Team (TISI)

Q3 2012 Earnings Call

April 04, 2012 9:00 am ET


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


Arnold Ursaner - CJS Securities, Inc.

Matt Duncan - Stephens Inc., Research Division

Matthew P. Tucker - KeyBanc Capital Markets Inc., Research Division

Adam R. Thalhimer - BB&T Capital Markets, Research Division



Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Team Inc. Earnings Conference Call. My name is Deanna, and I'll be the operator for today. [Operator Instructions] As a reminder, today's conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Phil Hawk, Chairman and CEO. Please proceed.

Philip J. Hawk

Thank you, and good morning. It's my pleasure to welcome you to the Team web conference call. Again, 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 third fiscal quarter ending February 29, 2012. 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; 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 then follow Ted with a few remarks and observations about our performance and prospects. Following these remarks, we'll take questions from our listeners.

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

Ted W. Owen

Thank you, Phil. First, as usual, I want to remind everyone that any forward-looking information that we discuss today is being provided in accordance with the provisions of the Private Securities and 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 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.

Now for the financial results. We are very pleased to report revenues for the quarter of $136.5 million, which were up 25% from the third quarter of 2011. We're disappointed, however, with what we did with that revenue growth. Net income available to shareholders was $2 million, and earnings were $0.10 per diluted share versus adjusted net income in last year's quarter of $1.7 million or $0.08 per share. Note that in last year's quarter, there was a nonrecurring tax credit which is excluded from the aforementioned comparison.

Our overall gross margin declined by 1.4 percentage points in the quarter because of increased indirect cost. And while SG&A declined as a percentage of revenues, we experienced some unusually high costs in this category that impacted our earnings by $0.07 per share. Phil will elaborate more fully on those items in his remarks.

Shifting now to year-to-date results. Total revenues for the 9 months of the fiscal year were nearly $435.9 million, up nearly $90 million or 26% from the prior year. Adjusted EBIT or operating income for the year was $33.1 million, an increase of 35%. Adjusted year-to-date earnings per share was $0.95 versus $0.72 last year. We remain on track to have another record year of both revenues and earnings.

Now with respect to some cash flow-related items. Capital expenditures for the quarter were $5 million. Depreciation and amortization was $4.6 million, and noncash compensation expense was $900,000. Additionally, as I reported in the last call, we spent $17 million in late December to acquire a mechanical service business on the West Coast.

Adjusted EBITDA was $8.9 million for the quarter and was $73 million on a trailing 12-month basis. At February 29, our total debt was $88 million, cash was $27 million, and therefore, net debt was $61 million. Our net debt to trailing 12-month EBITDA was less than 1:1 even after consideration of the additional debt added for the West Coast acquisition.

And with that, Phil, I will turn it back to you.

Philip J. Hawk

Thanks, Ted. Now I'd like to provide some additional perspectives on our business, recent performance and our outlook.

We continue to be pleased with the broad-based growth of our business, both in the third quarter and year-to-date. As Ted indicated, total revenue growth in the quarter was nearly $28 million, a 25% increase. For the year-to-date, Team's total revenue growth is $89 million, a 26% growth rate.

We continue to grow on virtually every segment of our business. In each of our major geographic markets, the U.S., Canada and Europe, Team revenues grew by more than 25% in the quarter. For the year-to-date, Team revenue growth -- Team's revenue growth in each of these markets exceeded 20%.

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