Team (TISI) Q1 2012 Earnings Call October 04, 2011 9:00 am ET Executives Philip J. Hawk - Executive Chairman, Chief Executive Officer and Chairman of Executive Committee Ted W. Owen - Chief Financial officer, Principal Accounting officer, Executive Vice President and Treasurer Analysts Craig Bell - SMH Capital Adam R. Thalhimer - BB&T Capital Markets, Research Division Matt Duncan - Stephens Inc., Research Division Arnold Ursaner - CJS Securities, Inc. Tahira Afzal - KeyBanc Capital Markets Inc., Research Division Richard Wesolowski - Sidoti & Company, LLC Presentation Operator
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With that, Ted, let me turn it over to you.Ted W. Owen Thanks, Phil. First, as usual, I want to remind everyone 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'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 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. And with that, now for the financial results, I'm pleased to report the best first quarter in the -- of operating results in Team's history. For the first quarter, net income was $6.8 million or $0.33 per share on revenues of $141 million. That's an increase of 35% over the same quarter last year. On an organic basis, which excludes the effect of the Quest acquisition, revenue growth was 28% for the quarter. Operating income was up 75% over the first quarter of last year and net income was up about 80%. We are obviously off to a good start for the year. Now with respect to some cash flow related items. Capital expenditures for the quarter were $5.3 million. Depreciation and amortization was about $4.1 million and noncash compensation expense was about $1 million. EBITDA for the quarter was $17 million and was $69 million on a trailing 12-month basis. At August 31, our total debt was $73 million, our cash was $21 million, and so therefore, net debt was $51 million. So our net debt to trailing 12-month EBITDA at August 31 was less than 1 to 1.
With that, Phil, I'll turn it back to you.Philip J. Hawk Thanks, Ted. Let me now add a couple of additional comments to Ted's summary. We are off to a very good start in this fiscal year. The primary driver of this good start is terrific broad-based revenue growth. Let me share several additional details on this revenue performance. As Ted indicated, overall growth in the quarter was 35%. Team's business in all major markets contributed to this growth. Total U.S. business grew about 18%. Our Canadian business increased almost 80%, which reflected increased oil sands activity, as well as a major repair project. And our business in the rest of the world, principally Europe, the Caribbean and New Zealand, Australia, nearly doubled, reflecting the timing of significant new projects and the addition of Quest business in those regions. Our business in non-North American regions represented about 15% of total Team revenues in the quarter. All of Team's service lines grew during the quarter. The onstream services increased about 10%. The inspection and assessment services increased about 25% and turnaround services increased more than 75%, reflecting expanded project activity in all major markets. This revenue growth drove very attractive profit growth. As mentioned previously, Team's net income for the quarter increased nearly 80% and operating income or EBIT increased approximately 75%. Operating profit margin as a percentage of revenue was 8.3%, an improvement of nearly 2 percentage points from the prior year. The margin improvement reflects improvements in both the gross margin and SG&A expense to revenue ratios. The improvement in the gross margin ratio reflects stable job margins and favorable volume leverage. Regarding SG&A, despite a significant overall increase in SG&A expenses, SG&A expenses as a percentage of revenue actually declined approximately 1.5 percentage points. The growth in SG&A expense reflects the addition of Quest, as well as increased compensation expenses related to targeted staff increases, salary adjustments and increased incentive compensation accruals. Read the rest of this transcript for free on seekingalpha.com