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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
[ ] 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 0-16284
TECHTEAM GLOBAL, INC.
---------------------
(Name of issuer in its charter)
DELAWARE 38-2774613
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
27335 W. 11 Mile Road, Southfield, MI 48034
-------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (248) 357-2866
----------------
Registrant's Internet address: www.techteam.com
----------------
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.
[X] Yes [ ] No
The number of shares of the registrant's only class of common stock
outstanding at October 31, 2003 was 9,712,353.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ACTUAL RESULTS COULD
DIFFER FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS DESCRIBED IN THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2002 PREVIOUSLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
1
TECHTEAM GLOBAL, INC.
FORM 10-Q
INDEX
PAGE
NUMBER
- ------------------------------------------------------------------------------------------------- -------
PART I - FINANCIAL INFORMATION
ITEM 1
Condensed Consolidated Statements of Operations (Unaudited) 3
Three and Nine Months Ended
September 30, 2003 and 2002
Condensed Consolidated Statements of Financial Position (Unaudited) 4 - 5
September 30, 2003 and December 31, 2002
Condensed Consolidated Statements of Cash Flows (Unaudited) 6
Nine Months Ended
September 30, 2003 and 2002
Notes to the Condensed Consolidated Financial Statements (Unaudited) 7 - 13
ITEM 2
Management's Discussion and Analysis of Financial Condition and Results of Operations 14 - 18
ITEM 4
Controls and Procedures 18
PART II - OTHER INFORMATION
ITEM 1
Legal Proceedings 18
ITEM 2
Changes in Securities and Use of Proceeds 18 - 19
ITEM 6
Exhibits and Reports on Form 8-K 19
Signatures 20
2
PART 1 - FINANCIAL INFORMATION
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
ITEM 1 - FINANCIAL STATEMENTS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
2003 2002 2003 2002
-------- -------- -------- --------
(In thousands, except per share data)
REVENUES
Corporate services
Corporate help desk services ................ $ 17,211 $ 14,948 $ 49,677 $ 43,676
Technical staffing .......................... 2,233 2,468 7,011 7,870
Systems integration ......................... 2,242 1,480 6,524 5,926
Training programs ........................... 213 241 674 824
-------- -------- -------- --------
Total corporate services ....................... 21,899 19,137 63,886 58,296
Leasing operations ............................. 409 1,995 2,101 7,685
-------- -------- -------- --------
TOTAL REVENUES ..................................... 22,308 21,132 65,987 65,981
COST OF SERVICES DELIVERED ......................... 18,057 15,613 54,018 50,138
-------- -------- -------- --------
GROSS PROFIT ....................................... 4,251 5,519 11,969 15,843
-------- -------- -------- --------
OTHER OPERATING EXPENSES
Selling, general, and administrative ........... 4,703 4,227 14,088 12,551
Michigan Single Business Tax ................... - 225 542 675
-------- -------- -------- --------
TOTAL OTHER OPERATING EXPENSE ...................... 4,703 4,452 14,630 13,226
-------- -------- -------- --------
Operating income (loss) ............................ (452) 1,067 (2,661) 2,617
-------- -------- -------- --------
Currency transaction gain .......................... 86 - 449 -
Interest income .................................... 397 238 907 712
Interest expense ................................... (9) (64) (32) (148)
-------- -------- -------- --------
NET OTHER INCOME ................................... 474 174 1,324 564
-------- -------- -------- --------
Income (loss) before income taxes .................. 22 1,241 (1,337) 3,181
Income tax provision ............................... 453 545 459 1,425
-------- -------- -------- --------
Income (loss) before cumulative effect of accounting
change.............................................. (431) 696 (1,796) 1,756
Cumulative effect of accounting change ............. -- -- -- 1,123
-------- -------- -------- --------
NET INCOME (LOSS) .................................. $ (431) $ 696 $ (1,796) $ 633
======== ======== ======== ========
BASIC EARNINGS (LOSS) PER SHARE
Income (loss) before cumulative effect of accounting
change.............................................. $ (.04) $ .06 $ (.18) $ .16
Cumulative effect of accounting change ............. -- -- -- (.10)
-------- -------- -------- --------
Total basic earnings (loss) per share .............. $ (.04) $ .06 $ (.18) $ .06
======== ======== ======== ========
DILUTED EARNINGS (LOSS) PER SHARE
Income (loss) before cumulative effect of accounting
change.............................................. $ (.04) $ .06 $ (.18) $ .16
Cumulative effect of accounting change ............. -- -- -- (.10)
-------- -------- -------- --------
Total diluted earnings (loss) per share ............ $ (.04) $ .06 $ (.18) $ .06
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON SHARE EQUIVALENTS OUTSTANDING
Basic .......................................... 9,723 10,980 9,975 10,967
Net effect of dilutive stock options ........... -- 230 -- 138
-------- -------- -------- --------
Diluted ........................................ 9,723 11,210 9,975 11,105
======== ======== ======== ========
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
NET INCOME (LOSS), AS SET FORTH ABOVE .............. $ (431) $ 696 $(1,796) $ 633
Foreign currency translation adjustments............ (28) 19 335 314
-------- -------- ------- --------
COMPREHENSIVE INCOME (LOSS) ........................ $ (459) $ 715 $(1,461) $ 947
======== ======== ======= ========
See accompanying notes.
3
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
ASSETS 2003 2002
-------------- ---------------
(In thousands)
CURRENT ASSETS
Cash and cash equivalents.............................................. $ 45,118 $ 39,435
Securities available for sale.......................................... - 6,492
Accounts receivable - corporate services (less allowances of $496 at
September 30, 2003 and $182 December 31, 2002)...................... 19,316 14,328
Accounts receivable - leasing (less allowances of $730 at
September 30, 2003 and $415 at December 31, 2002)................... 1,611 2,906
Refundable taxes....................................................... 863 1,393
Inventories of off-lease equipment and supplies (less reserves of
$2,585 at September 30, 2003 and $1,974 at December 31, 2002)....... 85 1,452
Prepaid expenses and other............................................. 1,709 864
Deferred income tax.................................................... 1,524 1,242
-------------- ---------------
TOTAL CURRENT ASSETS................................................... 70,226 68,112
PROPERTY, EQUIPMENT, AND PURCHASED SOFTWARE
Computer equipment and office furniture................................ 20,162 18,169
Purchased software..................................................... 10,613 9,435
Leasehold improvements................................................. 4,341 3,531
Transportation equipment............................................... 227 273
-------------- ---------------
35,343 31,408
Less - Accumulated depreciation and amortization....................... 25,697 22,768
-------------- ---------------
9,646 8,640
OTHER ASSETS
Assets of leasing operations, net of amortization (less reserves of
$415 at September 30, 2003 and $823 at December 31, 2002)........... 766 3,489
Intangibles (less accumulated amortization of $6,637 at
September 30, 2003 and $6,442 at December 31, 2002)................. 837 1,432
Other.................................................................. 129 191
-------------- ---------------
1,732 5,112
-------------- ---------------
TOTAL ASSETS............................................................... $ 81,604 $ 81,864
============== ===============
See accompanying notes.
4
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 2003 2002
-------------- ---------------
(In thousands)
CURRENT LIABILITIES
Accounts payable....................................................... $ 3,393 $ 1,639
Accrued payroll, related taxes and withholdings........................ 4,277 3,187
Deferred revenues...................................................... 283 321
Accrued expenses and taxes............................................. 1,794 1,618
Current portion of notes payable....................................... 340 492
Other.................................................................. 153 175
-------------- ---------------
TOTAL CURRENT LIABILITIES.............................................. 10,240 7,432
LONG-TERM LIABILITIES...................................................... 869 1,112
REDEEMABLE CONVERTIBLE PREFERRED STOCK, PAR VALUE, $.01, 5,000,000
SHARES AUTHORIZED, 689,656 ISSUED AND OUTSTANDING...................... 5,000 -
SHAREHOLDERS' EQUITY
Common stock, par value $.01, 45,000,000 shares authorized,
issued - 17,055,167 and 16,953,100 shares at
September 30, 2003 and December 31, 2002, respectively.............. 171 169
Additional paid-in capital............................................. 109,807 109,482
Retained earnings (deficit)............................................ (681) 1,114
Accumulated other comprehensive income - foreign currency
translation adjustment.............................................. 491 156
Treasury stock (7,342,814 and 6,274,436 shares
at September 30, 2003 and December 31, 2002, respectively).......... (44,293) (37,601)
-------------- ---------------
Total shareholders' equity............................................. 65,495 73,320
-------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................. $ 81,604 $ 81,864
============== ===============
See accompanying notes.
5
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
2003 2002
------------- ---------------
(In thousands)
OPERATING ACTIVITIES
Income (loss) before cumulative effect of accounting change........... $ (1,796) $ 1,756
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization................................... 4,576 9,153
Change in leasing business reserves............................. 1,050 -
Non-cash stock option compensation expense...................... 56 441
Treasury stock contributed to 401(k) plan and other............. 50 120
Changes in operating assets and liabilities..................... (1,340) (499)
Changes in long-term liabilities................................ (60) -
------------- ---------------
Net cash provided by operating activities.......................... 2,536 10,971
INVESTING ACTIVITIES
Sale (purchase) of marketable securities.............................. 6,492 (3,299)
Purchase of property, equipment, and software, net.................... (3,840) (3,031)
Disposal of leased equipment.......................................... 1,587 4,585
Decrease in investment in direct financing leases and residuals....... 306 295
Other................................................................. 62 (26)
------------- ---------------
Net cash provided by (used in) investing activities................ 4,607 (1,476)
FINANCING ACTIVITIES
Purchase of Company common stock...................................... (6,750) (57)
Proceeds from issuance of redeemable preferred stock, net............. 4,817 -
Proceeds from issuance of common stock................................ 461 335
Payments on notes payable, net........................................ (323) (4,155)
Other................................................................. 335 315
------------- ---------------
Net cash used in financing activities.............................. (1,460) 3,562)
------------- ---------------
Increase in cash and cash equivalents.............................. 5,683 5,933
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.......................... 39,435 30,251
------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................ $ 45,118 $ 36,184
============= ===============
See accompanying notes.
6
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared by TechTeam Global, Inc. ("TechTeam" or "Company" or "We") in
accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the nine-month
period ended September 30, 2003 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2003. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company and Subsidiaries' Annual Report on Form 10-K for
the year ended December 31, 2002.
Certain reclassifications have been made to the 2002 financial statements in
order to conform to the 2003 financial statement presentation.
NOTE B - EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of common
shares and common share equivalents outstanding. Common share equivalents
consist of stock options and are calculated using the treasury stock method.
The weighted average number of diluted shares fell from 11,102,814 at December
31, 2002 to 9,975,202 at September 30, 2003, due primarily to the common shares
the Company repurchased during the second and third quarters of 2003 under the
Company's stock repurchase program.
For the three and nine month periods ended September 30, 2003, diluted and basic
weighted average shares outstanding are the same because the effects of
potentially dilutive options would be antidilutive since there are losses in
each period.
NOTE C - REVENUES FROM MAJOR CLIENTS
Revenues from clients that represented ten percent or more of total revenue are
as follows:
2003 2002
-------------------------- ------------------------
PERCENT OF PERCENT OF
AMOUNT TOTAL AMOUNT TOTAL
-------- ---------- -------- ----------
(In thousands except percent of total data)
THREE MONTHS ENDED SEPTEMBER 30
Ford Motor Company ....... $ 10,389 46.6% $ 10,751 50.9%
DaimlerChrysler .......... 2,888 13.0% 3,183 15.1%
NINE MONTHS ENDED SEPTEMBER 30
Ford Motor Company ....... $ 32,705 49.6% $ 32,872 49.8%
DaimlerChrysler .......... 9,333 14.1% 9,763 14.8%
7
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D - EFFECTS OF ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible Assets."
Under Statement 142, goodwill and indefinite-lived intangible assets are no
longer amortized but are reviewed annually for impairment, or more frequently if
impairment indicators arise. Separable intangible assets that have finite lives
will continue to be amortized over their useful lives. As of January 1, 2002, we
adopted SFAS 142. Accordingly, we took a charge of $1.1 million related to
impaired goodwill in our leasing operations in the first quarter of 2002. Under
SFAS 142, the charge recognized upon adoption of the statement was reported as
the cumulative effect of an accounting change. As a result of the re-evaluation
of amortizable intangible assets as of October 1, 2003, we have determined that
the undiscounted cash flows are positive and exceed the recorded cost of the
intangibles.
In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS 150 is
effective for instruments entered into after May 31, 2003, and otherwise at the
beginning of the first interim period beginning after June 15, 2003 for public
entities. SFAS 150 requires instruments containing a mandatory redemption clause
to be reported on the balance sheet as a liability. The Company issued
redeemable convertible preferred stock in April 2003. The preferred stock
contains a mandatory redemption requirement, with the right to convert the
preferred stock into common stock (see Note J). The conversion features in the
preferred stock prevent the instrument from being subject to the reporting
requirements of SFAS 150. Redeemable preferred stock is not shown as a component
of equity, but is shown separately between debt and equity on the balance sheet
so as not to be confused with permanent capital.
During 2003, the FASB issued FASB Interpretation 46, Consolidation of Variable
Interest Entitie's. FASB Interpretation 46 requires the consolidation of
entities in which an enterprise absorbs a majority of the entity's expected
losses, receives a majority of the entity's expected residual returns, or both,
as a result of ownership, contractual or other financial interests in the
entity. Currently, entities are generally consolidated by an enterprise when it
has a controlling financial interest through ownership of a majority voting
interest in the entity. The Company is in process of evaluating the effects of
FASB Interpretation 46. Based upon the in-process review, the Company believes
that adoption of the pronouncement will have no significant effect on reported
financial position or results of operations.
NOTE E - STOCK OPTIONS
We account for stock options under Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employee's, and related interpretations.
Pro forma information regarding net income/(loss) and earnings/(loss) per share
is required by SFAS No. 123, Accounting for Stock-Based Compensation, and has
been determined as if the Company had accounted for its employee stock options
under the fair value method.
8
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE E - STOCK OPTIONS (continued)
For purposes of pro forma disclosures, the estimated fair value of the stock
options is amortized over the options' vesting period. Our pro forma information
is as follows:
2003 2002
------------- ------------
(In thousands, except per share data)
THREE MONTHS ENDED SEPTEMBER 30
Reported net income (loss)................................... $ (431) $ 696
SFAS No. 123 expense......................................... (69) (111)
------------- ------------
Pro forma net income (loss).................................. $ (500) $ 585
============= ============
Pro forma income (loss) per share
Basic.................................................... (.05) .06
Diluted.................................................. (.05) .06
NINE MONTHS ENDED SEPTEMBER 30
Reported net income (loss)................................... $ (1,796) $ 633
Executive stock option....................................... - 269
SFAS No. 123 expense......................................... (459) (329)
------------- ------------
Pro forma net income (loss).................................. $ (2,255) $ 573
============= ============
Pro forma income (loss) per share
Basic.................................................... (.23) .06
Diluted.................................................. (.23) .06
NOTE F - CHANGES IN ESTIMATES
Preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying footnotes. Actual results could differ from the estimates and
assumptions made. TechTeam senior management reviews these estimates and
reserves to ensure their reasonableness.
In the second quarter of 2003, we recorded a reduction to the values of the
Company's off-lease equipment inventory due to the significant decline in the
secondary market for used computer equipment. After obtaining an independent
valuation of this inventory equipment, management increased its reserve to
reduce the net book value of the inventory. We reduced the book value of
off-lease inventory by $1.00 million to $166,000, to reflect the deterioration
in the secondary computer equipment market.
Reserves against certain receivables were also increased during the second and
third quarters of 2003. After thorough examination of the collectibility of
certain receivables, management determined that there was a decreased
probability of collection. Allowances against certain receivables were increased
by $267,000 in the second quarter and $295,000 in the third quarter to reflect
the revised estimate of collectibility. The value of these items net of their
reserves was $100,000 at September 30, 2003.
9
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE G - STOCK REPURCHASE PROGRAMS
In April 2003, we announced a new stock repurchase program to repurchase up to
2,000,000 shares of Company common stock. Under this program, we repurchased
1,074,178 shares for $6,749,610 inclusive of sales commission expense.
In August 2002, we announced a stock repurchase program to repurchase up to
2,000,000 shares of common stock. Under this program, we repurchased 470,600
shares for $3,422,701, inclusive of sales commission expense, in 2002. The
Company did not acquire any shares of its common stock during the first quarter
of 2003 in connection with the program, which expired on February 26, 2003.
NOTE H - SEGMENT AND GEOGRAPHIC REPORTING
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker, or decision-making group, in deciding how to
allocate resources and in assessing performance. Our chief operating
decision-making group is the senior management committee, which is comprised of
the president and the lead executives of each of our functional divisions. The
operating segments are managed separately because each operating segment
represents a strategic business unit that offers different products.
Our reportable operating segments include corporate services (consisting of
corporate help desk services, technical staffing, systems integration, and
training programs), and leasing operations.
Our reportable geographic segments are the United States and Europe. The
European segment provides corporate help desk services and technical staffing.
The United States geographic segment provides services in all operating
segments. Revenues are attributed to geographic segments based upon the location
of service delivery.
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies in our Form 10-K for
the year ended December 31, 2002. We evaluate performance based on stand-alone
operating segment gross profit.
10
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE H - SEGMENT AND GEOGRAPHIC REPORTING (continued)
Financial information for our business segments is as follows:
CORPORATE SERVICES
------------------------------------------------------------
CORPORATE
HELP DESK TECHNICAL SYSTEMS TRAINING LEASING
SERVICES STAFFING INTEGRATION PROGRAMS TOTAL OPERATIONS TOTAL
--------- --------- ----------- -------- ------- ---------- -------
(in thousands)
THREE MONTHS ENDED
SEPTEMBER 30, 2003
Revenues ............................... $17,211 $ 2,233 $ 2,242 $ 213 $21,899 $ 409 $22,308
Gross profit (loss) .................... 3,522 436 600 36 4,594 (343) 4,251
Depreciation and ....................... --
amortization .................... 783 -- 14 2 799 278 1,077
Expenditures for property .............. 976 1 10 1 988 -- 988
THREE MONTHS ENDED
SEPTEMBER 30, 2002
Revenues ............................... $14,948 $ 2,468 $ 1,480 $ 241 $19,137 $ 1,995 $21,132
Gross profit ........................... 4,188 408 324 58 4,978 541 5,519
Depreciation and
amortization .................... 727 4 1 2 734 1,294 2,028
Expenditures for property .............. 426 3 1 2 432 -- 432
NINE MONTHS ENDED
SEPTEMBER 30, 2003
Revenues ............................... $49,677 $ 7,011 $ 6,524 $ 674 $63,886 $ 2,101 $65,987
Gross profit (loss) .................... 10,417 1,450 1,678 116 13,661 (1,692) 11,969
Depreciation and
amortization .................... 2,291 1 32 5 2,329 1,181 3,510
Expenditures for property .............. 3,165 1 19 3 3,188 -- 3,188
NINE MONTHS ENDED
SEPTEMBER 30, 2002
Revenues ............................... $43,676 $ 7,870 $ 5,926 $ 824 $58,296 $ 7,685 $65,981
Gross profit ........................... 11,970 1,219 1,468 168 14,825 1,018 15,843
Depreciation and
amortization .................... 2,130 17 6 6 2,159 5,955 8,114
Expenditures for property .............. 2,097 15 5 6 2,123 -- 2,123
SEGMENT ASSETS
September 30, 2003 ..................... $21,523 $ 2,124 $ 2,064 $ 218 $25,929 $ 2,349 $28,278
December 31, 2002 ...................... 16,695 1,919 1,350 216 20,180 7,757 27,937
11
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE H - SEGMENT AND GEOGRAPHIC REPORTING (continued)
A reconciliation of the totals reported for the operating segments to the
applicable line item in the consolidated financial statements is as follows:
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------
2003 2002
-------------- --------------
(In thousands)
Depreciation and amortization
Total for reportable segments ........................................ $ 3,510 $ 8,114
Corporate assets ..................................................... 1,066 1,039
-------------- --------------
Total depreciation and amortization ............................... $ 4,576 $ 9,153
============== ==============
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------
2003 2002
-------------- --------------
(In thousands)
Expenditures for property
Total assets for reportable segments ................................. $ 3,188 $ 2,123
Corporate assets ..................................................... 652 908
-------------- --------------
Total expenditures for property ................................... $ 3,840 $ 3,031
============== ==============
SEPTEMBER 30, DECEMBER 31,
2003 2002
-------------- --------------
(In thousands)
Assets
Total assets for reportable segments ................................. $ 28,278 $ 27,937
Corporate assets ..................................................... 53,326 53,927
-------------- --------------
Total assets ...................................................... $ 81,604 $ 81,864
============== ==============
Financial information from our geographic segments is as follows:
REVENUE
-------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ---------------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
(In thousands)
United States .......................... $ 14,993 $ 16,421 $ 46,537 $ 53,710
Europe ................................. 7,315 4,711 19,450 12,271
---------- ---------- ---------- ----------
Total .................................. $ 22,308 $ 21,132 $ 65,987 $ 65,981
========== ========== ========== ==========
12
TECHTEAM GLOBAL, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE H - SEGMENT AND GEOGRAPHIC REPORTING (continued)
GROSS PROFIT
-------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ---------------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
(In thousands)
United States .......................... $ 3,360 $ 3,623 $ 8,469 $ 11,446
Europe ................................. 891 1,896 3,500 4,397
---------- ---------- ---------- ----------
Total .................................. $ 4,251 $ 5,519 $ 11,969 $ 15,843
========== ========== ========== ==========
ASSETS
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- ------------
(In thousands)
United States................................... $ 65,290 $ 71,731
Europe 16,314 10,133
---------- ----------
Total........................................... $ 81,604 $ 81,864
========== ==========
NOTE I - INCOME TAXES
The consolidated effective tax rate differs from the statutory tax rate and has
changed during the third quarter due to the following: 1) a change in
Management's estimate of U.S. income before taxes for 2003, 2) the impact of
non-deductible expenses for U.S. tax purposes, 3) the impact of foreign losses
incurred for which future tax benefits have not been recorded, and 4) varying
tax rates specific to non-U.S. locations.
NOTE J - PRIVATE PLACEMENT PREFERRED STOCK TRANSACTION
On April 8, 2003, TechTeam Global, Inc. completed a private placement of 689,656
shares of newly created Series A Convertible Preferred Stock ("Series A
Preferred Stock") with ChrysCapital II, LLC, ("CCII") a Mauritius limited
liability company for $5,000,006 or $7.25 per share. Series A Preferred
Stockholders are currently entitled to elect one director to the Company's Board
of Directors. The holder of Series A Preferred Stock may convert any or all of
its Series A Preferred Stock into Common Stock at any time after the first
anniversary of the initial issuance thereof on a one share of Series A Preferred
Stock for one share of Common Stock basis. The holder(s) of Series A Preferred
Stock has the right to vote each share of its Series A Preferred Stock as if it
were converted to the Company's Common Stock. The Company is required to redeem
the Series A Preferred Stock on April 8, 2006 or earlier in certain
circumstances.
NOTE K - FOREIGN CURRENCY TRANSLATION
We translate the results of operations of our foreign subsidiaries on a monthly
basis using the simple average exchange rates for the month, whereas we
translate balance sheet accounts using either period end rates for assets and
liabilities, or historical rates for stockholders' equity. Resulting currency
translation adjustments are recorded as a component of stockholders' equity.
Foreign currency transaction gains and losses are recorded in the consolidated
statements of earnings. Currency transaction gains for the three and nine month
periods ended September 30, 2003 were $86,000 and $449,000, respectively,
comprised of recalculation of intercompany payables and customer receivables
based on currency exchange rate at quarter end. Currency transaction gains and
losses for the three and nine months ended September 30, 2002 were not
significant.
13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain of the statements contained in this report that are not historical facts
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. Our actual results may differ materially from those
included in the forward-looking statements. We caution readers not to place
undue reliance on these forward-looking statements, which reflect management's
opinions only as of the date hereof. We do not undertake an obligation to revise
or publicly release the results of any revisions to these forward-looking
statements. You should carefully review the risk factors described in other
documents the Company files from time to time with the SEC, including the Annual
Report on Form 10-K for the fiscal year ended December 31, 2002.
OVERVIEW
TECHTEAM GLOBAL, INC. ("TechTeam" or "Company" or "We") is a global provider of
information technology (IT) and business process outsourcing (BPO) support
services to entities, including Fortune 1000 companies, multinational companies,
product providers, and governments. These services are provided with a single
point of contact philosophy centralized on our IT help desk support services. We
also offer other services, including technology deployment and migration
services, consulting, systems integration, training, and technical staffing. We
provide support services in Europe through our subsidiaries: TechTeam Europe,
NV/SA; TechTeam Europe, Ltd.; TechTeam Europe, GmbH; and TechTeam Europe, AB.
TechTeam Global, Inc. is incorporated under the laws of the State of Delaware.
The Company's common stock is traded on the Nasdaq National Market(R) under the
symbol "TEAM". Our client base includes Ford Motor Company, DaimlerChrysler,
Deere & Company, Cendant Corporation, Liberty Mutual Insurance Company,
Schering-Plough Research Institute, and other companies in the manufacturing,
pharmaceutical, office equipment, insurance, logistics, hospitality, food
service, retail, and other industries.
EQUIPMENT LEASING
TechTeam Capital Group, L.L.C. ("Capital Group"), a subsidiary of the Company,
previously wrote leases for computer, telecommunications, and other types of
capital equipment, with initial lease terms ranging from 2 to 5 years. Effective
March 31, 2000, the majority of Capital Group staff was terminated and Capital
Group ceased looking for new leasing opportunities. Capital Group is currently
running out its lease portfolio. With the exception of renewals of existing
leases, the majority of the original leases were completed by the end of the
second quarter 2003. We cannot predict how many lease renewals we will receive
or how long they will be in effect.
IMPACT OF BUSINESS WITH MAJOR CLIENTS
Historically, we have been heavily dependent upon two or three major clients for
a substantial portion of our revenues. Any loss of (or failure to retain a
significant amount of business with) these key clients would have a material
adverse impact on the Company. Our major clients include Ford Motor Company
("Ford") and DaimlerChrysler. For the third quarter 2003 and 2002, Ford
accounted for 46.6% and 50.9% and DaimlerChrysler accounted for 13.0% and 15.1%,
respectively. For the nine months ended September 30, 2003 and 2002, Ford
accounted for 49.6% and 49.8% and DaimlerChrysler accounted for 14.1% and 14.8%,
respectively.
EUROPEAN OPERATIONS
We service our clients in Europe through four wholly-owned subsidiaries:
TechTeam Europe, Ltd., in Chelmsford, England; TechTeam Europe, NV/SA, in
Brussels, Belgium; TechTeam Europe, GmbH, in Cologne, Germany; and TechTeam
Europe, AB in Gothenburg, Sweden.
TechTeam Europe, Ltd., TechTeam Europe, GmbH, and TechTeam Europe, AB provide
clients with technical staffing and help desk services. TechTeam Europe, NV/SA
provides our clients primarily with multilingual help desk support. A
significant portion of our business in Europe is driven by our client base in
the United States.
Our international business is subject to risks customarily encountered in
foreign operations, including changes in a specific country's or region's
political or economic conditions, trade protection measures, import or export
licensing requirements, the overlap of different tax structures, unexpected
changes in regulatory requirements, and natural
14
disasters. We are also exposed to foreign currency exchange rate risk inherent
in our sales commitments, anticipated sales, and assets and liabilities
denominated in currencies other than the U.S. dollar. While these risks are
believed to be manageable, no assurances can be given.
LEASING OPERATIONS
TechTeam Capital Group, L.L.C. is in the final stages of running out its lease
portfolio. Capital Group ceased writing new leases in March of 2000. There are
four areas of concern in winding-down the leasing operation: a) the remaining
revenue stream, b) the residual value of the assets still being leased, c) the
value of the off-lease equipment held in inventory, and d) collecting Capital
Group's accounts receivable.
While there are a few leases whose original lease termination dates extend
through March of 2005, the vast majority of the lease terminations have already
occurred. The total value of the future revenue stream for the remaining
contractually committed leases (which excludes month-to-month leases) is
$128,000 as of September 30, 2003. During the first nine months of 2003, Capital
Group recorded $1.32 million in revenue above the contractually committed lease
revenue amount. This revenue is from contractual month-to-month extensions of
outstanding leases. We have not estimated additional revenues from future lease
renewals, as it is not possible for us to predict how many lease renewals we
will receive, or how long they will be extended.
As of September 30, 2003, the equipment still on lease had a residual book value
of $727,000, with a reserve of $415,000 for an adjusted net book value of
$312,000 or 3.3% of original cost of the equipment. During the first nine months
of 2003, we sold leased equipment for an average of 7.6% of original cost.
During the fourth quarter of 2003, leased assets with a residual value of
$556,000 and a reserve of $407,000, for a net of $149,000 or 1.6% of original
cost, are scheduled to come off lease and transfer into inventories, unless the
leases are renewed or the equipment is sold.
During the second quarter of 2003, we determined we would not be able to obtain
the value we had previously expected from the sale of our equipment inventories
due to the significant decline in the fair market value of the equipment in the
marketplace. In recognition of the deterioration in market prices, the Company
increased its reserves for the inventory by $1.0 million. As of September 30,
2003, inventories of off-lease equipment was carried at a book value of $2.67
million and a reserve of $2.58 million for an adjusted net value of $85,000,
which represents 0.64% of the original equipment cost.
Capital Group's accounts receivable decreased to $1.61 million, net of reserves,
at September 30, 2003 from $2.91 million, net of reserves, at December 31, 2002.
As we close down our portfolio and as our leasing relationships end, we are
experiencing additional collection delays. Allowances against accounts
receivable were increased to $730,000 at September 30, 2003 from $415,000 at
December 31, 2002 in recognition of the additional collection challenges.
Effective June 30, 2003, Edward J. Penkala, President of TechTeam Capital Group
and an Executive Officer of TechTeam Global, Inc., resigned from the Company. On
June 30, 2003, we entered into a consulting services agreement with Mr. Penkala
for the period July 1, 2003 through December 31, 2003 under which Mr. Penkala is
compensated only for successfully assisting Capital Group in completing its run
off of the leasing portfolio.
15
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO SEPTEMBER 30, 2002
Revenues increased 5.6% to $22.3 million from $21.1 million. This increase was
primarily due to the 14.4% increase in the corporate services segment, partially
offset by the 79.5% decrease in the leasing operations segment. Leasing
operations revenue decreased to $409,000 from $1.99 million for the comparable
period of 2002. The decrease was a result of our decision to cease actively
seeking new leasing business and to manage the winding down of the leasing
portfolio. The corporate services segment, comprised of corporate help desk
services, technical staffing, systems integration, and training programs,
experienced a 14.4% increase in revenue, reaching $21.9 million, up from $19.1
million for the comparable period last year. Revenues from corporate help desk
services increased 15.1% to $17.2 million from $14.9 million, due primarily to
growth in business with our existing customers. Revenues from systems
integration increased 51.5% to $2.24 million from $1.48 million. These revenue
increases were offset by revenue decreases in the other product lines. Revenues
from technical staffing decreased 9.5% to $2.23 million from $2.47 million
principally as a result of price concessions granted to existing customers and
reductions in placements. Revenue from the provision of training programs
declined 11.8% to $213,000 from $241,000.
Gross profit as a percentage of sales decreased to 19.1% in the third quarter of
2003 from 26.1% in the third quarter of 2002. This decrease was primarily due to
a decrease in gross profit margins from our leasing operations, to a negative
gross profit margin of 83.8% in 2003 from a positive gross profit margin of
27.1% in 2002. The year over year decline in gross margin for leasing operations
is primarily a result of management's decision to increase the reserve for
equipment in inventory during the second quarter of 2003.
Gross profit margin for corporate services decreased to 21.0% from 26.0%. Within
the corporate services product segment, the corporate help desk services gross
profit margin decreased to 20.5% from 28.0% due primarily to the price
concessions included in the multi-year contracts negotiated during 2002 and 2003
with some of our help desk customers, including Ford Motor Company, and costs
related to the launch of new business in our expanded help desk in Belgium. The
training program gross profit margin decreased to 16.8% from 23.9%. These gross
profit margin decreases were partially offset by improvements in the systems
integration gross profit margin to 26.8% from 21.9% and the technical staffing
gross profit margin to 19.5% from 16.5%.
Selling, general, and administrative (SG&A) expense increased to $4.70 million
in the third quarter of 2003 from $4.23 million in the third quarter of 2002.
The selling portion of SG&A expense increased by $200,000 for payroll, benefits
and payroll tax expense for additional sales personnel. The general and
administrative portion of SG&A expense increased $275,000 primarily due to
increased bad debt expense, professional service costs, and computer system
maintenance and repair expense, less savings in payroll costs, facilities
expenses, and travel and training expenses.
The Company's Michigan Single Business Tax expense decreased from $225,000 in
the third quarter of 2002 to zero in the third quarter of 2003, due to a change
in the 2003 tax law, which was favorable to the Company.
Currency transaction gains of $86,000 for the three months ended September 30,
2003 were due to the continued depreciation of the U.S. dollar against the euro,
British pound sterling, and the Swedish krona. Currency transaction gains and
losses for the three months ended September 30, 2002 were not significant.
Interest income increased to $397,000 from $238,000 in the third quarter of 2003
and 2002, respectively. This increase was due primarily to $141,000 in interest
income associated with a successful federal income tax refund claim for the
years 1998 through 2000. The federal income tax refunds and interest income
payments were received in October 2003. Interest expense decreased to $9,000
from $64,000 due primarily to the continuing reduction in outstanding debt
related to our leasing operations.
The consolidated effective tax rate differs from the statutory tax rate and has
changed during the third quarter due to the following: 1) a change in
Management's estimate of total U.S. income before taxes for 2003, 2) the impact
of non-deductible expenses for U.S. tax purposes, 3) the impact of foreign
losses incurred for which future tax benefits have not been recorded, and 4)
varying tax rates specific to non-U.S. locations.
16
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO SEPTEMBER 30, 2002
Revenues were $66.0 million for the nine months ended September 30, 2003, the
same amount reported for the comparable period in 2002. Leasing operations
reported a decrease in revenue of 72.7%, generating $2.10 million in 2003, down
from $7.69 million in 2002 for the reasons previously noted under Leasing
Operations. The corporate services segment, comprised of corporate help desk
services, technical staffing, system integration, and training programs,
reported a 9.6% increase in year to date revenue, generating $63.9 million
versus $58.3 million in the comparable period of the prior year. Revenues from
corporate help desk services increased 13.7% to $49.7 million from $43.7 million
due to growth in business with new and existing customers. Revenues from systems
integration services increased 10.1% to $6.52 million from $5.93 million.
Revenues from technical staffing decreased 10.9% to $7.01 million from $7.87
million as a result of price concessions granted to existing customers and
reductions in placements. Revenue from the provision of training programs
decreased 18.2% to $674,000 from $824,000.
Gross profit as a percentage of sales decreased to 18.1% in 2003 from 24.0% in
2002, due primarily to a decline in gross profit margins of our leasing
operations. This business segment posted a negative gross profit margin of 80.5%
in 2003, as opposed to a positive gross profit margin of 13.3% in 2002.
Gross profit margin decreased for corporate services to 21.4% from 25.4%.
Corporate help desk services gross profit margin decreased to 21.0% from 27.4%
due primarily to price concessions included in multi-year contracts negotiated
during 2002 and 2003 with some of our help desk customers, including Ford Motor
Company, costs for the launch for our expanded help desk in Belgium, and
severance expense related to re-aligning our cost structure in our European
operations in the second quarter. The training programs gross profit margin
decreased to 17.3% from 20.4%. These gross profit margin decreases were
partially offset by improvements in the systems integration gross profit margin
to 25.7% from 24.8% and in the technical staffing gross profit margin to 20.7%
from 15.5%.
Selling, general, and administrative (SG&A) expense increased to $14.1 million
in 2003 from $12.6 million in 2002. The selling portion of SG&A expense
increased by $622,000 as we invested in additional sales during 2003. The
additional sales staff increased payroll and travel expenses by $520,000 and
$88,000, respectively, over the comparable period of 2002. The general and
administrative portion of SG&A expense increased $915,000 due primarily to
increased professional service costs, bad debt expense, facilities expense,
computer system maintenance and repairs expense, and insurance expense, less
savings in travel expenses. SG&A expense in 2002 included a non-cash charge of
$410,000 resulting from the appreciation in the intrinsic value of a variable
stock option agreement made to the Company's president and chief executive
officer, pursuant to an employment agreement entered into on August 9, 2001.
The Company's Michigan Single Business Tax expense decreased $133,000 to
$542,000 in 2003 from $675,000 in 2002, principally as a result of a favorable
change in the tax law.
Currency transactions gains of $449,000 for the nine months ended September 30,
2003 were due to the continued depreciation of the U.S. dollar against the euro,
British pound sterling, and the Swedish krona. Currency transaction gains and
losses for the nine months ended September 30, 2002 were not significant.
Interest income increased to $907,000 in 2003 from $712,000 in 2002. This
increase is primarily a result of the $141,000 in interest income associated
with a successful federal income tax refund claim for the years 1998 through
2000. The federal income tax refunds and interest income payments were received
in October 2003. Interest expense decreased to $32,000 from $148,000 due
primarily to the continuing reduction in outstanding debt, related to our
leasing operations.
The consolidated effective tax rate differs from the statutory tax rate and has
changed during the third quarter due to the following: 1) a change in
management's estimate of U.S. income before taxes for 2003, 2) the impact of
non-deductible expenses for U.S. tax purposes, 3) the impact of foreign losses
incurred for which future tax benefits have not been recorded, and 4) varying
tax rates specific to non-U.S. locations.
17
LIQUIDITY AND CAPITAL RESOURCES
BALANCE SHEET
Cash, cash equivalents, and marketable securities decreased by $809,000, from
$45.9 million on December 31, 2002 to $45.1 million on September 30, 2003. Our
working capital position decreased by $694,000 during the first nine months of
2003, from $60.7 million as of December 31, 2002 to $60.0 million as of
September 30, 2003.
Our total debt decreased by $324,000 during the first nine months of 2003, from
a balance of $698,000 on December 31, 2002 to $374,000 on September 30, 2003.
The Company's total debt as a percentage of its cash, cash equivalents, and
securities decreased from 1.5% on December 31, 2002 to 0.8% on September 30,
2003.
CASH PROVIDED BY OPERATIONS
Cash provided by operating activities was $2.54 million for the nine months
ended September 30, 2003. Net working capital increased as a result of an
increase of $3.69 million in accounts receivable. Depreciation and amortization
expense for the nine months ended September 30, 2003 was $4.58 million, of which
$1.18 million came from our leasing operations.
CASH PROVIDED BY INVESTING ACTIVITIES
Net cash provided by investing activities was $4.61 million for the nine months
ended September 30, 2003. We received $6.49 million from the sale of marketable
securities, $1.59 million from the sale of assets used in leasing operations,
and $0.37 million from other activities. We used $3.84 million to purchase
assets to be used in the provision of customer services.
CASH USED IN FINANCING ACTIVITIES
Cash used in financing activities was $1.46 million. We used $6.75 million to
purchase Company common stock and $323,000 to pay down debt related to leasing
operations. We received $4.82 million from the issuance of preferred stock and
$461,000 from the issuance of common stock related to the exercise of stock
options. Additionally, $335,000 resulted from foreign currency transaction
adjustments.
ITEM 4 - CONTROLS AND PROCEDURES
As of September 30, 2003, an evaluation was performed under the supervision and
with the participation of our management, including the chief executive officer
and chief financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on that evaluation, our
management, including the chief executive officer and chief financial officer,
concluded that our disclosure controls and procedures were effective as of
September 30, 2003. There have been no significant changes in our internal
controls or in other factors that could significantly affect internal controls
subsequent to September 30, 2003.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is a party to legal proceedings, which are routine and incidental to
its business. Although the consequences of these proceedings are not presently
determinable, in the opinion of management, they will not have a material
adverse affect on the Company's liquidity, financial position, or results of
operations.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 8, 2003, TechTeam Global, Inc. completed the private placement of
689,656 shares of a newly created Series A Redeemable Convertible Preferred
Stock ("Series A Preferred Stock") with ChrysCapital II, LLC ("CCII") for
$5,000,006 or $7.25 per share. Expenses incurred by the Company in connection
with the issuance of the Series A Preferred Stock were approximately $183,300,
including a commission of $50,000, none of which were paid or are
18
owed to directors or officers of the Company. The net offering proceeds are
approximately $4,816,700. We anticipate using these funds to acquire businesses
in the Far East. The transaction is exempt from registration requirements under
section 5 of the Securities Act of 1933 ("Act") under section 4(2) of the Act,
as amended, and Rule 506 of Regulation D promulgated by the U.S. Securities and
Exchange Commission. Specifically, CCII is a partnership with total assets in
excess of $5,000,000. The holder of Series A Preferred Stock may convert its
Series A Preferred Stock into Common Stock at any time after the first
anniversary of the initial issuance thereof on a one share of Series A Preferred
Stock for one share of Common Stock basis. The conversion ratio is subject to
adjustment if there is a dilutive issuance. Upon expiration of the agreement,
the Company is required to redeem the Series A Preferred Stock (See Note J).
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.4 Bylaws of National TechTeam, Inc. (A Delaware Corporation) as
amended and restated October 28, 2003
10.6 TechTeam Sixth Amendment To Lease
10.19 TechTeam Global, Inc. Executive Annual Incentive Plan
31.1 Written Statement of the Chief Executive Officer
31.2 Written Statement of the Chief Financial Officer
32 Written Statement of the Chief Executive Officer and Chief
Financial Officer Pursuant to 10 U.S.C. Section 1350
(b) Three reports on Form 8-K were filed during the quarter ended September 30,
2003
(i) Announcement of the Company's earnings for the second quarter of 2003,
dated August 14, 2003
(ii) Announcement of the posting of the Company's corporate presentation to
its website, dated August 29, 2003
ITEMS 3, 4, AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TechTeam Global, Inc.
----------------------
(Registrant)
Date: 11/07/03 By: /s/William F. Coyro, Jr.
-------------------------------------
William F. Coyro, Jr.
President and Chief Executive
Officer
Date: 11/07/03 By: /s/David W. Morgan
-------------------------------------
David W. Morgan
Vice President, Chief Financial
Officer, and Treasurer
20
EXHIBIT INDEX
NO. DESCRIPTION
--- -----------
3.4 Bylaws of National TechTeam, Inc. (A Delaware Corporation) as
amended and restated October 28, 2003
10.6 TechTeam Sixth Amendment To Lease
10.19 TechTeam Global, Inc. Executive Annual Incentive Plan
31.1 Written Statement of the Chief Executive Officer
31.2 Written Statement of the Chief Financial Officer
32 Written Statement of the Chief Executive Officer and Chief
Financial Officer Pursuant to 10 U.S.C. Section 1350