247) $ (5,132) $ (77) $ 8
Earnings (Loss) from Discontinued
Operations, Net of Income Taxes ...................... 11 (452) 117 (189)
Gain (Loss) on Sale of Discontinued
Operations, Net of Income Taxes ...................... -- (457) -- 444
-------- -------- -------- --------
Net Earnings (Loss) .................................... $ (236) $ (6,041) $ 40 $ 263
======== ======== ======== ========
Net Earnings (Loss) per Common Share:
Earnings (Loss) from
Continuing Operations .............................. $ (0.05) $ (0.99) $ (0.01) $ .00
Earnings (Loss) from
Discontinued Operations ............................ -- (0.09) 0.02 (0.04)
Earnings (Loss) on Sales of
Discontinued Operations ............................ -- (0.09) -- 0.09
-------- -------- -------- --------
Net Earnings (Loss) .................................. $ (0.05) $ (1.17) $ 0.01 $ 0.05
======== ======== ======== ========
FISCAL 1994
-----------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- --------
Revenues ..................................................... $13,909 $16,792 $15,383 $ 15,049
======= ======= ======= ========
Gross Profit ................................................. $ 6,910 $ 8,718 $ 7,875 $ 7,255
======= ======= ======= ========
Earnings (Loss) from Continuing
Operations, Net of Income Taxes ............................ $ 78 $ 289 $ 242 $ (172)
Earnings (Loss) from Discontinued
Transportation Operations,
Net of Income Taxes ........................................ 126 152 62 (15)
Loss on Sale of Discontinued Operations,
Net of Income Taxes ........................................ -- -- -- (1,081)
------- ------- ------- --------
Net Earnings (Loss) .......................................... $ 204 $ 441 $ 304 $ (1,268)
======= ======= ======= ========
Net Earnings (Loss) per Common Share:
Earnings (Loss) from
Continuing Operations .................................... $ 0.02 $ 0.06 $ 0.05 $ (0.04)
Earnings (Loss) from Discontinued
Transportation Operations ................................ 0.02 0.03 0.01 0.00
Earnings (Loss) on
Sale of Discontinued Operations .......................... -- -- -- (0.21)
------- ------- ------- --------
Net Earnings (Loss) ........................................ $ 0.04 $ 0.09 $ 0.06 $ (0.25)
======= ======= ======= ========
34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements concerning accounting and financial
disclosures with the Company's independent accountants within the past two
years.
P A R T III.
THE INFORMATION CONTAINED IN ITEMS 10, 11, 12 AND 13 OF PART III HAS BEEN
OMITTED FROM THIS REPORT ON FORM 10-K SINCE THE COMPANY WILL FILE, NOT LATER
THAN 120 DAYS FOLLOWING THE CLOSE OF ITS FISCAL YEAR ENDED MAY 31, 1995, ITS
DEFINITIVE PROXY STATEMENT. THE INFORMATION REQUIRED BY PART III WILL BE
INCLUDED IN THAT PROXY STATEMENT AND SUCH INFORMATION IS HEREBY INCORPORATED BY
REFERENCE, WITH THE EXCEPTION OF THE INFORMATION UNDER THE HEADINGS
"COMPENSATION COMMITTEE REPORT" AND "COMPARISON OF TOTAL SHAREHOLDERS' RETURN."
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS
The following consolidated financial statements of Team, Inc. and its
subsidiaries are included in Part II, Item 8.
PAGE
----
Independent Auditors' Report ............................................... 17
Consolidated Balance Sheets - May 31, 1995 and 1994 ........................ 18
Consolidated Statements of Operations - Years ended May 31, 1995,
1994 and 1993 ............................................................ 19
Consolidated Statements of Stockholders' Equity - Years ended
May 31, 1995, 1994 and 1993 .............................................. 20
Consolidated Statements of Cash Flows - Years ended May 31, 1995,
1994 and 1993 ............................................................ 21
Notes to Consolidated Financial Statements ................................. 23
2. FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts ............................ S-1
All other schedules are omitted because they are not applicable or because the
required information is included in the Consolidated Financial Statements or
Notes thereto.
35
3. EXHIBITS
SEQUENTIAL
PAGE NO.
----------
3(a)* Second Restated Articles of Incorporation of the Company
(filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-2, File No. 33-31663).
3(b)* Bylaws of the Company (filed as Exhibit 4.2 to the
Company's Registration Statement on Form S- 2, File No.
33-31663).
4(a)* Certificate representing shares of common stock of
Company (filed as Exhibit 4(1) to the Company's
Registration Statement on Form S-1, File No. 2-68928).
4(b)* Statement of Relative Rights and Preferences of Series A
Participatory Preferred Stock of Team, Inc. (filed as
Exhibit 2.2 to the Company's Form 8-A with the
Securities and Exchange Commission on October 26, 1990).
4(c)* Rights Agreement dated as of October 24, 1990 between
Team, Inc. and Ameritrust Company National Association
as Rights Agent (filed as Exhibit 2.1 to the Company's
Form 8-A with the Securities and Exchange Commission on
October 26, 1990).
10(a) Asset Purchase Agreement dated April 10, 1995 by and
between Hellums Service, Inc. and Hellums Services II,
Inc.
10(b) Asset Purchase Agreement dated April 10, 1995 by and
between Elsik, Inc. and Elsik II, Inc.
10(c)* Asset Purchase Agreement dated April 13, 1994 by and
among ISI Acquisition Corp., Infrastructure Services,
Inc., Epoxy Design Systems, Inc., General Gunite &
Construction Co., Inc., Universal Services Co., Inc.,
Universal Texas Lite and Barricade, Inc., Water Company
of America, Universal Federal Services, Inc. and Team,
Inc. as amended by the Amendment to Asset Purchase
Agreement dated July 1, 1994 and Second Amendment to
Asset Purchase Agreement dated July 15, 1994 (filed as
Exhibit 10(a) to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1994).
10(d)* Assignment of Rents and Security Agreement dated June 1,
1992 by Ft. Bragg 801, Inc. for the benefit of Security
Pacific National Trust Company (New York) ("Security")
in its capacity as the Trustee for the Certificate
Holders under that certain Trust Agreement Relating to
Military Family Housing Projects (the "Trust Agreement")
(filed as Exhibit 10(b) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1994).
10(e)* Assignment of Rents and Security Agreement dated June 1,
1992 by Portales 801, Inc. for the benefit of Security
in its capacity as the Trustee for the Certificate
Holders under the Trust Agreement (filed as Exhibit
10(c) to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1994).
10(f)* Assignment of Rents and Security Agreement dated June 1,
1992 by Pensacola 801, Inc. for the benefit of Security
in its capacity as the Trustee for the Certificate
Holders under the Trust Agreement (filed as Exhibit
10(d) to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1994).
10(g)* Lease Agreement dated July 29, 1993 by and between the
United States of America and Portales 801, Inc. (filed
as Exhibit 10(e) to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1994).
10(h)* Lease No. DACA21-5-94-0442 dated November 16, 1993 by
and between Ft. Bragg 801, Inc. and the United States of
America (filed as Exhibit 10(f) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31,
1994).
10(i)* Lease No. N62467-94-RP-00001 dated October 12, 1993 by
and between Pensacola 801, Inc. and the United States of
America (filed as Exhibit 10(g) to the Company's Annual
Report on Form 10- K for the fiscal year ended May 31,
1994).
10(j)* Mortgage, Security Agreement and Collateral Assignment
of Lease dated June 1, 1992 by Pensacola 801, Inc. for
the benefit of Security Pacific National Trust Company
(New York) and Barnett Banks Trust Company, N.A. as
Trustee for the Certificate Holders, The Toyo Trust &
Banking Co., Ltd. and Canadian Imperial Bank of Commerce
(filed as Exhibit 10(h) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1994).
10(k)* Amended and Restated Deed of Trust, Security Agreement
and Collateral Assignment of Lease dated June 1, 1992
from Ft. Bragg 801, Inc. to Palmer Wilcox, Mortgage
Trustee, and Security, Trustee, The Toyo Trust & Banking
Co., Ltd. and Canadian Imperial Bank of Commerce (filed
as Exhibit 10(i) to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1994).
36
10(l)* Amended, Modified and Restated Construction Deed of
Trust, Security Agreement and Collateral Assignment of
Lease dated June 1, 1992 by Portales 801, Inc. to R. Max
Best (Trustee) for the benefit of Security Pacific
National Trust Company (New York), as Trustee for the
Certificate Holders, The Toyo Trust & Banking Co., Ltd.
and Canadian Imperial Bank of Commerce (filed as Exhibit
10(j) to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1994).
10(m)* Construction Loan Agreement between Team, Inc. and
Sterling Bank dated November 15, 1993 (filed as Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for
the quarter ended November 30, 1993).
10(n)* Credit Agreement between Texas Commerce Bank, N.A. and
Team, Inc. dated April 7, 1994 (filed as Exhibit 10.4 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1994).
10(o)* First Amendment and Supplement to Credit Agreement; and
Term Note Modification Agreement between Texas Commerce
Bank, N.A. and Team, Inc. effective as of February 28,
1995 (filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 28,
1995).
10(p) Amended and Restated Credit Agreement by and among Texas
Commerce Bank, N.A. and Team, Inc. and its subsidiaries
dated August 24, 1995.
10(q) Letter Agreement by and between Texas Commerce Bank, N.A.
and Team, Inc. dated September 13, 1995.
10(r)* 1987 Amended and Restated Stock Option Plan dated
December 16, 1991 (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1994).
10(s)# Employment Agreements and Consulting and Salary
Continuation Agreements between the Company and certain of
its executive officers (filed as Exhibit 10(f) to the
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1988, as Exhibit 10 to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31,
1989, as amended by Form 8 dated October 19, 1989, and
Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended November 30, 1990).
10(t)# Employment Agreement effective October 1, 1990 between the
Company and Ms. Valerie L. Banner, Vice President and
General Counsel of Team, Inc.
10(u)# Employment Agreement effective as of November 1, 1994
between the Company and Mr. John M. Slack, Vice
President of Team, Inc.
10(v)# Amendment to Consulting and Salary Continuation
Agreement dated September 20, 1994 by and between Team,
Inc. and Mr. H. Wesley Hall (filed as Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the
quarterly period ended August 31, 1994).
10(w)# Supplemental Retirement Agreement dated as of December
24, 1990 between Team, Inc. and H. Wesley Hall (filed as
Exhibit 10(j) to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1991) as amended
by the First Amendment to Supplemental Retirement
Agreement dated June 23, 1994 (filed as Exhibit 10(o) to
the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1994).
10(x)# Supplemental Retirement Trust dated as of July 18, 1994
between Team, Inc. and Texas Commerce Bank (filed as
Exhibit 10(p) to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1994).
10(y)* Fifth Amendment and Restatement of the Team, Inc. Salary
Deferral Plan dated March 26, 1991 (filed as Exhibit
10(f) to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1992).
10(z)* Sixth Amendment to Salary Deferral Plan dated as of
October 10, 1991. (filed as Exhibit 10(l) to the
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1992).
10(aa)* Team, Inc. Employee Stock Ownership Plan, as amended by
First Amendment thereto, Second Amendment thereto and by
two Third Amendments thereto adopted in the alternative
(filed as Exhibit 10(h) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1989),
and by Fourth Amendment dated as of December 31, 1991
(filed as Exhibit 10(m) to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1992).
10(bb)# Team, Inc. Non-Employee Director Stock Option Plan
effective December 1991 (filed as Exhibit 10(q) to the
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1992).
10(cc)# First Amendment to Non-Employee Directors' Stock Option
Plan dated November 2, 1993 (filed as Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1994).
10(dd)# Second Amendment to Team, Inc. Non-Employee Directors'
Stock Option Plan effective as of October 28, 1994
(filed as Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended November 30, 1994).
37
10(ee)* Team, Inc. 1992 Stock Option Plan for Key Employees of
Acquired Business effective January 1992 (filed as
Exhibit 10(r) to the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1992).
21 Subsidiaries of the Company.
23 Consent of Certified Public Accountants.
27 Financial Data Schedule.
* Incorporated herein by reference to the respective filing identified above.
# Management contracts and/or compensation plans required to be filed as an
exhibit to this Form 10-K pursuant to Item 14(c) of Form 10-K.
(B) REPORTS ON FORM 8-K.
There were no reports filed by the Company on Form 8-K during the fourth
quarter of fiscal 1995.
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized September 13, 1995.
Team, Inc.
By: WILLIAM A. RYAN
William A. Ryan, President
and Chief Executive Officer
(Pricipal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacity and on the dates indicated.
WILLIAM A. RYAN President, Chief September 13, 1995
(William A. Ryan) Executive Officer
and Director
SIDNEY B. WILLIAMS Director September 13, 1995
(Sidney B. Williams)
______________________ Director September 13, 1995
(H. Wesley Hall)
JACK M. JOHNSON, JR. Director September 13, 1995
(Jack M. Johnson, Jr.)
E. THEODORE LABORDE Director September 13, 1995
(E. Theodore Laborde)
JOHN L. FARRELL, JR. Director September 13, 1995
(John L. Farrell, Jr.)
THOMAS N. AMONETT Director September 13, 1995
(Thomas N. Amonett)
JOHN M. SLACK Vice President and September 13, 1995
(John M. Slack) Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
39
SCHEDULE II
TEAM, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
(B)
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COST AND TO OTHER (A) AT END
CLASSIFICATION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
-------------- ---------- ---------- -------- ---------- ----------
Deducted from assets to which they apply:
Allowance for doubtful accounts:
Year ended May 31, 1995 ............................... $242 $205 $-- $243 $204
Year ended May 31, 1994 ............................... 164 164 -- 86 242
Year ended May 31, 1993 ............................... 108 142 -- 86 164
Allowance for notes receivable:
Year ended May 31, 1995 ............................... $ 77 $ 28 $163 $-- $268
Year ended May 31, 1994 ............................... -- 77 -- -- 77
(A) Net write-off of bad debt
(B) Included in writedown
S1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1995 COMMISSION FILE NUMBER 1-8604
--------------------
TEAM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 74-1765729
(STATE OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
1001 FANNIN STREET, SUITE 4656, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 659-3600
------------------
EXHIBITS
Volume II
S2