Team Inc. (TISI)

F1Q11 (Qtr End 08/31/2010) Earnings Call

October 6, 2010 09:00 am ET

Executives

Phil Hawk - Chairman and CEO

Ted Owen - SVP and CFO

Analysts

Matt Duncan - Stephens

Rich Wesolowski - Sidoti

Torin Eastburn - CJS Securities

Matt Tucker - Keybanc Capital Markets

Max Barrett - Tudor, Pickering, Holt

Presentation

Operator

Welcome to the Team IR Call. (Operator Instructions)

I will now turn the call over to Mr. Phil Hawk.

Phil Hawk

It’s my pleasure to welcome you to the Team Inc. web conference call to discuss recent company performance. As indicated, my name is Phil Hawk; I’m the Chairman and CEO of Team. Joining me again today is Mr. Ted Owen, the company’s Executive Vice President and Chief Financial Officer.

The purpose of today’s conference call is to discuss our recently released financial results for the company’s first fiscal quarter ending August 31, 2010. As with past calls, our primary objective is to provide our shareholders and potential shareholders with an enhanced understanding of our company’s performance and prospects.

This discussion is intended to supplement our quarterly earnings releases; our 8-K, 10-Q and 10-K filings to the SEC as well as our Annual Report. Ted will begin with a review of the financial results. I will follow Ted with a few brief remarks and observations about our performance and prospects. Following our remarks, we will take questions from our listeners.

With that Ted, let me turn it over to you.

Ted Owen

First, I want to remind everyone as usual that any forward-looking information we discuss today 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. However, a variety of factors could cause actual results to differ materially from those anticipated in any forward-looking information.

A description of those factors is set forth in the last paragraph of our press release and in the company’s SEC filings. There can be no assurance that the forward-looking information discussed today will occur, or that our 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.

With that, now for the financial results.

Revenues for the first quarter were $104.5 million, which is up 4% compared to last year’s first quarter. Net income was $3.8 million in the current quarter versus $1.8 million adjusted for non-recurring charges in last year’s first quarter. The non-recurring charges in last year’s first quarter as you recall were associated with an SCPA investigation so that all of our discussion related to prior amounts, we’ll adjust for that as we had done last year for comparative purposes.

Earnings per diluted share were $0.20 in the current quarter versus an adjusted $0.09 in last year’s first quarter. Other highlights in the quarter were as follows:

Gross margin as a percentage of revenue improved to 30.2% compared to 29.2% in last year’s first quarter. SG&A expenses were down $800,000 in the quarter, or 3% from the prior year quarter. Operating income as a percent of revenues was 6.5% versus an adjusted 3.7% in the prior quarter.

During the quarter we repurchased approximately 90,000 shares of our stock for a total of $1.3 million. Capital expenditures in the quarter were $2.3 million. Depreciation and amortization expense was $3.1 million, and non-cash compensation expense was $1.1 million.

Total adjusted EBITDA was $11 million and $49 million for the trailing 12 months. Please note that adjusted EBITDA reflects the add-back of both non-cash comp expense and the non-routine charges affecting operating income.

During the quarter, we repaid $10 million of our outstanding debt, and at the end of the quarter our net debt to EBITDA was considerably less than 1:1. Our net debt at the end of the quarter was approximately $22 million, which is a reduction of $14 million during the quarter and includes the $10 million of debt paid back plus an increase in cash of $4 million.

And then finally, at the end of the quarter our unused borrowing capacity under our existing credit facilities was approximately $100 million.

So with that Phil, I’ll turn it back to you.

Phil Hawk

Now I would like to add some additional perspectives on our recent performance. We’re off to a good start our new fiscal year. I am pleased with several aspects of our performance in the recently completed quarter.

First of all, we continue to grow our business in a challenging market environment. As Ted indicated, for the quarter, our overall growth was approximately 4% versus the prior year period. This revenue growth was approximately the same rate of growth that we achieved in the most recent fourth quarter.

Let me share a few more details and perspectives on this growth. Overall, it is still a challenging market environment. Our customers continue to face business pressures, which are impacting their procurement approaches and operational plans. But there are some bright spots in a number of areas.

Our U.S. business revenues grew about 10% for the quarter, faster than even our Canadian or other international markets, reflecting a slightly stronger demand environment in several U.S. regions. We experienced growth in both our onstream and turnaround services.

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