Team (TISI)

Q4 2011 Earnings Call

July 27, 2011 9:00 am ET

Executives

Philip Hawk - Executive Chairman, Chief Executive Officer and Chairman of Executive Committee

Ted Owen - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Analysts

Craig Bell - SMH Capital

Adam Thalhimer - BB&T Capital Markets

Matthew Tucker - KeyBanc Capital Markets Inc.

Matt Duncan - Stephens Inc.

Arnold Ursaner - CJS Securities, Inc.

Richard Wesolowski - Sidoti & Company, LLC

Presentation

Operator

Welcome to the Team IR Call. My name is Sandra, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. Phil Hawk, CEO. Mr. Hawk, CEO, you may begin.

Philip Hawk

Thank you, Sandra. Good morning, everyone. It's my pleasure to welcome you to the Team Web conference call to discuss recent company performance. Again, my name is Phil Hawk, and I'm the Chairman and Chief Executive Officer of Team. Joining me again today, is 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 fourth quarter and full fiscal year ending May 31, 2011. 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, SEC filings, as well as our annual report.

Ted will begin with a review of the financial results. I will follow Ted, with a few remarks and observations about our performance and prospects. Following our remarks, we'll take questions from our listeners. With that, Ted, let me turn it over to you.

Ted Owen

Thanks, Phil. First, as usual, I want to remind everyone that any forward-looking information we discussed today is being provided in accordance with the provisions of the Private Securities Litigation Reform Act of 1995. We've 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 company's SEC filings. Accordingly, there could 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.

Now for the financial results. I am pleased to report record revenues and earnings for both the full year and for the quarter. For the fourth quarter, net income was $10.8 million or $0.53 per share on revenues of $162 million, which included $7.7 million contributed by Quest Integrity Group, which we acquired, you will recall, in November 2010. For the year, total revenues were $508 million, which included $15.8 million of revenues from Quest. And adjusted net income was $25.2 million or $1.26 per share. Again, a record for Team.

On an organic basis, excluding the effect of the Quest acquisition, revenue growth was 23% for the quarter and 8% for the year. On a GAAP basis, earnings for the year were $1.32 per fully diluted share, which includes the benefit of nonroutine tax credits that were recorded in the third quarter and that we discussed in last quarter's earnings call.

Now with respect to some cash flow-related items, capital expenditures were $13 million for the year, depreciation and amortization was about $15 million and non-cash compensation was $5 million. So adjusted EBITDA for the year was about $63 million. At May 31, our total debt was $76 million, cash was $14 million and thus, net debt was $62 million. Our net debt-to-EBITDA was about 1:1. Additionally, we're pleased to report that we have renewed and extended our now $150 million revolving credit facility to mature in July of 2016. Our thanks to our bank group for their continued support and confidence in us. With that, Phil, I'll turn it back to you.

Philip Hawk

Thanks, Ted. Now I'd like to provide some additional perspective on our recent performance and outlook. I will briefly touch on fourth quarter performance and then use the bulk of my comments to discuss and review our performance and progress throughout the entire year.

I'll wrap up with a few comments about our expectations for the current fiscal year 2012. To the fourth quarter, first kind of reaction is wow. As Ted indicated, in the recently completed fourth quarter, Team achieved record performance in a number of dimensions. Quarterly revenue was $162 million, up 29% from prior-year level and our highest level ever to date. Excluding the impact of the Quest acquisition earlier in the year, organic revenue growth was 23%. Operating earnings were $18.7 million also a new record for Team and not more than 70% from prior-year levels. EBIT margin as a percentage of revenue, increased more than 3 percentage points to 11.6%, and net income of $10.8 million or $0.53 per share was also a new record for Team.

To summarize the quarter, Team achieved significant revenue growth across virtually our entire service network. Further, strong project execution, attractive field labor utilization levels and effective cost management enabled Team to achieve attractive profit growth leverage in the business. I was pleased with our performance in virtually all respects. While it maybe tempting to dwell on this outstanding quarter, as always, I am cautious not to draw to many conclusions from our performance in a single quarter. Because of the natural lumpiness of our business, a full year perspective of our business and performance is more representative of where we are, and as a consequence is more helpful.

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