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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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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, 1996
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
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TEAM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 74-1765729
(STATE OF INCORPORATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
1019 SOUTH HOOD STREET, ALVIN, TEXAS 77511
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 331-6154
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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
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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 5, 1996, 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
$9,291,474.
DOCUMENTS INCORPORATED BY REFERENCE
Part III. Portions of the Definitive Proxy Statement for the 1996 Annual Meeting
of Shareholders of Team, Inc. to be held October 31, 1996.
================================================================================
FORM 10-K INDEX
PART 1
PAGE
Item 1. Business.........................................................2
Item 2. Properties.......................................................8
Item 3. Legal Proceedings................................................9
Item 4. Submission of Matters to a Vote of Security Holders..............9
PART II
Item 5. Market for Team's Common Equity and Related Stockholder Matters..10
Item 6. Selected Financial Data..........................................10
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................12
Item 8. Consolidated Financial Statements................................15
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure...........................................33
PART III
Item 10. Directors and Executive and Other Officers of Team...............33
Item 11. Executive Compensation...........................................33
Item 12. Security Ownership of Certain Beneficial Owners and Management...33
Item 13. Certain Relationships and Related Transactions...................33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..33
1
PART 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 monitoring and industrial
repair services. Environmental monitoring services, together with on-stream leak
repair and related industrial services for piping systems and process equipment,
are provided by a subsidiary 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 management is presently pursuing negotiations to sell
the Military Housing projects' segment. The Company's Environmental Services
segment is the core of Team's operations.
The Company, through its subsidiaries, operates in 40 locations throughout
the United States and one location in England. Additionally, certain
environmental services are offered internationally by the Company through 14
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 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 1996, the Company's revenues were $52.5 million compared to $55.7
million in fiscal 1995. The loss from continuing operations net of income tax
benefit was $9.3 million in fiscal 1996, of which $7.7 million is attributed to
the writedown of assets recorded in the third and fourth quarters and an
additional general and administrative expense of $2.4 million which pertains
primarily to certain compensation arrangements with former employees. This
compares to a loss of $5.4 million in fiscal 1995, of which $6.3 million was
attributed to the writedown of assets recorded in the second quarter.
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, 1996,
$6.5 million was borrowed under the Company's revolving line of credit, and $2.9
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 1996. 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
YEAR ENDED MAY 31,
--------------------------
1996 1995 1994
---- ---- ---
Revenues:
Environmental services ...................... 90% 91% 93%
Military housing projects ................... 10% 9% 7%
---- ---- ---
Total .................................... 100% 100% 100%
==== ==== ===
Operating profit (loss) before corporate
allocation and goodwill amortization:
Environmental services ...................... 124% 187% 78%
Military housing projects ................... (24%) (87%) 22%
---- ---- ---
Total .................................. 100% 100% 100%
==== ==== ===
Additional financial information about the Company's industry segments for
the years ended May 31, 1996, 1995 and 1994 is set forth in Note (11) of Notes
to Consolidated Financial Statements.
(c) NARRATIVE DESCRIPTION OF BUSINESS
ENVIRONMENTAL SERVICES
GENERAL. The Company's environmental services are provided through Team
Environmental Services, Inc. These services consist of leak sealing and
mechanical services, as well as environmental monitoring services. 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 systems and pipelines. 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 1996, 1995, and 1994,
leak sealing services accounted for 55%, 53% and 53%, respectively, of the
Company's consolidated revenues. In fiscal 1996, 1995 and 1994, environmental
consulting, engineering and monitoring services accounted for 23%, 30% and 32%,
respectively, of the Company's consolidated revenues. The Company has sold its
environmental consulting and engineering business.
Team's Environmental Services segment operates through 40 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 14 licensees operating in 15 countries.
LEAK SEALING. The Company's leak sealing and other industrial repair
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.
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
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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-steam repair work are then performed by the
field crew using, in large part, materials and sealants that are developed and
produced by the Company.
Subsequent to year end, the Company's manufacturing center earned the
international ISO-9001 certification for its engineering design and
manufacturing operations. ISO-9001 is the most stringent of all ISO-9000
programs in which to be certified.
The Company's non-destructive repair methods do not compromise the integrity
of its customer's process system and can be performed in temperature 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 leaks involving over 300 different kinds of chemicals.
The Company also offers live loading services, which are used to repair
valves and flanges. 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 by its
highly, in-house trained technicians, 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(registered trademark) 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(registered trademark)
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 management 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 U.S. Environmental Protection Agency ("EPA") requirements or can
custom-design these reports to its customers' specifications. The Company is
currently updating the Teamware (registered trademark) software system to
include new features that enhance the data management capabilities.
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 (registered trademark)
software system,
4
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 and for use in future reports that may be
requested or required. The Company also offers its customers a software package
named Customware (registered trademark), 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.
Recently, the Company has selected the LeakTracker 200 (registered
trademark) system as the data collection device to provide the highest quality
and flexibility to handle a plant's fugitive emissions monitoring program.
Additionally, Team has expanded its data management capabilities to include the
use of other commercially available software packages that meet customers'
specific needs.
The 1990 Clean Air Act Amendments established a list of 189 hazardous
air pollutants which must be monitored and controlled and, pursuant to these
Amendments, regulations have been passed concerning many of these pollutants.
The 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 several years. Additionally, Title III of the 1986 SARA
establishes 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. Effective May 31, 1996, the
Company sold substantially all of the operating assets of its environmental
consulting and engineering division. The environmental consulting and
engineering division was located in two major locations, Houston, Texas and San
Marcos, California. The assets of the division located in San Marcos, California
were purchased by a privately- held California company owned by former employees
of the Company. The assets of the division located in Houston, Texas were
purchased by a publicly-held corporation. Further, the Company sold the assets
of the source emissions testing business to a privately-held Louisiana
corporation. No officer or director of Team was a member of any of the above
acquiring groups.
Management believes that the aforementioned sales will allow the Company
to concentrate on improving the profitability of its Environmental Services
segment. The proceeds of the sale were used to reduce short and long-term debt
as required by the Company's Credit Agreement. See Notes (2) and (8) of Notes to
Consolidated Financial Statements for further information.
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 40
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 party to certain long term contracts. Substantially all
such agreements may be terminated by either party on short notice. The
agreements generally specify the range of services to be performed and the
5
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. 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. 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. Management believes Team has a
competitive advantage over most outside service contractors due to its in-house
and customer site-specific trained technicians who are approved for immediate
entry into the customer's facility, patented sealant materials, and ISO-9001
quality procedures and specifications. 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.
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, Australia and the Pacific
Rim 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.
Substantially 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
6
business outside the 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 consulting and
engineering services, the assets of which have been sold, the Company handled
small quantities of certain hazardous wastes or other 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
substances 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 consisted 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)"). The
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 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 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
7
Board of Contract Appeals ("ASBCA"). 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 appealed the
Corp's decision to terminate the contract to the ASBCA. The Company's appeals to
the ASBCA have been settled and subsequent to year end, the ASBCA issued a
decision for the Company's subsidiary in the amount of $462,000 plus interest
from April 6, 1993 until paid pursuant to the Contract Disputes Act. The Company
received the settlement amount of $559,000 in July 1996.
The Company does not intend to develop any additional Military Housing
projects, and management is currently pursuing negotiations to sell the
projects. Should such a sale be consummated, the operations of this business
segment will be accounted for as discontinued operations. See Note (3) of Notes
to Consolidated Financial Statements for additional information regarding the
Military Housing projects.
GENERAL
EMPLOYEES. As of May 31, 1996, the Company and its subsidiaries had 575
employees in its operations, consisting of 235 salaried and 340 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 automotive
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 Occupations Safety and
Health Administration ("OSHA") of the U.S. Department of Labor and the EPA. 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.
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 totaling approximately
95,000 square feet of floor space. These facilities include administrative,
manufacturing and training centers. The Company's manufacturing facility and
training centers 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 36 office and/or plant and
shop facilities at separate locations in 21 states for use in its Environmental
Services segment. The Military Housing segment owns three separate properties in
New Mexico, North Carolina, and Florida aggregating approximately 231 acres.
These properties have been developed as Military housing projects. As stated
previously, these properties are subject to mortgages in favor of the Trustee
for Certificate holders which secure payment to the Certificate holders. See
"Item 1(c) - Military Housing Projects." In addition, the Company owns real
property and office
8
facilities in Houston, Texas previously used in its discontinued infrastructure
operations which is currently being leased to a third party pursuant to a
long-term lease agreement.
As of May 31, 1996, the Company owned or leased 238 light trucks which are
primarily repair service trucks used in performing environmental services and
123 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 of 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 to settle its potential liability for clean up
of the Sheridan Site in consideration for a $101,700 payment by the Company. The
EPA approved the Settlement Agreement and executed a related Consent Decree.
This Consent Decree was rejected by the U.S. District Court for the Southern
District of Texas, Houston Division in April 1996. The EPA is presently
appealing the rejection of the Consent Decree.
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 was appealed to the ASBCA in July 1994. During fiscal 1994, the
Corps terminated the Agreement, thereby canceling the project. In February 1994,
the Company separately appealed the Corps' decision to terminate the Agreement,
again with the ASBCA. The Company's appeals to the ASBCA from (1) the Corps'
decision to terminate the Agreement and (2) the Corps' decision on the claim for
additional costs and expenses have been settled. On June 6, 1996 the ASBCA
issued a decision for the Company's subsidiary in the amount of $462,000 plus
interest from April 6, 1993 until paid pursuant to the Contract Disputes Act.
The settlement amount of $559,000 was received by the Company in July 1996.
While 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, any uninsured losses that
might arise from these lawsuits and proceedings would not have a material
adverse effect on the Company's consolidated financial statements.
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 1996.
9
PART 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, 1996 and 1995, respectively.
SALES PRICE
--------------------------
HIGH LOW
--------- --------
FISCAL 1996
Quarter Ended:
August 31................ $ 2 3/4 $ 1 5/8
November 30.............. 3 2 1/4
February 29.............. 2 3/8 1 3/4
May 31................... 2 5/8 1 1/4
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
(b) HOLDERS
There were 521 holders of record of Team's common stock as of August 5,
1996, excluding beneficial owners of stock held in street name. Although exact
information is unavailable, the Company estimates there are approximately 1,000
additional beneficial owners based upon information gathered in connection with
proxy solicitation.
(c) DIVIDENDS
No dividends were declared or paid in fiscal 1996 or fiscal 1995. 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, 1996.
10
ITEM 6. SELECTED FINANCIAL DATA - (CONTINUED)
YEAR ENDED MAY 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- ------- --------
(In Thousands, Except Per Share Amounts)
Revenues ............................................. $ 52,485 $ 55,730 $ 61,133 $63,716 $ 62,625
======== ======== ======== ======= ========
Earnings (Loss) from Continuing Operations,
Net of Income Taxes ................................ $ (9,278) $ (5,448) $ 437 $ 604 $ 2,229
Earnings (Loss) from Discontinued
Operations, Net of Income Taxes .................... -- (513) 325 1,277 (2,025)
Loss on Sales of Discontinued Operations,
Net of Income Taxes ................................ -- (13) (1,081) -- (12,051)
Net Earnings (Loss) .................................. $ (9,278) $ (5,974) $ (319) $ 1,881 $(11,847)
Earnings (Loss) Per Share:
Earnings (Loss) from
Continuing Operations ............................ $ (1.80) $ (1.06) $ 0.09 $ 0.12 $ 0.44
Earnings (Loss) from
Discontinued Operations .......................... -- (0.10) 0.06 0.25 (0.40)
Loss on Sales of Discontinued Operations ........... -- 0.00 (0.21) -- (2.37)
-------- -------- -------- ------- --------
Net Earnings (Loss) ................................ $ (1.80) $ (1.16) $ (0.06) $ 0.37 $ (2.33)
======== ======== ======== ======= ========
Weighted Average Shares Outstanding .................. 5,161 5,160 5,164 5,151 5,088
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) ............ $ 2,862 $ 2,391 $ 3,121 $ 2,833 $ 3,727
Cash Dividend Declared
Per Common Share ................................... $ 0.00 $ 0.00 $ 0.00 $ 0.075 $ 0.14
MAY 31,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- -------- ------- -------
(In Thousands)
Balance Sheet Data
Total Assets ............................... $69,436 $80,058 $103,114 $96,843 $65,515
Long-term Debt ............................. 11,754 13,627 21,001 22,156 24,524
Non-recourse Debt .......................... 38,765 39,722 40,603 30,769 --
Stockholders' Equity ....................... 11,045 20,323 26,297 26,608 25,022
Working Capital ............................ 10,562 14,786 10,472 7,790 10,655
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In fiscal 1996, the Company's environmental services consisted of industrial
repair services, air emission monitoring services and environmental consulting
and engineering 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, 1996 1995
-------------------------------------- VS. VS.
1996 1995 1994 1995 1994
------ ------ ------- -------- --------
Revenues:
Environmental Services ............................. 90.4% 91.2% 93.1% (6.6%) (10.7%)
Military Housing projects .......................... 9.6 8.8 6.9 2.5% 15.8%
----- ----- -----
Total Revenue ........................................ 100.0% 100.0% 100.0% (5.8%) (8.8%)
===== ===== =====
Operating expenses:
Environmental Services ............................. 47.9% 47.6% 47.2% (5.1%) (8.1%)
Military Housing projects .......................... 4.2 3.7 2.5 6.7% 36.9%
Selling, general and administrative expenses:
Environmental Services ............................. 44.6 40.7 40.5 3.4% (8.3%)
Military Housing projects .......................... 0.6 2.1 0.7 (75.9%) 185.7%
Interest:
Environmental Services ............................. 2.3 2.7 2.5 (20.0%) (4.1%)
Military Housing projects .......................... 6.4 6.1 5.0 (1.4%) 10.8%
Writedown of assets:
Environmental Services ............................. 14.7 2.5 -- n/a n/a
Military Housing projects .......................... -- 8.7 -- n/a n/a
----- ----- -----
Earnings (loss) from continuing
operations before income taxes ..................... (20.7) (14.1) 1.6 (37.9%) n/a
Provision (benefit) for income taxes ................. (3.0) (4.3) 0.9 (35.1%) n/a
----- ----- -----
Earnings (loss) from continuing
operations net of income taxes ..................... (17.7%) (9.8%) 0.7% (70.3%) n/a
===== ===== =====
RESULTS OF OPERATIONS - CONTINUING OPERATIONS
Fiscal 1996 Compared to Fiscal 1995
ENVIRONMENTAL SERVICES: For the fiscal year ended May 31, 1996, revenues
from the Company's environmental services business totaled $47.4 million, 7%
lower than revenues of $50.8 million reported in the prior fiscal year. This
decrease resulted from lower revenues from the Company's emissions monitoring
and environmental consulting and engineering services primarily as a result of
reduced
12
reporting requirements by many of the Company's customers due to the slowdown in
environmental regulatory activity.
In addition, some of the Company's customers have implemented internal
reporting for emissions control services. The Company's leak sealing services
business has remained stable while its mechanical (hot tapping and
line-stop (registered trademark)) services have increased.
Operating expenses in the Company's environmental services declined by 5%
from fiscal 1995 to fiscal 1996, primarily due to lower personnel related costs.
Gross margins declined from 47.8% to 47.0% as the Company was not able to reduce
costs sufficiently to offset the decline in revenues. Selling, general and
administrative expenses were $23.4 million for fiscal year 1996 compared to
$22.7 million in the prior year. The Company incurred one-time charges of
approximately $2.4 million of general and administrative expenses that related
primarily to certain compensation arrangements with former employees. This
increase was somewhat offset by the restructuring and relocation of its
corporate office which resulted in lower personnel and general office costs.
Interest expense of $1.2 million was 20% lower than in fiscal 1995 due to
reduced average borrowing levels as well as lower interest rates. The writedown
of assets of $7.7 million primarily reflected a $5.3 million write-off of
goodwill pertaining to the environmental engineering and consulting services
business, a $400,000 write-off of obsolete inventory and a reserve of $1.7
million for a note receivable obtained in the sale of a former business segment.
Including the effect of the $10.1 million writedown of assets and other one-time
charges recorded in the third and fourth quarters of fiscal year 1996, the loss
before taxes in the Company's environmental services was $10.0 million compared
to a $1.3 million loss in the prior year.
MILITARY HOUSING PROJECTS: For the year ended May 31, 1996, revenues were
$5.0 million compared to revenues of $4.9 million in the prior year. The pre-tax
loss from Military Housing projects' segment was $810,000 compared to $1.7
million (before the provision for writedown of assets) in fiscal 1995. Lower
legal fees accounted for the change. In fiscal 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 net loss from continuing operations for the 1996 fiscal year was $9.3
million of which $6.9 million is attributed to the writedown of assets and $1.6
million is attributed to non-recurring general and administrative expenses
related primarily to compensation arrangements with former employees recorded in
the third quarter. This compares to the net loss from continuing operations for
the 1995 fiscal year of $5.4 million, of which $4.1 million was attributed to
the writedown of assets. The net loss for fiscal 1996 was $9.3 million compared
to the overall net losses of $6.0 million in the prior year including the
operating losses and losses on the sales of discontinued operations.
FISCAL 1995 COMPARED TO FISCAL 1994
ENVIRONMENTAL SERVICES: 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
1994/1995. Colder weather often leads to higher demand for leak repair services
due to the contractions of piping systems in process plants.
Operating expenses in the Company's environmental services declined by 8%
from fiscal 1994 to fiscal 1995, primarily due to lower personnel related costs.
Gross profit margins declined from 49.3% to 47.8%, 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%
13
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 writedown of assets and other one-time charges recorded in the second
quarter of fiscal year 1995, the loss before taxes in the Company's
environmental services 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 writedown 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 $6.5 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 writedown 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.
LIQUIDITY AND CAPITAL RESOURCES
At May 31, 1996, the Company's working capital totaled $10.6 million, a
decrease of $4.2 million from working capital of $14.8 million a year earlier.
The Company has been able to finance its working capital requirements through
its internally generated cash flow and the sale of its discontinued businesses
and assets. In July 1996, the Company and its primary bank amended and extended
the terms of its credit agreement effective May 31, 1996. The agreement, as
amended, consists of a $3.95 million term loan, payable in quarterly
installments of $350,000 with the balance due December 1, 1997, and a $12
million revolving line of credit due December 1, 1997. At May 31, 1996, amounts
outstanding on the term loan and under the revolving line of credit were $2.9
million and $6.5 million, respectively, and $1.3 million was available for
borrowing under the terms of the agreement.
As of May 31, 1996, cash and cash equivalents totaled $2.0 million
decreasing $1.1 million from the prior year. This decrease in cash resulted
mainly from $4.7 million used in the Company's financing activities, $0.2
million used in the Company's investing activities, offset by $3.8 million
provided by the Company's operating activities. See Team's "Consolidated
Statements of Cash Flows" for additional detail.
Management expects that capital expenditures which are intended to provide
for normal replacement of assets and new assets to support planned growth will
approximate $1.3 million for fiscal 1996. The Company is presently pursuing
negotiations to sell the Military Housing projects, 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 further reduce Company bank
debt and to increase available working capital.
In the opinion of management, the Company currently has sufficient funds and
adequate financial sources available to meet its anticipated liquidity needs.
Management believes that cash flow from operations, cash balances and available
borrowings will be sufficient for the foreseeable future to finance anticipated
working capital requirements, capital expenditures and debt service
requirements.
14
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
subsidiaries as of May 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended May 31, 1996. 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, 1996 and 1995, and the results of their operations and their cash flows
for each of the three years in the period ended May 31, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion, such 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
July 29, 1996
15
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS MAY 31,
------------------------------------
1996 1995
------------ ------------
Current Assets:
Cash and cash equivalents ........................................................ $ 2,038,000 $ 3,154,000
Receivables ...................................................................... 8,149,000 8,408,000
Materials and supplies ........................................................... 5,748,000 6,641,000
Prepaid expenses and other current assets ........................................ 846,000 1,374,000
------------ ------------
Total Current Assets ........................................................... 16,781,000 19,577,000
Net Assets of Discontinued Operations .............................................. -- 124,000
Property, Plant and Equipment:
Land and buildings ............................................................... 6,874,000 6,889,000
Machinery and equipment .......................................................... 11,088,000 10,864,000
------------ ------------
17,962,000 17,753,000
Less accumulated depreciation and amortization ................................... 12,197,000 11,641,000
------------ ------------
5,765,000 6,112,000
Military Housing Projects:
Restricted cash and other assets ................................................. 2,880,000 2,897,000
Land and buildings, net of accumulated
depreciation of $6,168,000 in 1996 and
$4,710,000 in 1995 ............................................................. 41,123,000 42,581,000
------------ ------------
44,003,000 45,478,000
Goodwill, Net of Accumulated Amortization .......................................... -- 5,583,000
Other Assets ....................................................................... 2,887,000 3,184,000
------------ ------------
$ 69,436,000 $ 80,058,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt ................................................ $ 1,735,000 $ 1,344,000
Accounts payable ................................................................. 846,000 742,000
Other accrued liabilities ........................................................ 3,638,000 2,705,000
------------ ------------
Total Current Liabilities ...................................................... 6,219,000 4,791,000
Long-term Debt and Other ........................................................... 11,754,000 13,627,000
Military Housing Projects' Non-recourse Obligations:
Debt ............................................................................. 38,765,000 39,722,000
Other ............................................................................ 1,653,000 1,595,000
------------ ------------
40,418,000 41,317,000
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, 1996 and 1995 .......................................................... 1,551,000 1,551,000
Additional paid-in capital ....................................................... 24,992,000 24,992,000
Accumulated deficit .............................................................. (15,401,000) (6,123,000)
Less treasury stock at cost, 9,700 shares at
May 31, 1996 and 1995 .......................................................... (97,000) (97,000)
------------ ------------
Total Stockholders' Equity ..................................................... 11,045,000 20,323,000
------------ ------------
$ 69,436,000 $ 80,058,000
============ ============
See notes to consolidated financial statements.
16
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED MAY 31,
--------------------------------------------------------
1996 1995 1994
------------ ------------ ------------
Revenues:
Operating revenue .............................................. $ 47,449,000 $ 50,816,000 $ 56,891,000
Military housing projects' lease revenue ....................... 5,036,000 4,914,000 4,242,000
------------ ------------ ------------
52,485,000 55,730,000 61,133,000
Operating Costs and Expenses:
Operating expenses ............................................. 25,161,000 26,525,000 28,870,000
Selling, general and administrative expenses ................... 23,446,000 22,677,000 24,743,000
Interest ....................................................... 1,188,000 1,485,000 1,548,000
Writedown of assets ............................................ 7,697,000 1,421,000 --
------------ ------------ ------------
57,492,000 52,108,000 55,161,000
Military Housing Projects' Costs and Expenses:
Operating expenses ............................................. 2,198,000 2,061,000 1,505,000
General and administrative expenses ............................ 289,000 1,197,000 419,000
Interest ....................................................... 3,359,000 3,405,000 3,073,000
Writedown of assets ............................................ -- 4,832,000 --
------------ ------------ ------------
5,846,000 11,495,000 4,997,000
Earnings (Loss) from Continuing
Operations before Income Taxes ................................. (10,853,000) (7,873,000) 975,000
Provision (Benefit) for Income Taxes ............................. (1,575,000) (2,425,000) 538,000
------------ ------------ ------------
Earnings (Loss) from Continuing Operations,
Net of Income Taxes ............................................ (9,278,000) (5,448,000) 437,000
Earnings (Loss) from Discontinued
Operations, Net of Income Taxes ................................ -- (513,000) 325,000
Loss on Sales of Discontinued Operations,
Net of Income Taxes ............................................ -- (13,000) (1,081,000)
------------ ------------ ------------
Net Loss ......................................................... $ (9,278,000) $ (5,974,000) $ (319,000)
============ ============ ============
Net Earnings (Loss) Per Share:
Earnings (Loss) from Continuing Operations ................... $ (1.80) $ (1.06) $ .09
Earnings (Loss) from Discontinued Operations ................. -- (0.10) .06
Loss on Sales of Discontinued Operations ..................... -- (0.00) (0.21)
------------ ------------ ------------
Net Loss ....................................................... $ (1.80) $ (1.16) $ (0.06)
============ ============ ============
Weighted Average Number of Shares Outstanding .................. 5,161,000 5,160,000 5,164,000
============ ============ ============
See notes to consolidated financial statements.
17
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
MAY 31,
---------------------------------------------------------------
1996 1995 1994
------------ ------------ ------------
COMMON STOCK:
Balance at beginning of year ........................ $ 1,551,000 $ 1,551,000 $ 1,551,000
------------ ------------ ------------
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 $ 24,992,000
------------ ------------ ------------
Balance at end of year .............................. $ 24,992,000 $ 24,992,000 $ 24,992,000
============ ============ ============
RETAINED EARNINGS
(ACCUMULATED DEFICIT):
Balance at begininng of year ........................ $ (6,123,000) $ (149,000) $ 170,000
Net loss ............................................ (9,278,000) (5,974,000) (319,000)
------------ ------------ ------------
Balance at end of year .............................. $(15,401,000) $ (6,123,000) $ (149,000)
============ ============ ============
TREASURY STOCK:
Balance at begininng of year ........................ $ (97,000) $ (97,000) $ (105,000)
Reissuance of 700 shares ............................ -- -- 8,000
------------ ------------ ------------
Balance at end of year .............................. $ (97,000) $ (97,000) $ (97,000)
============ ============ ============
See notes to consolidated financial statements.
18
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
1996 1995 1994
----------- ------------ -----------
Cash Flows From Operating Activities:
Earnings (loss) from continuing operations
net of income taxes ............................................ $(9,278,000) $ (5,448,000) $ 437,000
Adjustments to reconcile earnings (loss)
from continuing operations net of income
taxes to net cash provided by operating
activities:
Writedown of assets .............................................. 7,697,000 6,253,000 --
Depreciation and amortization .................................... 3,443,000 3,957,000 3,585,000
Provision for doubtful accounts
and notes receivable ........................................... -- 233,000 241,000
Noncurrent deferred income taxes ................................. (1,923,000) (433,000) (137,000)
Change in other long-term obligations ............................ 1,782,000 -- --
Gain on sale of assets ........................................... (23,000) -- --
Changes in assets and liabilities:
(Increase) decrease:
Receivables .................................................. 259,000 1,755,000 867,000
Materials and supplies ....................................... 493,000 986,000 644,000
Prepaid expenses and other assets ............................ 528,000 (298,000) (384,000)
Increase (decrease):
Accounts payable ............................................. 104,000 (3,058,000) (2,788,000)
Other accrued liabilities .................................... 683,000 (2,569,000) (287,000)
Income taxes payable ......................................... -- (659,000) 579,000
----------- ------------ -----------
Net cash provided by operating activities ........................ 3,765,000 719,000 2,757,000
----------- ------------ -----------
Cash Flows From Investing Activities:
Capital expenditures ............................................. (788,000) (413,000) (1,242,000)
Disposal of property and equipment ............................... 115,000 28,000 60,000
Decrease (increase) in other assets .............................. 309,000 231,000 (2,844,000)
Decrease in net assets
of discontinued operations ..................................... 124,000 1,786,000 3,478,000
Military Housing projects' capital expenditures .................. -- (110,000) (5,882,000)
(Increase) decrease in Military Housing projects'
restricted cash and other assets ............................... 17,000 (45,000) (2,850,000)
Proceeds from sale of companies .................................. -- 8,254,000 --
----------- ------------ -----------
Net cash provided by (used in)
investing activities ........................................... (223,000) 9,731,000 (9,280,000)
----------- ------------ -----------
Cash Flows From Financing Activities:
Payments under debt agreements ................................... (3,546,000) (10,101,000) (7,695,000)
Principal payments under
capital lease obligations ...................................... (213,000) (290,000) (221,000)
Proceeds from issuance of debt ................................... -- 204,000 6,804,000
See notes to consolidated financial statements.
19
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS- (continued)
1996 1995 1994
----------- ------------ ------------
Proceeds from issuance of non-recourse debt .................... $ -- $ -- $ 10,248,000
Payments on Military Housing
projects' non-recourse obligations ........................... (957,000) (881,000) (414,000)
Increase (decrease) in Military Housing
projects' other non-recourse obligations ..................... 58,000 44,000 (149,000)
Reissuance of treasury stock ................................... -- -- 8,000
----------- ------------ ------------
Net cash provided by (used in)
financing activities ......................................... (4,658,000) (11,024,000) 8,581,000
----------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents ............................................. (1,116,000) (574,000) 2,058,000
Cash and cash equivalents at
beginning of year ............................................ 3,154,000 3,728,000 1,670,000
----------- ------------ ------------
Cash and cash equivalents at end of year ....................... $ 2,038,000 $ 3,154,000 $ 3,728,000
=========== ============ ============
Supplemental disclosures of information:
Interest paid during the period:
Operating interest ............................................. $ 1,201,000 $ 1,667,000 $ 1,793,000
Military Housing projects ...................................... 3,376,000 3,433,000 1,779,000
----------- ------------ ------------
$ 4,577,000 $ 5,100,000 $ 3,572,000
Income taxes paid during the period ............................ $ 31,000 $ 645,000 $ 260,000
Income taxes refunded during the period ........................ $ 797,000 $ 875,000 $ --
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
During 1996, 1995 and 1994, equipment and software acquired under capital lease
obligations amounted to $495,000, $254,000 and $0, respectively.
During 1995, the Company received $1,700,000 in promissory notes in connection
with the sale of Infrastructure Services, Inc.
See notes to consolidated financial statements.
20
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.
USE OF ESTIMATES IN FINANCIAL STATEMENT PREPARATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. The Company's
financial statements include amounts that are based on management's best
estimates and judgments. Actual results could differ from those estimates.
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 at May 31, 1995. During 1996 all goodwill was written
off. See Note 4.
REVENUE RECOGNITION
The Company recognizes revenue when services are rendered.
21
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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.
EARNINGS PER SHARE
Earnings per common and common equivalent share for fiscal 1996, 1995 and
1994 were computed using 5,160,000 weighted average common shares outstanding
during each year plus 1,000, 0 and 4,000 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 two fiscal years.
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of cash and cash equivalents, receivables and accounts
payable approximate their carrying amounts because of the short maturity of
those instruments. The fair value of the Company's long-term debt, including the
Military Housing Projects' non-recourse debt, is estimated based on the current
rates available to the Company for instruments with similar terms and
maturities.
ACCOUNTING CHANGES
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting
for Stock-Based Compensation" in October 1995. Under SFAS No. 123, companies are
permitted to either adopt this new standard and record expenses for stock
options and other stock-based employee compensation plans based on their fair
value at date of grant, or continue to apply its current accounting policy under
Accounting Principles Board ("APB") Opinion No. 25 and increase its footnote
disclosure. Team will continue to apply APB Opinion No. 25, and in 1997, will
increase its footnote disclosure to include the pro-forma impact on net income
and earnings per share of the application of the fair value based method of
accounting.
Team will adopt SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" in 1997. Issued in March
1995, SFAS No. 121, sets forth guidance on
22
how to measure an impairment of long-lived assets and when to recognize such an
impairment. The adoption of the new standard is not expected to have a material
impact on the Company's financial position or results from operations.
RECLASSIFICATIONS
Certain amounts from previous years have been reclassified to conform to
the 1996 presentation.
2. DIVESTITURES AND DISCONTINUED OPERATIONS
Effective May 31, 1996, the Company sold substantially all the assets of its
Environmental Engineering and Consulting Division, which had a carrying value of
approximately $111,000 with no gain or loss being recognized.
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.
In July 1994, the Company sold substantially all of 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. As of
May 31, 1996, the full amount of the note and all unpaid accrued interest were
fully reserved. (See Note 4.)
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. At May 31, 1996 the balance due on the Certificates of
Participation is $38,765,000 plus accrued interest of $1,236,000. The fair value
of this debt at May 31, 1996 is estimated at $35,979,000 based on rates
currently available to the Company for instruments with similar terms and
maturities. (Refer to Note 8 for discussion of fair value of Team's other debt.)
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 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
23
Board of Contract Appeals ("ASBCA"). 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 appealed the
Corp's decision to terminate the contract to the ASBCA. Subsequent to May 31,
1996, the Company has settled all claims and appeals regarding the Ft. Stewart
project. The settlement of approximately $559,000, including interest, differs
from the original claim due to non-allowance of certain general and
administrative costs by the United States Government.
Payments due on the Certificates of Participation are made solely from rent
paid by the government. 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: 1997, $1,041,000; 1998, $1,131,000; 1999, $1,229,000; 2000,
$1,336,000 and thereafter, $34,028,000.
The Company's management is presently pursuing negotiations to sell the
Military Housing business segment although there can be no assurance that the
transaction will be completed. Management intends to utilize the proceeds of
such a sale, if any, to further reduce bank debt and increase available working
capital.
4. PRE-TAX CHARGES
The loss from continuing operations for fiscal year 1996 included pre-tax
charges of $7,697,000 representing writedowns in the carrying value of certain
of the Company's assets. This charge primarily reflected the $5,347,000
write-off of goodwill as it pertained to the Environmental Consulting and
Engineering Division and a $400,000 write-off of obsolete inventory. The charge
also included the reserve of a $1,700,000 note receivable obtained in the sale
of a former business segment. In addition, the Company recorded $2,423,000 of
additional general and administrative expenses which relate primarily to certain
compensation arrangements with former employees and reversed $57,000 of accrued
but unpaid interest receivable on the above mentioned note receivable.
The loss from continuing operations for fiscal 1995 included 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,
----------------------------
1996 1995
-------------- -----------
Trade accounts receivable................. $ 8,058,000 $ 7,691,000
Current income tax receivable............. -- 722,000
Other receivables......................... 262,000 199,000
Allowance for doubtful accounts........... (171,000) (204,000)
------------- -----------
Total................................ $ 8,149,000 $ 8,408,000
============= ============
24
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. OTHER ACCRUED LIABILITIES
Other accrued liabilities consist of:
MAY 31,
--------------------------
1996 1995
---------- ----------
Payroll and other compensation expenses ........ $1,448,000 $1,172,000
Insurance accruals ............................. 1,096,000 889,000
Other .......................................... 1,094,000 644,000
---------- ----------
Total ...................................... $3,638,000 $2,705,000
========== ==========
7. INCOME TAXES
The provisions (benefits) for federal and state income taxes attributable to
pre-tax earnings from continuing operations are as follows:
YEAR ENDED MAY 31,
----------------------------------------------
1996 1995 1994
----------- ----------- ---------
Federal income taxes:
Current .................. $ (41,000) $(1,705,000) $ 999,000
Deferred ................. (1,525,000) (867,000) (540,000)
State income taxes:
Current .................. -- 68,000 177,000
Deferred ................. (9,000) 79,000 (98,000)
----------- ----------- ---------
Total .................... $(1,575,000) $(2,425,000) $ 538,000
=========== =========== =========
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 (loss) follows:
YEAR ENDED MAY 31,
-----------------------------------------
1996 1995 1994
------------ ----------- --------
Earnings (loss) from
continuing operations
before federal income taxes ...... $(10,853,000) $(7,873,000) $975,000
============ =========== ========
Computed income taxes at
statutory rate ................... $ (3,690,000) $(2,677,000) $332,000
Goodwill writeoff/amortization .... 1,843,000 147,000 117,000
State income taxes, net of
federal tax benefit .............. (6,000) 97,000 52,000
Other ............................. 278,000 8,000 37,000
------------ ----------- --------
Total ......................... $ (1,575,000) $(2,425,000) $538,000
============ =========== ========
25
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the significant components of the Company's deferred tax assets and
liabilities were comprised of the following:
YEAR ENDED MAY 31,
-------------------------------
1996 1995
----------- -----------
Accounts receivable ...................... $ (15,000) $ (47,000)
Tax over book depreciation ............... (1,271,000) (714,000)
Other .................................... (49,000) --
----------- -----------
Gross deferred liabilities ............... (1,335,000) (761,000)
----------- -----------
Notes receivable ......................... 559,000 --
Non deductible accrued expenses .......... 1,399,000 476,000
Inventory ................................ 95,000 53,000
Net operating loss carryover ............. 1,356,000 977,000
AMT & foreign tax credit ................. 73,000 --
Other .................................... 268,000 136,000
----------- -----------
Gross deferred assets .................... 3,750,000 1,642,000
----------- -----------
Net deferred taxes ....................... $ 2,415,000 $ 881,000
=========== ===========
No valuation account was required for the deferred tax assets. Net deferred tax
assets are classified in the consolidated balance sheets as follows:
YEAR ENDED MAY 31,
------------------------
1996 1995
---------- --------
Prepaid expenses and other current assets ........ $ 404,000 $793,000
Other assets ..................................... 2,011,000 88,000
---------- --------
Net deferred tax assets .......................... $2,415,000 $881,000
========== ========
The Company has a net operating loss carryforward of $3,989,000 at May 31, 1996,
which expires in fiscal years 2010 and 2011.
8. LONG-TERM OBLIGATIONS
Long-term obligations consist of:
YEAR ENDED MAY 31,
------------------------------
1996 1995
----------- -----------
Term loan ................................ $ 2,900,000 $ 3,950,000
Revolving credit agreement ............... 6,500,000 8,817,000
Term note ................................ 1,416,000 1,558,000
Capital lease obligations ................ 556,000 275,000
Compensation agreements .................. 1,717,000 --
Other .................................... 400,000 371,000
----------- -----------
13,489,000 14,971,000
Less current portion ..................... 1,735,000 1,344,000
----------- -----------
Total .................................. $11,754,000 $13,627,000
=========== ===========
26
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. An amendment was entered into effective
May 31, 1996, which extends the maturity date on both the term loan and the
revolving line of credit to December 1, 1997. Quarterly principal payments of
$350,000 are due on the term loan until maturity. Both the term loan and the
revolving line of credit bear interest at rates not exceeding the bank's prime
rate of interest (8.25 percent at May 31, 1996) 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, 1996, the Company had a $151,000 letter of credit
outstanding against the revolving line of credit. Amounts outstanding under the
revolving line of credit were $6,500,000 and $8,817,000 at May 31, 1996 and
1995, respectively. Amounts outstanding on the term loan were $2,900,000 and
$3,950,000 at May 31, 1996 and 1995, respectively. $1,330,000 was available for
borrowing under the terms of the agreement at May 31, 1996.
Loans under the Company's bank credit agreement are secured by substantially
all of the assets of the Company. The terms of the agreement, as amended,
require the maintenance of certain financial ratios and limit investments,
advances, liens, leases and indebtedness, among other things. At May 31, 1996,
the Company was in compliance with all credit agreement covenants.
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.
Based on the borrowing rates currently available to the Company for bank
loans with terms and maturities similar to the Company's long-term debt, the
fair value of such debt is estimated to approximate its carrying value at May
31, 1996.
COMPENSATION AGREEMENTS:
During the year ended May 31, 1996, the Company accrued for compensation to
be paid to former employees of the Company beyond the period in which services
are expected to be rendered. At May 31, 1996, these long-term obligations
totaled $1,717,000.
Maturities of long-term obligations are as follows:
YEAR ENDING MAY 31,
1997...................................................... $ 1,735,000
1998...................................................... 8,583,000
1999...................................................... 518,000
2000...................................................... 1,342,000
2001...................................................... 241,000
Thereafter................................................ 1,070,000
------------
Total..................................................... $ 13,489,000
============
27
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. STOCK OPTIONS AND EMPLOYEE BENEFIT PLANS AND SHAREHOLDER RIGHTS PLAN
Pursuant to option plans, the Company has granted options to purchase common
stock to officers, directors and employees at prices equal to or greater than
the 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. During the year ended May 31, 1996, all
options were re-priced to $2.125, the market value of the common stock on the
date the shares were re-priced. Transactions under all plans are summarized
below:
YEAR ENDED MAY 31,
-----------------------------
1996 1995 1994
--------- --------- -------
Shares under option, beginning of year...... 512,050 559,750 396,300
Changes during the year:
Granted................................. 70,000 65,400 182,900
Exercised............................... -- -- --
Canceled................................ (70,350) (113,100) (19,450)
-------- -------- -------
Shares under option, end of year............ 511,700 512,050 559,750
======== ========= ========
Average option price per share.............. $ 2.125 $ 5.28 $ 5.64
======== ========= ========
Exercisable at end of year.................. 459,000 398,350 351,900
======== ========= ========
Available for future grant.................. 626,300 555,950 503,250
======== ========= ========
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 1996, 1995, 1994 were
$167,000, $214,000 and $301,000, 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 1996 nor 1995.
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 transferable
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.
28
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
If, at any time after certain events occur which result in the Rights
becoming exercisable, 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 earnings 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, 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 privileges.
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 $464,000 and $831,000 at May 31, 1996 and 1995,
before accumulated amortization of $45,000 and $226,000, respectively. Other
assets includes software under capital lease in the amount of $281,000 and
$164,000 at May 31, 1996 and 1995, before accumulated amortization of $71,000
and $19,000, 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 $1,898,000, $1,735,000 and $2,216,000 in 1996,
1995 and 1994, respectively.
Minimum rental commitments for future periods are as follows:
OPERATING
YEAR ENDING MAY 31, CAPITAL LEASES LEASES TOTAL
- --------------------------------- -------------- -------------- ------------
1997............................. $ 243,000 $ 1,691,000 $ 1,934,000
1998............................. 186,000 1,298,000 1,484,000
1999............................. 108,000 740,000 848,000
2000............................. 76,000 374,000 450,000
2001............................. 44,000 261,000 305,000
---------- -------------- ------------
Total minimum lease payments..... 657,000 $ 4,364,000 $ 5,021,000
============== ============
Less amount representing interest 101,000
----------
Present value of net minimum lease
payments....................... $ 556,000
==========
29
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 to settle its potential liability for clean up
of the Sheridan Site in consideration for a $101,700 payment by the Company. The
EPA approved the Settlement Agreement and executed a related Consent Decree.
This Consent Decree was rejected by the Court in April 1996. The EPA is
presently appealing the rejection of the Consent Decree.
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 was appealed to the Armed Services Board of
Contract Appeals ("ASBCA"). During fiscal 1994, the Corps terminated the
Agreement, thereby canceling the project. The Company separately appealed the
Corps' decision to terminate the Agreement, again with the ASBCA. The Company's
appeals to the ASBCA from (1) the Corps' decision to terminate the Agreement and
(2) the Corps' decision on the claim for additional costs and expenses have been
settled. On June 6, 1996 the ASBCA issued a decision for the Company's
subsidiary in the amount of $462,000 plus interest from April 6, 1993 until
paid. The settlement amount, which totaled $559,000, was received by the Company
in July 1996.
While 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, any uninsured losses that
might arise from these lawsuits and proceedings would not have a material
adverse effect on the Company's consolidated financial statements.
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.
30
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
YEAR ENDED MAY 31,
---------------------------------
1996 1995 1994
-------- -------- ---------
(IN THOUSANDS)
Revenues:
Environmental services .................. $ 47,449 $ 50,816 $ 56,891
Military Housing projects ............... 5,036 4,914 4,242
-------- -------- ---------
Total ................................. $ 52,485 $ 55,730 $ 61,133
======== ======== =========
Operating profit after corporate allocation
and amortization of goodwill:(1)
Environmental services .................. $ (3,685) $ 3,342 $ 4,226
Military Housing projects ............... 2,516 (3,176) 2,318
General corporate ......................... (5,137) (3,149) (948)
Interest expense ........................ (4,547) (4,890) (4,621)
-------- -------- ---------
Earnings before income
taxes ..................................... $(10,853) $ (7,873) $ 975
======== ======== =========
Identifiable assets at end of period:
Environmental services .................. $ 18,407 $ 24,523 $ 28,971
Military Housing projects ............... 44,011 45,934 53,569
General corporate ....................... 7,018 9,601 20,574
-------- -------- ---------
Total ................................. $ 69,436 $ 80,058 $ 103,114
======== ======== =========
Capital expenditures during period:
Environmental services .................. $ 1,048 $ 640 $ 1,211
Military Housing projects ............... -- 110 5,882
General corporate ....................... 235 27 31
======== ======== =========
Total ................................. $ 1,283 $ 777 $ 7,124
======== ======== =========
Provision for depreciation and
amortization:
Environmental services .................. $ 1,350 $ 1,658 $ 1,709
Military Housing projects ............... 1,458 1,449 1,262
General corporate ....................... 635 850 614
-------- -------- ---------
Total ................................. $ 3,443 $ 3,957 $ 3,585
======== ======== =========
(1) Included in operating profits are charges representing writedowns taken in
the third and fourth quarters of fiscal 1996 and the second quarter of fiscal
1995 as follows:
Environmental services ....................... $5,997 $ 724
Military Housing projects .................... -- 4,832
General corporate ............................ 1,700 697
------ ------
$7,697 $6,253
====== ======
For the three years ended May 31, 1996, there were no customers with sales
greater than 10 percent of consolidated revenues.
31
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, 1996 and 1995 were as follows: (in thousands except per share
amounts)
FISCAL 1996
-------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- ------- ---------
Revenues ........................... $13,375 $12,728 $13,006 $ 13,376
======= ======= ======= ========
Gross Profit ....................... $ 6,446 $ 5,773 $ 6,200 $ 6,707
======= ======= ======= ========
Net Earnings (Loss) ................ $ 33 $ (548) $(7,716) $ (1,047)
======= ======= ======= ========
Net Earnings (Loss) per Share ...... $ 0.01 $ (0.11) $ (1.50) $ (0.20)
======= ======= ======= ========
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 Sales of Discontinued
Operations, Net of Income Taxes . -- (457) -- 444
-------- -------- ----------- --------
Net Earnings (Loss) ................ $ (236) $ (6,041) $ 40 $ 263
======== ======== =========== ========
Net Earnings (Loss) per Share:
Earnings (Loss) from Continuing
Operations ..................... $ (0.05) $ (0.99) $ (0.01) $ 0.00
Earnings (Loss) from Discontinued
Operations ..................... 0.00 (0.09) 0.02 (0.04)
Earnings (Loss) on Sales of
Discontinued Operations ........ 0.00 (0.09) 0.00 0.09
-------- -------- ----------- --------
Net Earnings (Loss) .............. $ (0.05) $ (1.17) $ 0.01 $ 0.05
======== ======== =========== ========
32
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.
PART 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, 1996, 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................................................. 15
Consolidated Balance Sheets - May 31, 1996 and 1995.......................... 16
Consolidated Statements of Operations - Years ended
May 31, 1996, 1995, and 1994............................................... 17
Consolidated Statements of Stockholders' Equity -
Years ended May 31, 1996, 1995 and 1994.................................... 18
Consolidated Statements of Cash Flows - Years
ended May 31, 1996, 1995 and 1994.......................................... 19
Notes to Consolidated Financial Statements................................... 21
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.
33
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. (filed as
Exhibit 10(a) to the Company's Annual Report on Form 10-K for
the fiscal year ended May 31, 1995).
10(b)* Asset Purchase Agreement dated April 10, 1995 by and between
Elsik, Inc. and Elsik II, Inc. (filed as Exhibit 10(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1995).
10(c)* 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(d)* 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(e)* 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(f)* 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(g)* 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(h)* 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(i)* 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).
34
10(j)* 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).
10(k)* 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(l)* 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(m)* 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(n)* 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(o)* Amended and Restated Credit Agreement among Texas Commerce
Bank, N.A. and Team, Inc. and its subsidiaries dated August
24, 1995 (filed as Exhibit 10(p) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1995).
10(p)* First Amendment and Supplement to Amended and Restated Credit
Agreement and Note Modification Agreement by and between Team,
Inc. and Texas Commerce Bank Association effective as of
September 13, 1995 (filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended February
29, 1996).
10(q) Second Amendment and Supplement to Amended and Restated Credit
Agreement, and Revolving Credit Note Modification and Term
Note Modification Agreement effective as of May 31, 1996 by
and between Texas Commerce Bank N.A. and Team, Inc.
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)* Fourth Amendment to Team, Inc. Amended and Restated 1987
Restricted Stock Option Plan (filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1995).
10(t)*# 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(u)# Employment Agreement effective as of August 25, 1995 between
the Company and Mr. William A. Ryan, President and Chief
Executive Officer of the Company.
10(v)* 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).
35
10(w)* 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(x)* Ninth Amendment and Restatement of the Team, Inc. Salary
Deferral Plan (filed as Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended February
29, 1996).
10(y)* 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) and by Sixth Amendment (filed as Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended February 29, 1996).
10(z)# Team, Inc. Restated Non-Employee Directors' Stock Option Plan
(As amended through March 28, 1996).
10(aa)*# 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).
10(bb)*# Third Amendment to Team, Inc. Non-Employee Directors' Stock
Option Plan effective December 14, 1995 (filed as Exhibit 10.2
to the Company's Quarterly Report on Form 10-Q for the quarter
ended November 30, 1995).
10(cc)* 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).
10(dd)# Team, Inc. Officers' Restricted Stock Option Plan dated
December 14, 1995.
11 Statement re: Computation of Per Share Earnings.
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 1996.
36
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 August 12, 1996.
Team, Inc.
By: /s/ WILLIAM A. RYAN
William A. Ryan
President and Chief Executive Officer
(Principal 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.
/s/ WILLIAM A. RYAN President, August 12, 1996
(William A. Ryan) Chief Executive Officer
and Director
/s/ GEORGE W. HARRISON Director August 12, 1996
(George W. Harrison)
/s/ SIDNEY B. WILLIAMS Director August 12, 1996
(Sidney B. Williams)
/s/ JACK M. JOHNSON, JR. Director August 12, 1996
(Jack M. Johnson, Jr.)
/s/ E. THEODORE LABORDE Director August 12, 1996
(E. Theodore Laborde)
/s/ JOHN L. FARRELL, JR. Director August 12, 1996
(John L. Farrell, Jr.)
/s/ MARGIE E. ROGERS Treasurer August 12, 1996
(Margie E. Rogers) (Principal Financial
Officer and Principal
Accounting Officer)
37
SCHEDULE II
TEAM, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
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, 1996 .............. $ 204 $ -- $ -- $ 33 $ 171
Year ended May 31, 1995 .............. 242 205 -- 243 204
Year ended May 31, 1994 .............. 164 164 -- 86 242
Allowance for notes receivable:
Year ended May 31, 1996 (B) .......... $ 268 $ 1,757 $ -- $ -- $ 2,025
Year ended May 31, 1995 .............. 77 28 163 -- 268
Year ended May 31, 1994 .............. -- 77 -- -- 77
- ----------------
(A) Net write-off bad debt
(B) $1,700 included in writedown and $57 included in general and
administrative expenses.
S-1