Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - TEAM INC | form8-kq3x2018earnings.htm |
Exhibit 99.1
 | NEWS RELEASE |
Contact: | |
Greg L. Boane | |
Chief Financial Officer | |
(281) 388-5541 | |
TEAM, INC. REPORTS THIRD QUARTER 2018 RESULTS
• | Q3 2018 operating cash flow of $23 million represents the highest quarterly operating cash flow generated since 2015 |
• | Repayments of outstanding debt totaled $15 million in Q3 2018 |
• | Inspection & Heat Treating operating performance improved significantly; Q3 2018 operating income improved to $9 million from an operating loss of $18 million in Q3 2017; Q3 2018 adjusted EBITDA margin increased to 10% compared to 8% in Q3 2017 |
• | Quest Integrity operating performance improved significantly; Q3 2018 revenues increased 53% over Q3 2017; Q3 2018 operating income improved to $5 million from an operating loss of $1 million in Q3 2017; Q3 2018 adjusted EBITDA margin increased to 26% compared to 4% in Q3 2017 |
• | OneTEAM program generated $5.4 million of savings in Q3 2018 and is on pace to deliver $8–$10 million in the second half of 2018 |
SUGAR LAND, TX – November 5, 2018 – Team, Inc. (NYSE: TISI) today reported its financial results for its third quarter ended September 30, 2018.
Consolidated revenues increased 2.0% to $290.9 million in the third quarter of 2018 compared to $285.1 million in the prior year quarter, primarily from increased activity levels in our Quest Integrity and Inspection and Heat Treating Group (“IHT”) segments, which were partially offset by lower activity in our Mechanical Services Group (“MS”). Consolidated net loss in the third quarter of 2018 was $22.9 million ($0.76 loss per diluted share) compared to a net loss of $83.5 million ($2.80 loss per diluted share) in the third quarter of 2017. Operating loss improved to $19.7 million in the third quarter of 2018 compared to an operating loss of $94.1 million for the prior year quarter, which included a $75.2 million goodwill impairment loss ($68.0 million net of tax).
Cash flow from operations and free cash flow for the quarter were both the highest quarterly performance since 2015. Cash flow from operations in the third quarter improved to $23.0 million, an increase of $20.6 million compared to Q3 2017. Free cash flow, a non-GAAP measure, improved by $21.2 million in the current quarter, and we repaid $15 million of outstanding debt under our credit facility during the quarter.
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Commenting on the results, Amerino Gatti, Chief Executive Officer, said, “We are pleased to report that Team delivered third quarter year-over-year organic growth in revenues, and represented Team’s highest third quarter revenues since 2015. These improvements were led by our two inspection and assessment segments, Inspection and Heat Treating and Quest Integrity, which were up 7% and 53%, respectively. Third quarter revenue gains were partially offset by a 9% decline in our Mechanical Services segment, however, the segment’s year-to-date performance has improved 4% year-over-year.
“Cash flow from operations improved significantly throughout the quarter. We generated free cash flow in the quarter of $16 million, of which $15 million was used to pay-down debt. We remain committed to generating positive free cash flow for the full year 2018. Finally, the OneTEAM program generated $5.4 million of savings in the third quarter and remains on track to deliver $8–$10 million in the second half of 2018.”
Mr. Gatti continued, “It is important to note that all three business segments delivered year-to-date 2018 revenue growth and improved adjusted EBITDA margins compared to 2017. During the current quarter, IHT and Quest Integrity contributed strong results versus 2017. MS was negatively impacted by higher refinery facility utilization levels as customers capitalized on higher regional crack spreads driven by recent pipeline capacity constraints and widened crude oil pricing differentials. Looking ahead, we believe this is a temporary refinery customer demand decline for mechanical services and we continue to be encouraged by the macro factors in our end markets, which have not changed significantly from our prior outlook. When coupled with rescheduled maintenance-related work, we believe these favorable market conditions will lead to higher mechanical services spending in 2019 and beyond.”
The third quarter 2018 reported results include certain charges not indicative of Team’s core operating activities, including: $4.3 million of costs related to our OneTEAM program and $2.1 million of certain legal, professional fees and other costs. Additionally, we incurred $2.0 million of restructuring costs. Net of tax, these items totaled $6.1 million ($0.20 per diluted share).
Excluding these items, adjusted net loss, a non-GAAP measure, was $16.8 million ($0.56 adjusted loss per diluted share) for the current quarter compared to adjusted net loss of $11.4 million ($0.38 adjusted loss per diluted share) for the prior year quarter. Our adjusted measure of operating loss, Adjusted EBIT, was a loss of $11.2 million in the third quarter of 2018, versus Adjusted EBIT loss of $7.1 million in the prior year comparable quarter. Adjusted EBITDA was $7.2 million in the current quarter compared to $7.1 million in the prior year quarter.
Adjusted net loss, Adjusted EBIT and adjusted EBITDA are non-GAAP financial measures that exclude certain items that are not indicative of Team’s core operating activities. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures is at the end of this news release.
Third quarter 2018 selling, general and administrative expense (“SG&A”) was $87.8 million and included $6.4 million of items not indicative of core operating activities described above. Second quarter 2018 SG&A was $93.2 million and included $5.8 million of items not indicative of core operating activities. The sequential cost decrease of $6.0 million in the third quarter is primarily
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due to savings generated from the OneTEAM program and lower incentive and stock-based compensation expense.
Segment Results
The following table illustrates the composition of the Company’s revenue and operating income (loss) for the quarters ended September 30, 2018 and 2017 (in thousands):
Three Months Ended September 30, | Increase (Decrease) | |||||||||||
2018 | 2017 | $ | % | |||||||||
(unaudited) | (unaudited) | |||||||||||
Revenues by business segment: | ||||||||||||
IHT | $ | 147,529 | $ | 138,383 | $ | 9,146 | 6.6% | |||||
MS | 119,011 | 130,768 | (11,757 | ) | (9.0)% | |||||||
Quest Integrity | 24,316 | 15,916 | 8,400 | 52.8% | ||||||||
Total | $ | 290,856 | $ | 285,067 | $ | 5,789 | 2.0% | |||||
Operating income (loss): | ||||||||||||
IHT2 | $ | 8,754 | $ | (17,515 | ) | $ | 26,269 | NM1 | ||||
MS2 | (9,086 | ) | (51,154 | ) | 42,068 | 82.2% | ||||||
Quest Integrity | 5,255 | (828 | ) | 6,083 | NM1 | |||||||
Corporate and shared support services | (24,617 | ) | (24,619 | ) | 2 | 0.0% | ||||||
Total | $ | (19,694 | ) | $ | (94,116 | ) | $ | 74,422 | 79.1% | |||
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1 | NM - Not meaningful |
2 | For the three months ended September 30, 2017, includes goodwill impairment charge of $21.1 million and $54.1 million in IHT and MS, respectively. |
The lower overall operating loss primarily reflects the effect of a third quarter 2017 goodwill impairment charge of $21.1 million and $54.1 million in IHT and MS, respectively. Further, third quarter 2018 operating results benefited from the Company’s cost savings initiatives, including the OneTEAM program. The Quest Integrity and IHT segments both experienced higher revenues and operating income in the current quarter compared to 2017 as customer demand increased for inspection-related services. Offsetting these inspection improvements, MS revenues declined in the current quarter on reduced activity levels, primarily in the Gulf Coast region. The MS segment experienced a significant demand reduction in Q3 2018 resulting from higher than normal U.S. refinery utilization during the quarter. In addition to the revenue decline in the current quarter, we also had incremental charges of approximately $3 million related to inventory, bad debt provisions and legal claims during the quarter that negatively impacted profit margins as well as $3.1 million of accelerated amortization associated with the Furmanite trade name, discussed below.
Supplemental Financial Information
OneTEAM Program: The deployment phase of the OneTEAM integration and business transformation initiative is now well underway. We incurred $4.3 million of expenses during the third quarter of 2018, which are primarily related to professional fees associated with the project, and $2.0 million of severance-related restructuring costs. We expect the OneTEAM program will be substantially complete in the first half of 2019.
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Furmanite trade name amortization: Results for the third quarter of 2018 include incremental amortization expense of $3.1 million associated with a change in the estimated useful life of the Furmanite trade name, reflecting initiatives to consolidate the Company’s branding. The trade name will be fully amortized by the end of 2018.
Interest expense: We recorded $8.0 million of interest expense during the third quarter of 2018, which includes $1.8 million of non-cash interest expense. The non-cash interest expense is primarily attributable to the amortization of debt issuance costs and the amortization of the discount on the Company’s convertible debt.
Income taxes: Our effective tax rate was a benefit of 17.9% for the third quarter of 2018 compared to a benefit of 12.6% for the same period last year. The higher effective tax rate benefit was due to certain discrete items recognized this year and the effect of the prior year goodwill impairment charge, partially offset by changes in the valuation allowance on deferred tax assets this year.
Foreign currency: Changes in foreign currency exchange rates unfavorably impacted third quarter 2018 revenues by $1.7 million.
Borrowing capacity: At September 30, 2018, our cash balance was $16 million and we had approximately $58 million of available borrowing capacity. Total liquidity of $74 million increased by $6 million since the beginning of 2018. Additionally, our leverage ratio under the credit facility has improved sequentially in each quarter of 2018 to date.
GAAP Earnings and Non-GAAP Financial Measures
Certain items that management believes are not indicative of Team’s core operating activities have been excluded from net income (loss) reported in accordance with generally accepted accounting principles in the United States (“GAAP”) when arriving at adjusted net income (loss) and adjusted operating income (loss) (which the Company also refers to as adjusted EBIT), each a non-GAAP financial measure. In the current quarter, the most significant of such items were $6.3 million of costs related to our OneTEAM transformation project (including $2.0 million of restructuring costs).
A reconciliation of these financial measures to the most comparable GAAP financial measures is contained in the accompanying schedule.
Conference Call
Team, Inc. has scheduled a conference call to discuss its third quarter 2018 results, which will be broadcast live over the Internet, on Tuesday, November 6, 2018 at 10:00 a.m. Eastern Time / 9:00 a.m. Central Time. To participate in the call, dial 1-847-852-4067 and ask for the Team conference call at least 10 minutes prior to the start time, or access it live over the Internet at www.teaminc.com. For those who cannot listen to the live call, a replay will be available through November 13, 2018 and may be accessed by dialing 404-537-3406 and using pass code 3982988#. In addition, an archive of the webcast will be available shortly after the call at www.teaminc.com for 90 days.
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About Team, Inc.
Headquartered near Houston, Texas, Team, Inc. (NYSE: TISI) is a leading provider of specialty industrial services, including inspection and assessment, required in maintaining and installing high-temperature and high-pressure piping systems and vessels that are utilized extensively in the refining, petrochemical, power, pipeline and other heavy industries. Team offers these services across over 200 locations and more than 20 countries throughout the world. For more information, please visit www.teaminc.com.
Non-GAAP Financial Measures
This press release presents information about the Company’s adjusted net income (loss) and adjusted net income (loss) per diluted share, and the Company sometimes uses adjusted EBITDA, EBIT, adjusted EBIT and free cash flow, which are non-GAAP financial measures provided as supplemental to the results provided in accordance with GAAP. A reconciliation of each of the foregoing historical non-GAAP financial measures to the most directly comparable historical GAAP financial measure is contained in the accompanying schedule for each of the fiscal periods indicated.
Certain forward-looking information contained herein is being provided in accordance with the provisions of the Private Securities Litigation Reform Act of 1995. We have made reasonable efforts to ensure that the information, assumptions and beliefs upon which this forward-looking information is based are current, reasonable and complete. Such forward-looking statements involve estimates, assumptions, judgments and uncertainties. There are known and unknown factors that could cause actual results or outcomes to differ materially from those addressed in the forward-looking information. Such known factors are detailed in the Company’s Annual Report on Form 10-K and in the Company's Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission, and in other reports filed by the Company with the Securities and Exchange Commission from time to time. Accordingly, there can be no assurance that the forward-looking information contained herein, including projected cost savings, will occur or that objectives will be achieved. We assume no obligation to publicly update or revise any forward-looking statements made today or any other forward-looking statements made by the Company, whether as a result of new information, future events or otherwise, except as may be required by law.
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TEAM, INC. AND SUBSIDIARIES | ||||||||||||||||
SUMMARY OF OPERATING RESULTS | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Revenues | $ | 290,856 | $ | 285,067 | $ | 937,130 | $ | 883,877 | ||||||||
Operating expenses | 220,717 | 216,126 | 694,275 | 655,489 | ||||||||||||
Gross margin | 70,139 | 68,941 | 242,855 | 228,388 | ||||||||||||
Selling, general and administrative expenses | 87,786 | 85,179 | 270,619 | 265,557 | ||||||||||||
Restructuring and other related charges, net | 2,047 | 2,637 | 4,458 | 1,661 | ||||||||||||
Gain on revaluation of contingent consideration | — | — | (202 | ) | (1,174 | ) | ||||||||||
Goodwill impairment loss | — | 75,241 | — | 75,241 | ||||||||||||
Operating loss | (19,694 | ) | (94,116 | ) | (32,020 | ) | (112,897 | ) | ||||||||
Interest expense, net | 8,022 | 6,369 | 23,250 | 13,899 | ||||||||||||
Write-off of deferred loan costs | — | 1,244 | — | 1,244 | ||||||||||||
(Gain) loss on convertible debt embedded derivative | — | (6,292 | ) | 24,783 | (6,292 | ) | ||||||||||
Other expense, net | 123 | 157 | 455 | 515 | ||||||||||||
Loss before income taxes | (27,839 | ) | (95,594 | ) | (80,508 | ) | (122,263 | ) | ||||||||
Less: Income tax benefit | (4,977 | ) | (12,066 | ) | (7,331 | ) | (18,141 | ) | ||||||||
Net loss | $ | (22,862 | ) | $ | (83,528 | ) | $ | (73,177 | ) | $ | (104,122 | ) | ||||
Loss per common share: | ||||||||||||||||
Basic | $ | (0.76 | ) | $ | (2.80 | ) | $ | (2.44 | ) | $ | (3.49 | ) | ||||
Diluted | $ | (0.76 | ) | $ | (2.80 | ) | $ | (2.44 | ) | $ | (3.49 | ) | ||||
Weighted-average number of shares outstanding: | ||||||||||||||||
Basic | 30,021 | 29,841 | 30,000 | 29,824 | ||||||||||||
Diluted | 30,021 | 29,841 | 30,000 | 29,824 | ||||||||||||
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TEAM, INC. AND SUBSIDIARIES | ||||||||
SUMMARY CONSOLIDATED BALANCE SHEET INFORMATION | ||||||||
(in thousands) | ||||||||
September 30, | December 31, | |||||||
2018 | 2017 | |||||||
(unaudited) | ||||||||
Cash and cash equivalents | $ | 15,955 | $ | 26,552 | ||||
Other current assets | 378,600 | 370,508 | ||||||
Property, plant and equipment, net | 193,412 | 203,219 | ||||||
Other non-current assets | 434,608 | 455,556 | ||||||
Total assets | $ | 1,022,575 | $ | 1,055,835 | ||||
Current liabilities | $ | 150,934 | $ | 147,784 | ||||
Long-term debt | 376,958 | 387,749 | ||||||
Other non-current liabilities | 58,235 | 62,834 | ||||||
Stockholders’ equity | 436,448 | 457,468 | ||||||
Total liabilities and stockholders’ equity | $ | 1,022,575 | $ | 1,055,835 | ||||
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TEAM INC. AND SUBSIDIARIES | ||||||||
SUMMARY CONSOLIDATED CASH FLOW INFORMATION | ||||||||
(in thousands) | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
2018 | 2017 | |||||||
(unaudited) | (unaudited) | |||||||
Net loss | $ | (73,177 | ) | $ | (104,122 | ) | ||
Depreciation and amortization expense | 48,466 | 38,686 | ||||||
Provision for doubtful accounts | 9,432 | 6,157 | ||||||
Deferred income taxes | (8,273 | ) | (22,107 | ) | ||||
Non-cash compensation cost | 9,414 | 5,846 | ||||||
Goodwill impairment loss | — | 75,241 | ||||||
Loss (gain) on convertible debt embedded derivative | 24,783 | (6,292 | ) | |||||
Working capital changes | (7,995 | ) | (1,796 | ) | ||||
Other items affecting operating cash flows | 2,652 | (1,778 | ) | |||||
Net cash provided by (used in) operating activities | 5,302 | (10,165 | ) | |||||
Capital expenditures | (19,394 | ) | (26,541 | ) | ||||
Proceeds from disposal of assets | 1,464 | 2,559 | ||||||
Other items affecting investing cash flows | (462 | ) | (519 | ) | ||||
Net cash used in investing activities | (18,392 | ) | (24,501 | ) | ||||
Borrowings (payments) on Credit Facility, net | 6,370 | (207,386 | ) | |||||
Issuance of convertible debt, net of issuance costs | — | 222,311 | ||||||
Debt issuance costs on Credit Facility | (855 | ) | (1,038 | ) | ||||
Cash associated with share-based payment arrangements, net | (269 | ) | 124 | |||||
Other items affecting financing cash flows | (1,106 | ) | (1,278 | ) | ||||
Net cash provided by financing activities | 4,140 | 12,733 | ||||||
Effect of exchange rate changes | (1,647 | ) | 2,398 | |||||
Change in cash and cash equivalents | $ | (10,597 | ) | $ | (19,535 | ) | ||
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TEAM, INC. AND SUBSIDIARIES | ||||||||||||||||
SEGMENT INFORMATION | ||||||||||||||||
(in thousands) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Revenues | ||||||||||||||||
IHT | $ | 147,529 | $ | 138,383 | $ | 467,621 | $ | 439,751 | ||||||||
MS | 119,011 | 130,768 | 400,890 | 385,154 | ||||||||||||
Quest Integrity | 24,316 | 15,916 | 68,619 | 58,972 | ||||||||||||
$ | 290,856 | $ | 285,067 | $ | 937,130 | $ | 883,877 | |||||||||
Operating income (loss) (“EBIT”) | ||||||||||||||||
IHT1 | $ | 8,754 | $ | (17,515 | ) | $ | 28,775 | $ | 1,139 | |||||||
MS1 | (9,086 | ) | (51,154 | ) | 4,014 | (45,318 | ) | |||||||||
Quest Integrity | 5,255 | (828 | ) | 12,100 | 7,252 | |||||||||||
Corporate and shared support services | (24,617 | ) | (24,619 | ) | (76,909 | ) | (75,970 | ) | ||||||||
$ | (19,694 | ) | $ | (94,116 | ) | $ | (32,020 | ) | $ | (112,897 | ) | |||||
Adjusted EBIT | ||||||||||||||||
IHT | $ | 9,400 | $ | 5,792 | $ | 30,437 | $ | 23,272 | ||||||||
MS | (8,659 | ) | 5,021 | 5,279 | 9,807 | |||||||||||
Quest Integrity | 5,262 | (404 | ) | 12,140 | 7,676 | |||||||||||
Corporate and shared support services | (17,250 | ) | (17,543 | ) | (58,253 | ) | (56,115 | ) | ||||||||
$ | (11,247 | ) | $ | (7,134 | ) | $ | (10,397 | ) | $ | (15,360 | ) | |||||
Adjusted EBITDA | ||||||||||||||||
IHT | $ | 14,049 | $ | 10,598 | $ | 44,616 | $ | 37,794 | ||||||||
MS | 252 | 10,402 | 32,412 | 26,848 | ||||||||||||
Quest Integrity | 6,287 | 661 | 15,130 | 11,106 | ||||||||||||
Corporate and shared support services | (13,395 | ) | (14,541 | ) | (44,675 | ) | (46,576 | ) | ||||||||
$ | 7,193 | $ | 7,120 | $ | 47,483 | $ | 29,172 | |||||||||
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1 | For the three and nine months ended September 30, 2017, includes goodwill impairment charge of $21.1 million and $54.1 million for IHT and MS, respectively. |
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TEAM, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
(Unaudited)
The Company uses supplemental non-GAAP financial measures which are derived from the consolidated financial information including adjusted net income (loss); adjusted net income (loss) per share, earnings before interest and taxes (“EBIT”); adjusted EBIT (defined below); adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) and free cash flow to supplement financial information presented on a GAAP basis. Adjusted net income (loss) and adjusted net income (loss) per diluted share, each as defined by the Company, exclude the following items from net income (loss): costs associated with our OneTEAM transformation program, acquisition costs associated with business combinations, legal costs associated with Quest Integrity patent defense litigation, professional fees for acquired business integration, gains (losses) on the revaluation of contingent consideration, restructuring and other related charges (credits), executive severance/transition costs, non-capitalized Enterprise Resource Planning (“ERP”) implementation costs, gains (losses) on our convertible debt embedded derivative, and certain other items that management does not believe are indicative of core operating activities and the related income tax impacts. We also exclude the income tax impacts of certain special income tax items including certain changes to valuation allowances and the effects of certain tax legislation changes. The identification of these special tax items is judgmental in nature, and their calculation is based on various assumptions and estimates. EBIT, as defined by the Company, excludes income tax expense (benefit), interest charges and items of other (income) expense and therefore is equal to operating income (loss) reported in accordance with GAAP. Adjusted EBIT further excludes the following items: costs associated with our OneTEAM transformation program, acquisition costs associated with business combinations, legal costs associated with Quest Integrity patent defense litigation, professional fees for acquired business integration, gains (losses) on the revaluation of contingent consideration, restructuring and other related charges (credits), executive severance/transition costs, non-capitalized ERP implementation costs and certain other items that management does not believe are indicative of core operating activities. Adjusted EBITDA further excludes from adjusted EBIT depreciation, amortization and non-cash share based compensation costs. Free cash flow is defined as net cash provided by (used in) operating activities minus capital expenditures.
Management believes that excluding certain items from GAAP results allows management to better understand the consolidated financial performance from period to period and to better identify operating trends that may not otherwise be apparent. Moreover, the Company believes these non-GAAP financial measures will provide its stakeholders with useful information to help them evaluate operating performance. However, there are limitations to the use of the non-GAAP financial measures presented in this report. The Company’s non-GAAP financial measures may not be comparable to similarly titled measures of other companies who may calculate non-GAAP financial measures differently than Team does, limiting the usefulness of those measures for comparative purposes. The liquidity measure of free cash flow does not represent a precise calculation of residual cash flow available for discretionary expenditures.
The non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for net income (loss) as a measure of operating performance or to cash flows from operating activities as a measure of liquidity, prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis. Reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure are presented below. You are encouraged to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented.
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TEAM, INC. AND SUBSIDIARIES | ||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Net loss: | ||||||||||||||||
Net loss | $ | (22,862 | ) | $ | (83,528 | ) | $ | (73,177 | ) | $ | (104,122 | ) | ||||
Professional fees, legal and other1 | 6,400 | 1,945 | 16,980 | 6,710 | ||||||||||||
ERP costs | — | 3,909 | 87 | 11,849 | ||||||||||||
Restructuring and other related charges, net2 | 2,047 | 2,637 | 4,458 | 1,661 | ||||||||||||
Executive transition cost3 | — | 1,027 | 300 | 1,027 | ||||||||||||
Natural disaster costs | — | 2,223 | — | 2,223 | ||||||||||||
Goodwill impairment loss | — | 75,241 | — | 75,241 | ||||||||||||
Gain on revaluation of contingent consideration | — | — | (202 | ) | (1,174 | ) | ||||||||||
Write-off of deferred loan costs | — | 1,244 | — | 1,244 | ||||||||||||
(Gain) loss on convertible debt embedded derivative | — | (6,292 | ) | 24,783 | (6,292 | ) | ||||||||||
Tax impact of adjustments4 | (2,366 | ) | (9,762 | ) | (12,994 | ) | (13,668 | ) | ||||||||
Adjusted net loss | $ | (16,781 | ) | $ | (11,356 | ) | $ | (39,765 | ) | $ | (25,301 | ) | ||||
Adjusted net loss per common share: | ||||||||||||||||
Basic | $ | (0.56 | ) | $ | (0.38 | ) | $ | (1.33 | ) | $ | (0.85 | ) | ||||
Diluted | $ | (0.56 | ) | $ | (0.38 | ) | $ | (1.33 | ) | $ | (0.85 | ) | ||||
Adjusted EBIT and Adjusted EBITDA: | ||||||||||||||||
Operating loss (“EBIT”) | $ | (19,694 | ) | $ | (94,116 | ) | $ | (32,020 | ) | $ | (112,897 | ) | ||||
Professional fees, legal and other1 | 6,400 | 1,945 | 16,980 | 6,710 | ||||||||||||
ERP costs | — | 3,909 | 87 | 11,849 | ||||||||||||
Restructuring and other related charges, net2 | 2,047 | 2,637 | 4,458 | 1,661 | ||||||||||||
Executive transition cost3 | — | 1,027 | 300 | 1,027 | ||||||||||||
Natural disaster costs | — | 2,223 | — | 2,223 | ||||||||||||
Goodwill impairment loss | — | 75,241 | — | 75,241 | ||||||||||||
Gain on revaluation of contingent consideration | — | — | (202 | ) | (1,174 | ) | ||||||||||
Adjusted EBIT | (11,247 | ) | (7,134 | ) | (10,397 | ) | (15,360 | ) | ||||||||
Depreciation and amortization | ||||||||||||||||
Amount included in operating expenses | 6,568 | 6,424 | 20,341 | 20,214 | ||||||||||||
Amount included in selling, general, and administrative expenses | 9,464 | 6,247 | 28,125 | 18,472 | ||||||||||||
Total depreciation and amortization | 16,032 | 12,671 | 48,466 | 38,686 | ||||||||||||
Non-cash share-based compensation costs | 2,408 | 1,583 | 9,414 | 5,846 | ||||||||||||
Adjusted EBITDA | $ | 7,193 | $ | 7,120 | $ | 47,483 | $ | 29,172 | ||||||||
Free Cash Flow: | ||||||||||||||||
Cash provided by (used in) operating activities | $ | 23,049 | $ | 2,445 | $ | 5,302 | $ | (10,165 | ) | |||||||
Capital expenditures | (7,312 | ) | (7,879 | ) | (19,394 | ) | (26,541 | ) | ||||||||
Free Cash Flow | $ | 15,737 | $ | (5,434 | ) | $ | (14,092 | ) | $ | (36,706 | ) | |||||
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1 | For the three and nine months ended September 30, 2018, includes $4.3 million and $11.8 million, respectively, associated with the OneTEAM program (exclusive of restructuring costs). |
2 | For 2018, relates to restructuring costs incurred associated with the OneTEAM program. For 2017, primarily associated with the 2017 Cost Savings Initiative, net of a $1.1 million gain associated with disposal of Furmanite operations in Belgium included in the nine months ended September 30, 2017. |
3 | Transition costs associated with September 2017 leadership change. |
4 | Represents the tax effect of the adjustments at an assumed marginal tax rate of 28% for the three and nine months ended September 30, 2018 and 37% for the three and nine months ended September 30, 2017, except that the tax impact on the goodwill impairment loss is adjusted for the non-deductible portion. |
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TEAM, INC. AND SUBSIDIARIES | ||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued) | ||||||||||||||||
(in thousands) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Adjusted EBIT and Adjusted EBITDA by Segment: | ||||||||||||||||
IHT | ||||||||||||||||
Operating income (loss) | $ | 8,754 | $ | (17,515 | ) | $ | 28,775 | $ | 1,139 | |||||||
Professional fees, legal and other | 178 | — | 226 | — | ||||||||||||
Restructuring and other related charges, net1 | 468 | 862 | 1,436 | 862 | ||||||||||||
Natural disaster costs | — | 1,305 | — | 1,305 | ||||||||||||
Goodwill impairment loss | — | 21,140 | — | 21,140 | ||||||||||||
Gain on revaluation of contingent consideration | — | — | — | (1,174 | ) | |||||||||||
Adjusted EBIT | 9,400 | 5,792 | 30,437 | 23,272 | ||||||||||||
Depreciation and amortization | 4,649 | 4,806 | 14,179 | 14,522 | ||||||||||||
Adjusted EBITDA | $ | 14,049 | $ | 10,598 | $ | 44,616 | $ | 37,794 | ||||||||
MS | ||||||||||||||||
Operating income (loss) | $ | (9,086 | ) | $ | (51,154 | ) | $ | 4,014 | $ | (45,318 | ) | |||||
Professional fees, legal and other | 19 | — | 526 | 163 | ||||||||||||
Restructuring and other related charges, net1 | 408 | 1,224 | 739 | 11 | ||||||||||||
Natural disaster costs | — | 850 | — | 850 | ||||||||||||
Goodwill impairment loss | 54,101 | 54,101 | ||||||||||||||
Adjusted EBIT | (8,659 | ) | 5,021 | 5,279 | 9,807 | |||||||||||
Depreciation and amortization | 8,911 | 5,381 | 27,133 | 17,041 | ||||||||||||
Adjusted EBITDA | $ | 252 | $ | 10,402 | $ | 32,412 | $ | 26,848 | ||||||||
Quest Integrity | ||||||||||||||||
Operating income (loss) | $ | 5,255 | $ | (828 | ) | $ | 12,100 | $ | 7,252 | |||||||
Restructuring and other related charges, net1 | 7 | 424 | 40 | 424 | ||||||||||||
Adjusted EBIT | 5,262 | (404 | ) | 12,140 | 7,676 | |||||||||||
Depreciation and amortization | 1,025 | 1,065 | 2,990 | 3,430 | ||||||||||||
Adjusted EBITDA | $ | 6,287 | $ | 661 | $ | 15,130 | $ | 11,106 | ||||||||
Corporate and shared support services | ||||||||||||||||
Operating loss | $ | (24,617 | ) | $ | (24,619 | ) | $ | (76,909 | ) | $ | (75,970 | ) | ||||
Professional fees, legal and other2 | 6,203 | 1,945 | 16,228 | 6,547 | ||||||||||||
ERP costs | — | 3,909 | 87 | 11,849 | ||||||||||||
Restructuring and other related charges, net1 | 1,164 | 127 | 2,243 | 364 | ||||||||||||
Executive transition cost3 | — | 1,027 | 300 | 1,027 | ||||||||||||
Natural disaster costs | — | 68 | — | 68 | ||||||||||||
Gain on revaluation of contingent consideration | — | — | (202 | ) | — | |||||||||||
Adjusted EBIT | (17,250 | ) | (17,543 | ) | (58,253 | ) | (56,115 | ) | ||||||||
Depreciation and amortization | 1,447 | 1,419 | 4,164 | 3,693 | ||||||||||||
Non-cash share-based compensation costs | 2,408 | 1,583 | 9,414 | 5,846 | ||||||||||||
Adjusted EBITDA | $ | (13,395 | ) | $ | (14,541 | ) | $ | (44,675 | ) | $ | (46,576 | ) | ||||
___________________
1 | For 2018, relates to restructuring costs incurred associated with the OneTEAM program. For 2017, primarily associated with the 2017 Cost Savings Initiative, net of a $1.1 million gain in MS associated with disposal of Furmanite operations in Belgium included in the nine months ended September 30, 2017. |
2 | For the three months and nine months ended September 30, 2018, includes $4.3 million and $11.8 million associated with the OneTEAM program (exclusive of restructuring costs). |
3 | Transition costs associated with September 2017 leadership change. |
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