þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Exact Name of Registrant as Specified in Its Charter) | ||
Delaware | 74-1765729 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
13131 Dairy Ashford, Suite 600, Sugar Land, Texas | 77478 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(281) 331-6154 | ||
(Registrant’s Telephone Number, Including Area Code) | ||
None | ||
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) |
Large accelerated filer | ¨ | Accelerated filer | þ | |||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ | |||
(Do not check if a smaller reporting company) |
Page No. | ||
ITEM 1. | FINANCIAL STATEMENTS |
June 30, 2016 | December 31, 2015 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 65,440 | $ | 44,825 | |||
Restricted cash | — | 5,000 | |||||
Receivables, net of allowance of $5,739 and $3,548 | 282,324 | 214,324 | |||||
Inventory | 54,255 | 27,936 | |||||
Income tax receivable | 9,821 | 3,893 | |||||
Deferred income taxes | 17,212 | 6,917 | |||||
Prepaid expenses and other current assets | 36,141 | 11,664 | |||||
Current assets of discontinued operations | 14,810 | — | |||||
Total current assets | 480,003 | 314,559 | |||||
Property, plant and equipment, net | 206,292 | 124,983 | |||||
Intangible assets, net of accumulated amortization of $28,511 and $21,161 | 167,196 | 99,119 | |||||
Goodwill | 361,961 | 256,654 | |||||
Other assets, net | 3,464 | 2,421 | |||||
Deferred income taxes | 4,108 | 1,255 | |||||
Total assets | $ | 1,223,024 | $ | 798,991 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 20,000 | $ | 20,000 | |||
Accounts payable | 51,946 | 22,364 | |||||
Other accrued liabilities | 75,112 | 49,796 | |||||
Current liabilities of discontinued operations | 2,328 | — | |||||
Total current liabilities | 149,386 | 92,160 | |||||
Deferred income taxes | 101,013 | 17,302 | |||||
Long-term debt | 405,731 | 351,383 | |||||
Defined benefit pension liability | 12,483 | — | |||||
Other long-term liabilities | 4,268 | — | |||||
Total liabilities | 672,881 | 460,845 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Preferred stock, 500,000 shares authorized, none issued | — | — | |||||
Common stock, par value $0.30 per share, 60,000,000 shares authorized; 30,148,278 and 21,836,694 shares issued | 9,044 | 6,552 | |||||
Additional paid-in capital | 334,813 | 120,126 | |||||
Retained earnings | 251,902 | 250,980 | |||||
Accumulated other comprehensive loss | (16,885 | ) | (18,374 | ) | |||
Treasury stock at cost, 821,087 and 546,977 shares | (28,731 | ) | (21,138 | ) | |||
Total equity | 550,143 | 338,146 | |||||
Total liabilities and equity | $ | 1,223,024 | $ | 798,991 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | $ | 336,440 | $ | 235,399 | $ | 587,294 | $ | 427,806 | |||||||
Operating expenses | 237,747 | 159,921 | 422,619 | 298,285 | |||||||||||
Gross margin | 98,693 | 75,478 | 164,675 | 129,521 | |||||||||||
Selling, general and administrative expenses | 82,501 | 53,444 | 155,863 | 99,788 | |||||||||||
Loss on revaluation of contingent consideration | 2,184 | — | 2,184 | — | |||||||||||
Operating income | 14,008 | 22,034 | 6,628 | 29,733 | |||||||||||
Interest expense, net | 3,408 | 574 | 6,343 | 1,141 | |||||||||||
Foreign currency (gain) loss | (137 | ) | (51 | ) | (99 | ) | 323 | ||||||||
Other expense (income), net | (29 | ) | (3 | ) | (39 | ) | 1,176 | ||||||||
Earnings from continuing operations before income taxes | 10,766 | 21,514 | 423 | 27,093 | |||||||||||
Less: Provision for income taxes | 3,796 | 7,446 | 13 | 9,659 | |||||||||||
Income from continuing operations | 6,970 | 14,068 | 410 | 17,434 | |||||||||||
Income from discontinued operations, net of income tax | 386 | — | 512 | — | |||||||||||
Net income | 7,356 | 14,068 | 922 | 17,434 | |||||||||||
Less: Income attributable to noncontrolling interest | — | 153 | — | 213 | |||||||||||
Net income available to Team shareholders | $ | 7,356 | $ | 13,915 | $ | 922 | $ | 17,221 | |||||||
Basic earnings per share: | |||||||||||||||
Continuing operations | $ | 0.24 | $ | 0.69 | $ | 0.01 | $ | 0.85 | |||||||
Discontinued operations | 0.01 | — | 0.02 | — | |||||||||||
Net income | $ | 0.25 | $ | 0.69 | $ | 0.03 | $ | 0.85 | |||||||
Diluted earnings per share: | |||||||||||||||
Continuing operations | $ | 0.24 | $ | 0.65 | $ | 0.01 | $ | 0.80 | |||||||
Discontinued operations | 0.01 | — | 0.02 | — | |||||||||||
Net income | $ | 0.25 | $ | 0.65 | $ | 0.03 | $ | 0.80 | |||||||
Amounts attributable to Team shareholders: | |||||||||||||||
Income from continuing operations, net of tax | $ | 6,970 | $ | 13,915 | $ | 410 | $ | 17,221 | |||||||
Income from discontinued operations, net of tax | 386 | — | 512 | — | |||||||||||
Net income | $ | 7,356 | $ | 13,915 | $ | 922 | $ | 17,221 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 7,356 | $ | 14,068 | $ | 922 | $ | 17,434 | |||||||
Foreign currency translation adjustment | (3,176 | ) | 850 | 3,050 | (6,899 | ) | |||||||||
Foreign currency hedge | 310 | (302 | ) | (243 | ) | 1,305 | |||||||||
Tax (provision) benefit attributable to other comprehensive income (loss) | (167 | ) | (432 | ) | (1,318 | ) | 554 | ||||||||
Total comprehensive income | 4,323 | 14,184 | 2,411 | 12,394 | |||||||||||
Less: Total comprehensive income attributable to noncontrolling interest | — | 136 | — | 179 | |||||||||||
Total comprehensive income available to Team shareholders | $ | 4,323 | $ | 14,048 | $ | 2,411 | $ | 12,215 |
Common Shares | Treasury Shares | Common Stock | Treasury Stock | Additional Paid-in Capital | Non-controlling Interest | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | |||||||||||||||||||||||||
Balance at January 1, 2016 | 21,837 | (547 | ) | $ | 6,552 | $ | (21,138 | ) | $ | 120,126 | $ | — | $ | 250,980 | $ | (18,374 | ) | $ | 338,146 | ||||||||||||||
Net income | — | — | — | — | — | — | 922 | — | 922 | ||||||||||||||||||||||||
Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | — | 1,636 | 1,636 | ||||||||||||||||||||||||
Foreign currency hedge, net of tax | — | — | — | — | — | — | — | (147 | ) | (147 | ) | ||||||||||||||||||||||
Non-cash compensation | — | — | — | — | 4,704 | — | — | — | 4,704 | ||||||||||||||||||||||||
Vesting of stock awards | 28 | — | 8 | — | (162 | ) | — | — | — | (154 | ) | ||||||||||||||||||||||
Tax benefit of exercise of stock options | — | — | — | — | 86 | — | — | — | 86 | ||||||||||||||||||||||||
Issuance of common stock in Furmanite acquisition and conversion of Furmanite share-based awards | 8,208 | — | 2,462 | — | 209,068 | — | — | — | 211,530 | ||||||||||||||||||||||||
Exercise of stock options | 75 | — | 22 | — | 1,042 | — | — | — | 1,064 | ||||||||||||||||||||||||
Purchase of treasury stock | — | (274 | ) | — | (7,593 | ) | — | — | — | — | (7,593 | ) | |||||||||||||||||||||
Other | — | — | — | — | (51 | ) | — | — | — | (51 | ) | ||||||||||||||||||||||
Balance at June 30, 2016 | 30,148 | (821 | ) | $ | 9,044 | $ | (28,731 | ) | $ | 334,813 | $ | — | $ | 251,902 | $ | (16,885 | ) | $ | 550,143 |
Common Shares | Treasury Shares | Common Stock | Treasury Stock | Additional Paid-in Capital | Non- controlling Interest | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | |||||||||||||||||||||||||
Balance at January 1, 2015 | 20,700 | — | $ | 6,211 | $ | — | $ | 109,700 | $ | 5,855 | $ | 225,747 | $ | (8,406 | ) | $ | 339,107 | ||||||||||||||||
Net income | — | — | — | — | — | — | 17,434 | — | 17,434 | ||||||||||||||||||||||||
Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | — | (5,863 | ) | (5,863 | ) | ||||||||||||||||||||||
Foreign currency hedge, net of tax | — | — | — | — | — | — | — | 823 | 823 | ||||||||||||||||||||||||
Comprehensive income attributable to noncontrolling interest | — | — | — | — | — | 179 | (213 | ) | 34 | — | |||||||||||||||||||||||
Non-cash compensation | — | — | — | — | 2,424 | — | — | — | 2,424 | ||||||||||||||||||||||||
Vesting of stock awards | 3 | — | — | — | (41 | ) | — | — | — | (41 | ) | ||||||||||||||||||||||
Tax benefit of exercise of stock options | — | — | — | — | 1,535 | — | — | — | 1,535 | ||||||||||||||||||||||||
Exercise of stock options | 201 | — | 61 | — | 2,489 | — | — | — | 2,550 | ||||||||||||||||||||||||
Purchase of treasury stock | — | (547 | ) | — | (21,138 | ) | — | — | — | — | (21,138 | ) | |||||||||||||||||||||
Balance at June 30, 2015 | 20,904 | (547 | ) | $ | 6,272 | $ | (21,138 | ) | $ | 116,107 | $ | 6,034 | $ | 242,968 | $ | (13,412 | ) | $ | 336,831 |
Six Months Ended June 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 922 | $ | 17,434 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Loss on investment in Venezuela | — | 1,177 | |||||
Depreciation and amortization | 22,893 | 11,760 | |||||
Amortization of deferred loan costs | 242 | 112 | |||||
Provision for doubtful accounts | 2,496 | 389 | |||||
Foreign currency (gain) loss | (99 | ) | 323 | ||||
Deferred income taxes | (934 | ) | (5 | ) | |||
Loss on asset disposal | 47 | 503 | |||||
Loss on contingent consideration revaluation | 2,184 | — | |||||
Non-cash compensation cost | 4,704 | 2,424 | |||||
Other, net | (525 | ) | — | ||||
(Increase) decrease, net of the effect of acquisitions: | |||||||
Receivables | 2,602 | (22,331 | ) | ||||
Inventory | 156 | (502 | ) | ||||
Prepaid expenses and other current assets | (3,866 | ) | (3,579 | ) | |||
Increase (decrease), net of the effect of acquisitions: | |||||||
Accounts payable | 14,379 | 408 | |||||
Other accrued liabilities | (3,900 | ) | 16,510 | ||||
Income taxes | (3,238 | ) | (2,967 | ) | |||
Net cash provided by operating activities | 38,063 | 21,656 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (21,853 | ) | (18,416 | ) | |||
Business acquisitions, net of cash acquired | (48,382 | ) | (10,540 | ) | |||
Change in restricted cash | 5,000 | — | |||||
Proceeds from sale of assets | 1,026 | 97 | |||||
Decrease in other assets, net | 213 | 120 | |||||
Change related to Venezuelan operations | — | (621 | ) | ||||
Net cash used in investing activities | (63,996 | ) | (29,360 | ) | |||
Cash flows from financing activities: | |||||||
Net borrowings under revolving credit agreement | 53,191 | 14,070 | |||||
Purchase of treasury stock | (7,593 | ) | (21,138 | ) | |||
Debt issuance costs | (377 | ) | — | ||||
Corporate tax effect from share-based payment arrangements | 86 | 1,535 | |||||
Issuance of common stock from share-based payment arrangements | 1,064 | 2,550 | |||||
Payments related to withholding tax for share-based payment arrangements | (154 | ) | (41 | ) | |||
Net cash provided by (used in) financing activities | 46,217 | (3,024 | ) | ||||
Effect of exchange rate changes on cash | 331 | (1,821 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 20,615 | (12,549 | ) | ||||
Cash and cash equivalents at beginning of period | 44,825 | 44,426 | |||||
Cash and cash equivalents at end of period | $ | 65,440 | $ | 31,877 |
Classification | Useful Life |
Buildings | 20-40 years |
Leasehold improvements | 2-15 years |
Machinery and equipment | 2-12 years |
Furniture and fixtures | 2-10 years |
Computers and computer software | 2-5 years |
Automobiles | 2-5 years |
Six Months Ended June 30, 2016 | |||||||||||||||
(unaudited) | |||||||||||||||
TeamQualspec | TeamFurmanite | Quest Integrity | Total | ||||||||||||
Balance at beginning of period | $ | 207,497 | $ | 19,874 | $ | 29,283 | $ | 256,654 | |||||||
Acquisitions | 5,955 | 93,903 | 4,137 | 103,995 | |||||||||||
Foreign currency adjustments | 917 | 159 | 236 | 1,312 | |||||||||||
Balance at end of period | $ | 214,369 | $ | 113,936 | $ | 33,656 | $ | 361,961 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||
Weighted-average number of basic shares outstanding | 29,452 | 20,296 | 26,738 | 20,366 | |||||||
Stock options, stock units and performance awards | 76 | 315 | 70 | 324 | |||||||
Conversion of non-controlling interest | — | 728 | — | 728 | |||||||
Total shares and dilutive securities | 29,528 | 21,339 | 26,808 | 21,418 |
February 29, 2016 | |||
(unaudited) | |||
Common stock (8,208,006 shares) | $ | 209,529 | |
Converted share-based payment awards | 2,001 | ||
Cash | 70,811 | ||
Total consideration | $ | 282,341 |
February 29, 2016 | |||
(unaudited) | |||
Cash and cash equivalents | $ | 37,734 | |
Accounts receivable | 69,603 | ||
Inventory | 27,800 | ||
Current deferred tax assets | 11,563 | ||
Prepaid expenses and other current assets | 24,026 | ||
Current assets of discontinued operations | 14,760 | ||
Plant, property and equipment | 70,526 | ||
Intangible assets | 70,800 | ||
Goodwill | 93,903 | ||
Other non-current assets | 3,709 | ||
Total assets acquired | $ | 424,424 | |
Accounts payable | $ | 12,360 | |
Other accrued liabilities | 26,894 | ||
Income taxes payable | 229 | ||
Current liabilities of discontinued operations | 1,434 | ||
Non-current deferred tax liabilities | 84,963 | ||
Defined benefit pension liability | 13,509 | ||
Other long-term liabilities | 2,694 | ||
Total liabilities assumed | 142,083 | ||
Net assets acquired | $ | 282,341 |
July 7, 2015 | |||
(unaudited) | |||
Cash and cash equivalents | $ | 3,981 | |
Accounts receivable | 21,495 | ||
Current deferred tax assets | 279 | ||
Prepaid expenses | 1,049 | ||
Plant, property and equipment | 15,472 | ||
Intangible assets | 78,100 | ||
Goodwill | 148,482 | ||
Other assets | 138 | ||
Total assets acquired | $ | 268,996 | |
Accounts payable | $ | 2,892 | |
Other accrued liabilities | 7,581 | ||
Non-current deferred tax liability | 2,982 | ||
Total liabilities assumed | 13,455 | ||
Net assets acquired | $ | 255,541 |
Pro forma data | Pro forma data | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2015 | 2016 | 2015 | |||||||||||
(unaudited) | (unaudited) | (unaudited) | |||||||||||
Revenues | $ | 370,616 | $ | 631,064 | $ | 693,167 | |||||||
Income from continuing operations attributable to Team shareholders | $ | 14,087 | $ | 2,620 | $ | 18,300 | |||||||
Earnings per share from continuing operations: | |||||||||||||
Basic | $ | 0.49 | $ | 0.09 | $ | 0.64 | |||||||
Diluted | $ | 0.48 | $ | 0.09 | $ | 0.62 |
June 30, 2016 | December 31, 2015 | ||||||
(unaudited) | |||||||
Trade accounts receivable | $ | 214,779 | $ | 170,774 | |||
Unbilled revenues | 73,284 | 47,098 | |||||
Allowance for doubtful accounts | (5,739 | ) | (3,548 | ) | |||
Total | $ | 282,324 | $ | 214,324 |
June 30, 2016 | December 31, 2015 | ||||||
(unaudited) | |||||||
Raw materials | $ | 8,163 | $ | 3,167 | |||
Work in progress | 5,037 | 1,018 | |||||
Finished goods | 41,055 | 23,751 | |||||
Total | $ | 54,255 | $ | 27,936 |
June 30, 2016 | December 31, 2015 | ||||||
(unaudited) | |||||||
Land | $ | 7,445 | $ | 3,124 | |||
Buildings and leasehold improvements | 41,533 | 29,690 | |||||
Machinery and equipment | 236,122 | 174,222 | |||||
Furniture and fixtures | 8,172 | 6,561 | |||||
Capitalized ERP system development costs | 35,207 | 25,606 | |||||
Computers and computer software | 11,641 | 8,062 | |||||
Automobiles | 5,763 | 5,280 | |||||
Construction in progress | 9,480 | 5,177 | |||||
Total | 355,363 | 257,722 | |||||
Accumulated depreciation and amortization | (149,071 | ) | (132,739 | ) | |||
Property, plant and equipment, net | $ | 206,292 | $ | 124,983 |
June 30, 2016 | December 31, 2015 | ||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
Customer relationships | $ | 156,840 | $ | (18,368 | ) | $ | 138,472 | $ | 103,288 | $ | (12,995 | ) | $ | 90,293 | |||||||||
Non-compete agreements | 5,477 | (3,711 | ) | 1,766 | 4,898 | (3,468 | ) | 1,430 | |||||||||||||||
Trade names | 24,710 | (3,249 | ) | 21,461 | 6,299 | (1,940 | ) | 4,359 | |||||||||||||||
Technology | 7,834 | (2,918 | ) | 4,916 | 5,112 | (2,541 | ) | 2,571 | |||||||||||||||
Licenses | 846 | (265 | ) | 581 | 683 | (217 | ) | 466 | |||||||||||||||
Total | $ | 195,707 | $ | (28,511 | ) | $ | 167,196 | $ | 120,280 | $ | (21,161 | ) | $ | 99,119 |
June 30, 2016 | December 31, 2015 | ||||||
(unaudited) | |||||||
Payroll and other compensation expenses | $ | 34,476 | $ | 21,878 | |||
Insurance accruals | 10,102 | 7,008 | |||||
Property, sales and other non-income related taxes | 6,009 | 3,058 | |||||
Contingent consideration | 5,966 | 3,638 | |||||
Deferred revenue | 3,136 | 1,355 | |||||
Lease commitments | 2,411 | 1,721 | |||||
Accrued commission | 1,854 | 1,159 | |||||
Volume discount | 626 | 1,280 | |||||
Accrued interest | 591 | 984 | |||||
Acquisition-related costs | 229 | 370 | |||||
Other | 9,712 | 7,345 | |||||
Total | $ | 75,112 | $ | 49,796 |
Gain (Loss) Recognized in Other Comprehensive Income (Loss) | Gain Reclassified from Other Comprehensive Income (Loss) to Earnings | Gain (Loss) Recognized in Other Comprehensive Income (Loss) | Gain (Loss) Reclassified from Other Comprehensive Income (Loss) to Earnings | ||||||||||||||||||||||||||||
Three Months Ended June 30, | Three Months Ended June 30, | Six Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
Net investment hedge | $ | 310 | $ | (302 | ) | $ | — | $ | — | $ | (243 | ) | $ | 1,305 | $ | — | $ | — |
June 30, 2016 | December 31, 2015 | ||||||||||||||
(unaudited) | |||||||||||||||
Classification | Balance Sheet Location | Fair Value | Classification | Balance Sheet Location | Fair Value | ||||||||||
Net investment hedge | Liability | Long-term debt | $ | (4,324 | ) | Liability | Long-term debt | $ | (4,567 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Service cost | $ | 22 | $ | — | $ | 29 | $ | — | |||||||
Interest cost | 801 | — | 1,068 | — | |||||||||||
Expected return on plan assets | (820 | ) | — | (1,093 | ) | — | |||||||||
Net periodic pension cost | $ | 3 | $ | — | $ | 4 | $ | — |
June 30, 2016 | |||||||||||||||
(unaudited) | |||||||||||||||
Quoted Prices in Active Markets for Identical Items (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Liabilities: | |||||||||||||||
Contingent consideration1 | $ | — | $ | — | $ | 7,626 | $ | 7,626 | |||||||
Net investment hedge | $ | — | $ | (4,324 | ) | $ | — | $ | (4,324 | ) |
December 31, 2015 | |||||||||||||||
Quoted Prices in Active Markets for Identical Items (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||
Liabilities: | |||||||||||||||
Contingent consideration1 | $ | — | $ | — | $ | 3,638 | $ | 3,638 | |||||||
Net investment hedge | $ | — | $ | (4,567 | ) | $ | — | $ | (4,567 | ) |
Six Months Ended June 30, 2016 | ||||
(unaudited) | ||||
Balance, beginning of period | $ | 3,638 | ||
Accretion of liability | 144 | |||
Revaluation | 2,184 | |||
Acquisitions | 1,660 | |||
Balance, end of period | $ | 7,626 |
Six Months Ended June 30, 2016 | Six Months Ended June 30, 2015 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||
No. of Stock Units | Weighted Average Fair Value | No. of Stock Units | Weighted Average Fair Value | ||||||||||
(in thousands) | (in thousands) | ||||||||||||
Stock and stock units, beginning of period | 371 | $ | 36.26 | 328 | $ | 36.14 | |||||||
Changes during the period: | |||||||||||||
Granted | 86 | $ | 26.19 | — | $ | — | |||||||
Assumed - Furmanite acquisition | 40 | $ | 25.63 | — | $ | — | |||||||
Vested and settled | (34 | ) | $ | 27.87 | (4 | ) | $ | 30.73 | |||||
Cancelled | (9 | ) | $ | 27.81 | (22 | ) | $ | 35.32 | |||||
Stock and stock units, end of period | 454 | $ | 34.22 | 302 | $ | 36.27 |
Six Months Ended June 30, 2016 | Six Months Ended June 30, 2015 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||
No. of Stock Units | Weighted Average Fair Value | No. of Stock Units | Weighted Average Fair Value | ||||||||||
(in thousands) | (in thousands) | ||||||||||||
Long-term performance stock units, beginning of period | 59 | $ | 37.16 | 23 | $ | 42.25 | |||||||
Changes during the period: | |||||||||||||
Granted | — | $ | — | — | $ | — | |||||||
Vested and settled | — | $ | — | — | $ | — | |||||||
Cancelled | — | $ | — | — | $ | — | |||||||
Long-term performance stock units, end of period | 59 | $ | 37.16 | 23 | $ | 42.25 |
Six Months Ended June 30, 2016 | Six Months Ended June 30, 2015 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||
No. of Performance Awards | Weighted Average Fair Value | No. of Performance Awards | Weighted Average Fair Value | ||||||||||
(in thousands) | (in thousands) | ||||||||||||
Performance awards, beginning of period | 13 | $ | 35.15 | 28 | $ | 32.86 | |||||||
Changes during the period: | |||||||||||||
Granted | — | $ | — | — | $ | — | |||||||
Vested and settled | — | $ | — | — | $ | — | |||||||
Cancelled | — | $ | — | — | $ | — | |||||||
Performance awards, end of period | 13 | $ | 35.15 | 28 | $ | 32.86 |
Six Months Ended June 30, 2016 | Six Months Ended June 30, 2015 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||
No. of Options | Weighted Average Exercise Price | No. of Options | Weighted Average Exercise Price | ||||||||||
(in thousands) | (in thousands) | ||||||||||||
Shares under option, beginning of period | 376 | $ | 25.71 | 691 | $ | 21.26 | |||||||
Changes during the period: | |||||||||||||
Granted | — | $ | — | — | $ | — | |||||||
Assumed - Furmanite acquisition | 132 | $ | 33.20 | — | $ | — | |||||||
Exercised | (69 | ) | $ | 15.52 | (201 | ) | $ | 12.65 | |||||
Cancelled | (4 | ) | $ | 44.62 | — | $ | — | ||||||
Expired | (4 | ) | $ | 30.33 | — | $ | — | ||||||
Shares under option, end of period | 431 | $ | 29.39 | 490 | $ | 24.80 | |||||||
Exercisable at end of period | 427 | $ | 29.30 | 490 | $ | 24.80 |
Range of Prices | No. of Options | Weighted Average Exercise Price | Weighted Average Remaining Life | |||||
(in thousands) | (in years) | |||||||
$10.09 to $20.19 | 34 | $ | 12.94 | 0.3 | ||||
$20.20 to $30.28 | 80 | $ | 26.41 | 2.0 | ||||
$30.29 to $40.38 | 306 | $ | 31.22 | 2.1 | ||||
$40.39 to $50.47 | 11 | $ | 50.40 | 5.1 | ||||
Total | 431 | $ | 29.39 | 2.0 |
Six Months Ended June 30, 2016 | Six Months Ended June 30, 2015 | ||||||||||||||||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||||||||||||||||
Foreign Currency Translation Adjustments | Foreign Currency Hedge | Tax Provision | Total | Foreign Currency Translation Adjustments | Foreign Currency Hedge | Tax Provision | Total | ||||||||||||||||||||||||
Balance, beginning of period | $ | (28,124 | ) | $ | 4,567 | $ | 5,183 | $ | (18,374 | ) | $ | (13,718 | ) | $ | 3,028 | $ | 2,284 | $ | (8,406 | ) | |||||||||||
Other comprehensive income (loss) before tax | 3,050 | (243 | ) | (1,318 | ) | 1,489 | (6,899 | ) | 1,305 | 554 | (5,040 | ) | |||||||||||||||||||
Noncontrolling interest | — | — | — | — | 34 | — | — | 34 | |||||||||||||||||||||||
Balance, end of period | $ | (25,074 | ) | $ | 4,324 | $ | 3,865 | $ | (16,885 | ) | $ | (20,583 | ) | $ | 4,333 | $ | 2,838 | $ | (13,412 | ) |
Six Months Ended June 30, 2016 | Six Months Ended June 30, 2015 | ||||||||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||||||||
Gross Amount | Tax Effect | Net Amount | Gross Amount | Tax Effect | Net Amount | ||||||||||||||||||
Foreign currency translation adjustments | $ | 3,050 | $ | (1,414 | ) | $ | 1,636 | $ | (6,899 | ) | $ | 1,036 | $ | (5,863 | ) | ||||||||
Foreign currency hedge | (243 | ) | 96 | (147 | ) | 1,305 | (482 | ) | 823 | ||||||||||||||
Total | $ | 2,807 | $ | (1,318 | ) | $ | 1,489 | $ | (5,594 | ) | $ | 554 | $ | (5,040 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Revenues: | |||||||||||||||
TeamQualspec | $ | 157,238 | $ | 130,221 | $ | 293,500 | $ | 237,412 | |||||||
TeamFurmanite | 159,681 | 81,103 | 260,275 | 150,455 | |||||||||||
Quest Integrity | 19,521 | 24,075 | 33,519 | 39,939 | |||||||||||
Total | $ | 336,440 | $ | 235,399 | $ | 587,294 | $ | 427,806 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Operating income (loss): | |||||||||||||||
TeamQualspec | $ | 16,677 | $ | 18,331 | $ | 24,621 | $ | 28,706 | |||||||
TeamFurmanite | 11,982 | 9,451 | 19,021 | 13,892 | |||||||||||
Quest Integrity | 3,221 | 6,742 | 2,464 | 8,005 | |||||||||||
Corporate and shared support services | (17,872 | ) | (12,490 | ) | (39,478 | ) | (20,870 | ) | |||||||
Total | $ | 14,008 | $ | 22,034 | $ | 6,628 | $ | 29,733 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Capital expenditures: | |||||||||||||||
TeamQualspec | $ | 2,222 | $ | 4,418 | $ | 5,211 | $ | 6,686 | |||||||
TeamFurmanite | 3,154 | 2,142 | 6,131 | 3,192 | |||||||||||
Quest Integrity | 263 | 583 | 894 | 1,291 | |||||||||||
Corporate and shared support services | 4,749 | 3,625 | 9,732 | 7,247 | |||||||||||
Total | $ | 10,388 | $ | 10,768 | $ | 21,968 | $ | 18,416 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Depreciation and amortization: | |||||||||||||||
TeamQualspec | $ | 5,051 | $ | 2,257 | $ | 10,105 | $ | 4,397 | |||||||
TeamFurmanite | 6,020 | 2,067 | 9,344 | 3,912 | |||||||||||
Quest Integrity | 1,284 | 1,446 | 2,566 | 2,881 | |||||||||||
Corporate and shared support services | 515 | 300 | 878 | 570 | |||||||||||
Total | $ | 12,870 | $ | 6,070 | $ | 22,893 | $ | 11,760 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Revenues: | |||||||||||||||
United States | $ | 241,064 | $ | 168,519 | $ | 443,117 | $ | 317,483 | |||||||
Canada | 41,836 | 39,241 | 63,821 | 62,943 | |||||||||||
Europe | 33,152 | 13,287 | 50,041 | 25,358 | |||||||||||
Other foreign countries | 20,388 | 14,352 | 30,315 | 22,022 | |||||||||||
Total | $ | 336,440 | $ | 235,399 | $ | 587,294 | $ | 427,806 |
June 30, 2016 | December 31, 2015 | ||||||
(unaudited) | |||||||
Total assets: | |||||||
United States | $ | 995,136 | $ | 682,124 | |||
Canada | 61,350 | 59,626 | |||||
Europe | 115,468 | 33,271 | |||||
Other foreign countries | 51,070 | 23,970 | |||||
Total | $ | 1,223,024 | $ | 798,991 |
Three Months Ended June 30, 2016 | Six Months Ended June 30, 2016 | ||||||
(unaudited) | (unaudited) | ||||||
Revenues | $ | 15,906 | $ | 21,674 | |||
Operating expenses | 14,686 | 19,961 | |||||
Gross margin | 1,220 | 1,713 | |||||
Selling, general and administrative expenses | 577 | 858 | |||||
Income from discontinued operations, before income tax | 643 | 855 | |||||
Less: Provision for income taxes | 257 | 343 | |||||
Income from discontinued operations, net of income tax | $ | 386 | $ | 512 |
June 30, 2016 | |||
(unaudited) | |||
Current assets of discontinued operations: | |||
Receivables | $ | 14,467 | |
Prepayments and other assets | 343 | ||
Total assets of discontinued operations | 14,810 | ||
Current liabilities of discontinued operations: | |||
Other accrued liabilities | $ | 2,328 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Three Months Ended June 30, | Increase (Decrease) | |||||||||||||
2016 | 2015 | $ | % | |||||||||||
(unaudited) | (unaudited) | |||||||||||||
Revenues by business segment: | ||||||||||||||
TeamQualspec | $ | 157,238 | $ | 130,221 | $ | 27,017 | 20.7 | % | ||||||
TeamFurmanite | 159,681 | 81,103 | 78,578 | 96.9 | % | |||||||||
Quest Integrity | 19,521 | 24,075 | (4,554 | ) | (18.9 | )% | ||||||||
Total | $ | 336,440 | $ | 235,399 | $ | 101,041 | 42.9 | % | ||||||
Operating income (loss): | ||||||||||||||
TeamQualspec | $ | 16,677 | $ | 18,331 | $ | (1,654 | ) | (9.0 | )% | |||||
TeamFurmanite | 11,982 | 9,451 | 2,531 | 26.8 | % | |||||||||
Quest Integrity | 3,221 | 6,742 | (3,521 | ) | (52.2 | )% | ||||||||
Corporate and shared support services | (17,872 | ) | (12,490 | ) | (5,382 | ) | 43.1 | % | ||||||
Total | $ | 14,008 | $ | 22,034 | $ | (8,026 | ) | (36.4 | )% |
Six Months Ended June 30, | Increase (Decrease) | |||||||||||||
2016 | 2015 | $ | % | |||||||||||
(unaudited) | (unaudited) | |||||||||||||
Revenues by business segment: | ||||||||||||||
TeamQualspec | $ | 293,500 | $ | 237,412 | $ | 56,088 | 23.6 | % | ||||||
TeamFurmanite | 260,275 | 150,455 | 109,820 | 73.0 | % | |||||||||
Quest Integrity | 33,519 | 39,939 | (6,420 | ) | (16.1 | )% | ||||||||
Total | $ | 587,294 | $ | 427,806 | $ | 159,488 | 37.3 | % | ||||||
Operating income (loss): | ||||||||||||||
TeamQualspec | $ | 24,621 | $ | 28,706 | $ | (4,085 | ) | (14.2 | )% | |||||
TeamFurmanite | 19,021 | 13,892 | 5,129 | 36.9 | % | |||||||||
Quest Integrity | 2,464 | 8,005 | (5,541 | ) | (69.2 | )% | ||||||||
Corporate and shared support services | (39,478 | ) | (20,870 | ) | (18,608 | ) | 89.2 | % | ||||||
Total | $ | 6,628 | $ | 29,733 | $ | (23,105 | ) | (77.7 | )% |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
Exhibit Number | Description | |
10.1 | Non-Disclosure, Non-Competition and Non-Solicitation Agreement between Philip J. Hawk, Team Industrial Services, Inc., Team, Inc. and their affiliated entities, effective as of August 8, 2016. | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS— | XBRL Instance Document. | |
101.SCH— | XBRL Taxonomy Schema Document. | |
101.CAL— | XBRL Calculation Linkbase Document. | |
101.DEF— | XBRL Definition Linkbase Document. | |
101.LAB— | XBRL Label Linkbase Document. | |
101.PRE— | XBRL Presentation Linkbase Document. |
TEAM, INC. (Registrant) | ||
Date: August 9, 2016 | /S/ TED W. OWEN | |
Ted W. Owen President and Chief Executive Officer (Principal Executive Officer) | ||
/S/ GREG L. BOANE | ||
Greg L. Boane Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
TEAM, INC. | ||||||
By: | /s/ Ted W. Owen | |||||
Printed Name: | Ted W. Owen | |||||
Title: Chief Executive Officer | ||||||
Date Signed: | August 8, 2016 | |||||
/s/ Philip J. Hawk | ||||||
PHILIP J. HAWK | ||||||
Date Signed: | August 8, 2016 |
1. | I have reviewed this quarterly report on Form 10-Q of Team, Inc., (“Team”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | Team’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Team and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Team, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of Team’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in Team’s internal control over financial reporting that occurred during Team’s most recent fiscal quarter (Team’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, Team’s internal control over financial reporting; and |
5. | Team’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Team’s auditors and audit committee of Team’s board of directors: |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Team’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in Team’s internal control over financial reporting. |
/S/ TED W. OWEN | |
Ted W. Owen President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Team, Inc., (“Team”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | Team’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for Team and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Team, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of Team’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in Team’s internal control over financial reporting that occurred during Team’s most recent fiscal quarter (Team’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, Team’s internal control over financial reporting; and |
5. | Team’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Team’s auditors and audit committee of Team’s board of directors: |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Team’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in Team’s internal control over financial reporting. |
/S/ GREG L. BOANE | |
Greg L. Boane Executive Vice President and Chief Financial Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ TED W. OWEN | |
Ted W. Owen President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/S/ GREG L. BOANE | |
Greg L. Boane Executive Vice President and Chief Financial Officer |
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Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jul. 31, 2016 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | TISI | |
Entity Registrant Name | TEAM INC | |
Entity Central Index Key | 0000318833 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 29,327,191 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Receivables, allowance | $ 5,739 | $ 3,548 |
Intangible assets, accumulated amortization | $ 28,511 | $ 21,161 |
Preferred stock, shares authorized | 500,000 | 500,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.30 | $ 0.30 |
Common stock, shares authorized | 60,000,000 | 60,000,000 |
Common stock, shares issued | 30,148,278 | 21,836,694 |
Treasury stock at cost, shares | 821,087 | 546,977 |
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 7,356 | $ 14,068 | $ 922 | $ 17,434 |
Foreign currency translation adjustment | (3,176) | 850 | 3,050 | (6,899) |
Foreign currency hedge | 310 | (302) | (243) | 1,305 |
Tax (provision) benefit attributable to other comprehensive income (loss) | (167) | (432) | (1,318) | 554 |
Total comprehensive income | 4,323 | 14,184 | 2,411 | 12,394 |
Less: Total comprehensive income attributable to noncontrolling interest | 0 | 136 | 0 | 179 |
Total comprehensive income available to Team shareholders | $ 4,323 | $ 14,048 | $ 2,411 | $ 12,215 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES Introduction. Unless otherwise indicated, the terms “Team, Inc.,” “Team,” “the Company,” “we,” “our” and “us” are used in this report to refer to Team, Inc., to one or more of our consolidated subsidiaries or to all of them taken as a whole. We are incorporated in the State of Delaware and our company website can be found at www.teaminc.com. Our corporate headquarters is located at 13131 Dairy Ashford, Suite 600, Sugar Land, Texas, 77478 and our telephone number is (281) 331-6154. Our stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “TISI”. On November 10, 2015, we announced we would change our fiscal year end to December 31 of each calendar year from May 31. Accordingly, we have recast the prior-period comparative financial information presented in this report to align with our new fiscal calendar. We are a leading provider of specialty industrial services, including inspection and assessment, required in maintaining high temperature and high pressure piping systems and vessels that are utilized extensively in the refining, petrochemical, power, pipeline and other heavy industries. We conduct operations in three segments: TeamQualspec Group (“TeamQualspec”) (formerly the Inspection and Heat Treating Services Group), TeamFurmanite Group (“TeamFurmanite”) (formerly the Mechanical Services Group) and Quest Integrity Group (“Quest Integrity”). While our services are aligned in three business groups, we believe our services broadly fall into three different classifications that have unique customer demand drivers: inspection and assessment services, turnaround services, and on-stream services. Inspection and assessment services are offered in both TeamQualspec and Quest Integrity. TeamQualspec provides basic and advanced non-destructive testing (“NDT”) services for the process, pipeline and power sectors, pipeline integrity management services, as well as associated engineering and assessment services. These services can be offered while facilities are running (on-stream), during facility turnarounds or during new construction or expansion activities. Quest Integrity provides integrity and reliability management solutions for the process, pipeline and power sectors. These solutions encompass two broadly-defined disciplines: (1) highly specialized in-line inspection services for unpiggable process piping and pipelines using proprietary in-line inspection tools and analytical software; and (2) advanced condition assessment services through a multi-disciplined engineering team. We believe there is a general growth in market demand for inspection and assessment services as improved inspection technologies enable better information about asset reliability to be available to facility owners and operators. Turnaround services are offered in both TeamQualspec and TeamFurmanite. These services are project-related and demand is a function of the number and scope of scheduled and unscheduled facility turnarounds as well as new industrial facility construction or expansion activities. Turnaround services include the field machining, technical bolting, field valve repair, heat exchanger repair, and isolation test plugging services that are part of TeamFurmanite and the field heat treating services that are part of TeamQualspec. On-stream services are offered by TeamFurmanite and represent the services offered while plants are operating and under pressure. These services include leak repair, fugitive emissions control and hot tapping. We offer these services in over 220 locations in 22 countries throughout the world. Our industrial services are available 24 hours a day, 7 days a week, 365 days a year. We market our services to companies in a diverse array of heavy industries which include the petrochemical, refining, power, pipeline, steel, pulp and paper industries, as well as municipalities, shipbuilding, original equipment manufacturers (“OEMs”), distributors, and some of the world’s largest engineering and construction firms. Our services are also provided across a broad geographic reach. Basis for presentation. These interim financial statements are unaudited, but in the opinion of our management, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods. The consolidated condensed balance sheet at December 31, 2015 is derived from the December 31, 2015 audited consolidated financial statements. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in our Transition Report on Form 10-K for the transition period from June 1, 2015 to December 31, 2015. Consolidation. The consolidated financial statements include the accounts of Team, Inc. and our majority-owned subsidiaries where we have control over operating and financial policies. Investments in affiliates in which we have the ability to exert significant influence over operating and financial policies, but where we do not control the operating and financial policies, are accounted for using the equity method. All material intercompany accounts and transactions have been eliminated in consolidation. Use of estimates. Our accounting policies conform to Generally Accepted Accounting Principles in the U.S. (“GAAP”). Our most significant accounting policies are described below. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect our reported financial position and results of operations. We review significant estimates and judgments affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Estimates and judgments are based on information available at the time such estimates and judgments are made. Adjustments made with respect to the use of these estimates and judgments often relate to information not previously available. Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements. Estimates and judgments are used in, among other things, (1) aspects of revenue recognition, (2) valuation of acquisition-related tangible and intangible assets and assessments of all long-lived assets for possible impairment, (3) estimating various factors used to accrue liabilities for workers’ compensation, auto, medical and general liability, (4) establishing an allowance for uncollectible accounts receivable, (5) estimating the useful lives of our assets, (6) assessing future tax exposure and the realization of tax assets, (7) estimating the value associated with contingent consideration payment arrangements and (8) selecting assumptions used in the measurement of costs and liabilities associated with defined benefit pension plans. Fair value of financial instruments. Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts payable and debt obligations. The carrying amount of cash, cash equivalents, trade accounts receivable and trade accounts payable are representative of their respective fair values due to the short-term maturity of these instruments. The fair value of our banking facility is representative of the carrying value based upon the variable terms and management’s opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the banking facility. Cash and cash equivalents. Cash and cash equivalents consist of all demand deposits and funds invested in highly liquid short-term investments with original maturities of three months or less. Included in our cash and cash equivalents at June 30, 2016 and December 31, 2015 is $14.9 million and $17.5 million, respectively, of cash in certain foreign subsidiaries (located primarily in Europe and Canada) where earnings are considered by the Company to be permanently reinvested. In the event that some or all of this cash were to be repatriated, we would be required to accrue and pay additional taxes. While not legally restricted from repatriating this cash, we consider all undistributed earnings of these foreign subsidiaries to be indefinitely reinvested and access to cash to be limited. Restricted cash. We recorded $5.0 million in restricted cash on our balance sheet at December 31, 2015 to reflect the amount held in escrow for contingent consideration as stipulated by the Qualspec Group LLC (“Qualspec”) purchase agreement. Based on Qualspec’s results through December 31, 2015, the contingent consideration did not become due and, accordingly, this cash became unrestricted in the second quarter of 2016. Inventory. We use the first-in, first-out method to determine inventory cost, except that inventory cost of Furmanite Corporation (“Furmanite”) and its subsidiaries, which we acquired on February 29, 2016 (see Note 2), is determined based on weighted-average cost. Inventory includes material, labor and certain fixed overhead costs. Inventory is stated at the lower of cost or market. Inventory quantities on hand are reviewed periodically and carrying cost is reduced to net realizable value for inventories for which their cost exceeds their utility. The cost of inventories consumed or products sold are included in operating expenses. Property, plant and equipment. Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Leasehold improvements are amortized over the shorter of their respective useful life or the lease term. Depreciation and amortization of assets are computed by the straight-line method over the following estimated useful lives of the assets:
Goodwill and intangible assets. We allocate the purchase price of acquired businesses to their identifiable tangible assets and liabilities, such as accounts receivable, inventory, property, plant and equipment, accounts payable and accrued liabilities. We also allocate a portion of the purchase price to identifiable intangible assets, such as non-compete agreements, trademarks, trade names, patents, technology and customer relationships. Allocations are based on estimated fair values of assets and liabilities. The Company uses all available information to estimate fair values including quoted market prices, the carrying value of acquired assets, and widely accepted valuation techniques such as discounted cash flows. Certain estimates and judgments are required in the application of the fair value techniques, including estimates of future cash flows, selling prices, replacement costs, economic lives and the selection of a discount rate, and it involves using of Level 3 measurements as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosure (“ASC 820”). Deferred taxes are recorded for any differences between the assigned values and tax bases of assets and liabilities. Estimated deferred taxes are based on available information concerning the tax bases of assets acquired and liabilities assumed and loss carryforwards at the acquisition date, although such estimates may change in the future as additional information becomes known. Any remaining excess of cost over allocated fair values is recorded as goodwill. We typically engage third-party valuation experts to assist in determining the fair values for both the identifiable tangible and intangible assets. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, could materially impact the Company’s results of operations. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but are instead tested for impairment at least annually in accordance with the provisions of the ASC 350, Intangibles—Goodwill and Other (“ASC 350”). Intangible assets with estimated useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with ASC 350. We assess goodwill for impairment at the reporting unit level, which we have determined to be the same as our operating segments. Each reporting unit has goodwill relating to past acquisitions. The test for impairment is a two-step process that involved comparing the estimated fair value of each reporting unit to the reporting unit’s carrying value, including goodwill. If the fair value of a reporting unit exceeded its carrying amount, the goodwill of the reporting unit was not considered impaired; therefore, the second step of the impairment test would not be deemed necessary. If the carrying amount of the reporting unit exceeded its fair value, we would then perform a second step to the goodwill impairment test to measure the amount of goodwill impairment loss to be recorded. With the change in our fiscal year end to December 31 of each calendar year, our goodwill annual test date changed to December 1, effective December 1, 2015. Due to the changes in the underlying assumptions surrounding our goodwill testing as a result of significant acquisitions (see Note 2), we performed a quantitative analysis of goodwill to test for impairment at December 1, 2015 and concluded there was no impairment. The fair values of the reporting units at December 1, 2015 were determined using a method based on discounted cash flow models with estimated cash flows based on internal forecasts of revenue and expenses over a four-year period plus a terminal value period (the income approach). The income approach estimated fair value by discounting each reporting unit’s estimated future cash flows using a discount rate that approximated our weighted-average cost of capital. The fair value derived from the income approach, in the aggregate, approximated our market capitalization. At December 1, 2015, our market capitalization exceeded the carrying value of our consolidated net assets by approximately $482 million or 141%, and the fair value of each reporting unit significantly exceeded its respective carrying amount as of that date. There have been no events that have required an interim assessment of the carrying value of goodwill during 2016. There was $362.0 million and $256.7 million of goodwill at June 30, 2016 and December 31, 2015, respectively. See Note 2 for additional information related to the acquisitions that increased goodwill in the period. A rollforward of goodwill for the six months ended June 30, 2016 is as follows (in thousands):
Income taxes. We follow the guidance of ASC 740, Income Taxes (“ASC 740”) which requires that we use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant temporary differences. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax payable and related tax expense together with assessing temporary differences resulting from differing treatment of certain items, such as depreciation, for tax and accounting purposes. These differences can result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. In accordance with ASC 740, we are required to assess the likelihood that our deferred tax assets will be realized and, to the extent we believe that it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized, we must establish a valuation allowance. We consider all available evidence to determine whether, based on the weight of the evidence, a valuation allowance is needed. Evidence used includes information about our current financial position and our results of operations for the current and preceding years, as well as all currently available information about future years, including our anticipated future performance, the reversal of existing taxable temporary differences and tax planning strategies. For the six months ended June 30, 2016, income tax expense as a percentage of pre-tax income from continuing operations was 3.1% compared to 35.7% for the six months ended June 30, 2015. The effective tax rate for the current year was impacted by the effects of discrete items, primarily the settlement of prior years with the Internal Revenue Service, and permanent differences that had significant impacts on the effective rate due to the relatively low amount of pre-tax income from continuing operations. During the three months ended June 30, 2016, we calculated a measurement-period adjustment associated with our acquisition of Furmanite (Note 2) that increased deferred tax liabilities and goodwill by $47.9 million. This adjustment represents the acquisition-date deferred tax liability associated with the accumulated undistributed earnings of Furmanite’s foreign subsidiaries, which we do not consider to be indefinitely reinvested outside the United States. Workers’ compensation, auto, medical and general liability accruals. In accordance with ASC 450, Contingencies, we record a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We review our loss contingencies on an ongoing basis to ensure that we have appropriate reserves recorded on our balance sheet. These reserves are based on historical experience with claims incurred but not received, estimates and judgments made by management, applicable insurance coverage for litigation matters, and are adjusted as circumstances warrant. For workers’ compensation, our self-insured retention is $1.0 million and our automobile liability self-insured retention is currently $500,000 per occurrence. For general liability claims we have an effective self-insured retention of $3.0 million per occurrence. For medical claims, our self-insured retention is $175,000 per individual claimant determined on an annual basis. For environmental liability claims, our self-insured retention is $1.0 million per occurrence. We maintain insurance for claims that exceed such self-retention limits. The insurance is subject to terms, conditions, limitations and exclusions that may not fully compensate us for all losses. Furmanite was generally incorporated into our existing insurance coverage during the second quarter of 2016, but for certain items it continues to maintain separate insurance policies and accordingly has separate self-insurance retention amounts, with such self-retention amounts generally below the levels noted above. Our estimates and judgments could change based on new information, changes in laws or regulations, changes in management’s plans or intentions, or the outcome of legal proceedings, settlements or other factors. If different estimates and judgments were applied with respect to these matters, it is likely that reserves would be recorded for different amounts. Revenue recognition. We determine our revenue recognition guidelines for our operations based on guidance provided in applicable accounting standards and positions adopted by the FASB and the Securities and Exchange Commission (“SEC”). Most of our projects are short-term in nature and we predominantly derive revenues by providing a variety of industrial services on a time and material basis. For all of these services, our revenues are recognized when services are rendered or when product is shipped to the job site and risk of ownership passes to the customer. However, due to various contractual terms with our customers, at the end of any reporting period, there may be earned but unbilled revenue that is accrued to properly match revenues with related costs. At June 30, 2016 and December 31, 2015, the amount of earned but unbilled revenue included in accounts receivable was $73.3 million and $47.1 million, respectively. Allowance for doubtful accounts. In the ordinary course of business, a portion of our accounts receivable are not collected due to billing disputes, customer bankruptcies, dissatisfaction with the services we performed and other various reasons. We establish an allowance to account for those accounts receivable that will eventually be deemed uncollectible. The allowance for doubtful accounts is based on a combination of our historical experience and management’s review of long outstanding accounts receivable. Concentration of credit risk. No single customer accounts for more than 10% of consolidated revenues. Earnings per share. Basic earnings per share is computed by dividing income from continuing operations, income from discontinued operations or net income available to Team shareholders by the weighted-average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing income from continuing operations, income from discontinued operations or net income available to Team shareholders, less income or loss for the period attributable to the non-controlling interest, by the sum of (1) the weighted-average number of shares of common stock, outstanding during the period, (2) the dilutive effect of the assumed exercise of share-based compensation using the treasury stock method and (3) the dilutive effect of the assumed conversion of our non-controlling interest to our common stock prior to the acquisition of that interest. Amounts used in basic and diluted earnings per share, for the three and six months ended June 30, 2016 and 2015, are as follows (in thousands):
There were 0.3 million and 0.4 million stock options outstanding during the three months and six months ended June 30, 2016, respectively, excluded from the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of common shares during the periods. There were no stock options outstanding during the three and six months ended June 30, 2015 excluded from the computation of diluted earnings per share. Foreign currency. For subsidiaries whose functional currency is not the U.S. Dollar, assets and liabilities are translated at period ending rates of exchange and revenues and expenses are translated at period average exchange rates. Translation adjustments for the asset and liability accounts are included as a separate component of accumulated other comprehensive loss in shareholders’ equity. Foreign currency transaction gains and losses are included in our consolidated statements of income. We utilize monthly foreign currency swap contracts to reduce exposures to changes in foreign currency exchange rates related to our largest exposures including, but not limited to, the Australian Dollar, Brazilian Real, British Pound, Euro, Malaysian Ringgit and Mexican Peso. The impact from these swap contracts was not material for the three months or six months ended June 30, 2016 nor as of the balance sheet dates of June 30, 2016 and December 31, 2015. Defined Benefit Pension Plans. Pension benefit costs and liabilities are dependent on assumptions used in calculating such amounts. The primary assumptions include factors such as discount rates, expected investment return on plan assets, mortality rates and retirement rates. These rates are reviewed annually and adjusted to reflect current conditions. These rates are determined based on reference to yields. The expected return on plan assets is derived from detailed periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks (standard deviations) and correlations of returns among the asset classes that comprise the plans’ asset mix. While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return. Mortality and retirement rates are based on actual and anticipated plan experience. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense in future periods. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the pension obligation and future expense. Newly Adopted Accounting Principles ASU No. 2015-03 and ASU No. 2015-15. In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which requires that debt issuance costs be presented as a direct deduction from the carrying amount of the related debt liability, consistent with the presentation of debt discounts. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as other assets, separate from the related debt liability. ASU 2015-03 does not change the recognition and measurement requirements for debt issuance costs. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (“ASU 2015-15”), that adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015, Emerging Issues Task Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, ASU 2015-15 states the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Team adopted ASU 2015-15 effective upon adoption of ASU 2015-03 on January 1, 2016. Because essentially all of Team’s deferred debt issuance costs relate to line-of-credit arrangements, we have elected to continue presenting such costs as an asset. Therefore, adoption of ASU 2015-03 and ASU 2015-15 did not have any impact on our results of operations, financial position or cash flows. ASU No. 2015-16. In September 2015, the FASB issued ASU No. 2015-16, Business Combinations- Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”), that requires the acquirer in a business combination to recognize in the reporting period in which adjustment amounts are determined, any adjustments to provisional amounts that are identified during the measurement period, calculated as if the accounting had been completed at the acquisition date. Prior to the issuance of ASU 2015-16, an acquirer was required to restate prior period financial statements as of the acquisition date for adjustments to provisional amounts. Team adopted the update effective January 1, 2016. The adoption of ASU 2015-16 did not have a material impact on our results of operations, financial position or cash flows. We have included the required disclosures with respect to measurement-period adjustments in Note 2. Accounting Principles Not Yet Adopted ASU No. 2014-09. In May 2014, the FASB issued Accounting Standards Update (“ASU”) ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for us on January 1, 2018, with early application permitted as of January 1, 2017. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method or determined the effect ASU 2014-09 will have on our ongoing financial reporting. ASU No. 2015-11. In July 2015, the FASB issued ASU 2015-11, Inventory—Simplifying the Measurement of Inventory (“ASU 2015-11”), which requires entities that measure inventory using the first-in, first-out or average cost methods to measure inventory at the lower of cost and net realizable value to more closely align the measurement of inventory in GAAP with International Financial Reporting Standards (“IFRS”). Net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016 on a prospective basis, with earlier application permitted. The adoption of this update is not expected to have a material impact on our results of operations, financial position or cash flows. ASU No. 2015-17. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The adoption of this update is not expected to have a material impact on our results of operations, financial position or cash flows. ASU No. 2016-02. In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which changes the accounting for leases, including a requirement to record all leases on the consolidated balance sheets as assets and liabilities. This update is effective for fiscal years beginning after December 15, 2018. We will adopt ASU 2016-02 effective January 1, 2019. We are currently evaluating the impact this standard will have on our ongoing financial reporting. ASU No. 2016-09. In March 2016, the FASB issued ASU No. 2016-09, Compensation–Stock Compensation: Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which makes several modifications to GAAP related to share-based payments including the accounting for forfeitures, employee taxes and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The adoption of ASU 2016-09 is not expected to have a material impact on our financial position or cash flows. Upon adoption, on a prospective basis, our income tax expense will be impacted by future excess tax benefits or deficiencies that under previous GAAP were recognized within stockholders’ equity rather than through the statement of income. ASU No. 2016-13. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends GAAP by introducing a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable. The standard is effective for interim and annual reporting periods beginning after December 15, 2019, although it may be adopted one year earlier, and requires a modified retrospective transition approach. We are currently evaluating the impact this standard will have on our ongoing financial reporting. |
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ACQUISITIONS | ACQUISITIONS Furmanite In November 2015, Team and Furmanite entered into an Agreement and Plan of Merger (the “Merger Agreement”). The merger was completed on February 29, 2016. Pursuant to the terms of the Merger Agreement, we acquired all the outstanding shares of Furmanite in a stock transaction whereby Furmanite shareholders received 0.215 shares of Team common stock for each share of Furmanite common stock they owned. Outstanding Furmanite share-based payment awards were generally converted into comparable share-based awards of Team, with certain awards vesting upon the closing of the merger, pursuant to the Merger Agreement. The combined company is a premier NDT inspection and specialty mechanical services company with a strong presence in North America and comprises more than 8,300 employees and 220 locations in 22 countries. The combination doubled the size of Team’s mechanical services capabilities and established a deeper, broader talent and resource pool that better supports customers across standard and specialty mechanical services. In addition, our expanded capability and capacity offers an enhanced single-point of accountability and flexibility in addressing some of the most critical needs of clients; whether as individual services or as part of an integrated specialty industrial services solution. The acquisition-date fair value of the consideration transferred totaled $282.3 million, which consisted of the following (in thousands, except shares):
The fair value of the 8,208,006 common shares issued was determined based on the closing market price of our common shares on the acquisition date of February 29, 2016. The issuance of common shares in the acquisition is a non-cash financing activity that has been excluded from the consolidated statement of cash flows. The fair value of the converted share-based payment awards reflects an apportionment of the fair value of the awards, based on the closing market price of our common shares and other assumptions as of the acquisition date, that is attributable to employee service completed prior to the acquisition date. The fair value of the awards attributable to service after the acquisition date is recognized as share-based compensation expense over the applicable vesting periods. The cash consideration represents amounts Team paid, immediately prior to the closing of the acquisition, to settle Furmanite’s outstanding debt and certain related liabilities, which were not assumed by Team. The cash portion of the consideration was financed through additional borrowings under our banking credit facility. The following table presents the preliminary purchase price allocation for Furmanite (in thousands):
The preliminary purchase price allocation above reflects adjustments as a result of new information obtained during the three months ended June 30, 2016. The significant adjustments were an increase in deferred tax liabilities of $47.9 million, a decrease in inventory of $5.4 million, a decrease in accounts receivable of $2.1 million, an increase in other accrued liabilities of $1.4 million and a decrease in prepaid expenses and other current assets of $0.5 million. These adjustments resulted in an offsetting increase to goodwill of $57.3 million. Additionally, the allocation above reflects a reclassification adjustment of $5.7 million from inventory to prepaid expenses and other current assets as well as reclassification adjustments to segregate the preliminary fair values of assets and liabilities of acquired discontinued operations (see Note 15). These measurement period adjustments did not result in any material impacts to the consolidated statements of income. The preliminary purchase price allocation shown above and the disclosures below are based upon the fair values at the acquisition date and are subject to additional changes within the measurement period as additional information is obtained. The final valuation of assets acquired and liabilities assumed is expected to be completed as soon as possible, but no later than one year from the acquisition date. To the extent that our estimates require adjustment, we will modify the provisional amounts. Given the size, complexity and timing of the acquisition, the valuation of certain assets and liabilities is still being finalized. The fair value of the acquired working capital, which includes accounts receivable, inventory, prepaid expenses, accounts payable and accrued liabilities is provisional subject to the completion of our detailed review of the underlying accounts. The fair value of the acquired property, plant and equipment and identifiable intangible assets is provisional pending the completion of and our review of the valuation reports for those assets from a third-party valuation firm. The valuation of Furmanite’s tax accounts is provisional pending the completion of Furmanite’s tax returns to be filed for periods up to the acquisition date. The fair values recorded are “Level 3” measurements as defined in Note 10. Of the $70.8 million of acquired intangible assets, $51.6 million was assigned to customer relationships with an estimated useful life of 12 years, $16.9 million was assigned to trade names with a weighted-average estimated useful life of 12 years and $2.3 million was assigned to developed technology with an estimated useful life of 10 years. The $93.9 million of goodwill was assigned to the TeamFurmanite segment. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Furmanite. None of the goodwill recognized is expected to be deductible for income tax purposes. The fair value of accounts receivable acquired was $69.6 million with the gross contractual amount being $73.8 million. We expect $4.2 million to be uncollectible. Additionally, we acquired accounts receivable with a fair value of $14.0 million associated with discontinued operations, which is included in the current assets of discontinued operations line above, with the gross contractual amount of these receivables being $14.1 million. We expect $0.1 million to be uncollectible. For the three and six months ended June 30, 2016, we recognized a total of $0.5 million and $6.6 million, respectively, of acquisition costs related to the Furmanite acquisition, which were included in selling, general and administrative expenses in the consolidated statements of income. Our condensed consolidated statements of income (unaudited) include the activity of Furmanite beginning on the acquisition date of February 29, 2016. Subsequent to the acquisition date, we commenced integration activities relative to Furmanite. As a result, certain business operations have been consolidated and/or transferred from legacy Furmanite operations to legacy Team operations to facilitate the new operating structure. Revenues of $97.4 million and a net loss of $1.6 million are included in the six month period ended June 30, 2016 and only include operating results that are directly attributable to legacy Furmanite operations. These amounts do not reflect any attempt to account for the effects of integration activities, which are not practicable to determine. Certain transactions related to the Furmanite acquisition were recognized separately from the acquisition of assets and assumption of liabilities in accordance with GAAP. These transactions, which were attributable to certain compensation (both cash and share-based) that was paid or became payable in conjunction with the closing of the acquisition, totaled $4.7 million and were recognized as selling, general and administrative expenses during the six months ended June 30, 2016. There were no such amounts recognized during the three months ended June 30, 2016. Qualspec In July 2015, we acquired 100% of Qualspec for total cash consideration of $255.5 million. Qualspec is a leading provider of NDT services in the United States, with significant operations in the West Coast, Gulf Coast and Mid-Western areas of the country. Qualspec is expected to add strength to our resident refinery inspection programs with major customer relationships across the U.S., and to add to our already strong capabilities in advanced inspection services, rope access services and the delivery of innovative technologies to our customers. The purchase of Qualspec was financed through borrowings under our banking credit facility. The initial purchase price could have been increased by $10.0 million depending upon the operating results of Qualspec through the end of calendar year 2015. The fair value of the contingent consideration arrangement at the acquisition date was initially estimated at $5.8 million. However, based on Qualspec results through December 31, 2015, there was no additional amount payable and, accordingly, we have reversed our initial contingent consideration obligation of $5.8 million to zero with a corresponding decrease to goodwill. The following table presents the purchase price allocation for Qualspec (in thousands):
The purchase price allocation shown above is based upon the fair values at the acquisition date. The fair values recorded are “Level 3” measurements as defined in Note 10. Of the $78.1 million of acquired intangible assets, $75.2 million was assigned to customer relationships with an estimated useful life of 15 years, $1.6 million was assigned to non-compete agreements with an estimated useful life of 5 years and $1.3 million was assigned to trade names with an estimated useful life of 1 year. The $148.5 million of goodwill was assigned to the TeamQualspec segment. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Qualspec. About $109.6 million of the goodwill is expected to be deductible for income tax purposes. The fair value of accounts receivables acquired was $21.5 million, with the gross contractual amount being $22.5 million. We expect $1.0 million to be uncollectible. Our consolidated results include the activity of Qualspec beginning on the acquisition date of July 7, 2015. Pro Forma Information - Furmanite and Qualspec Our unaudited pro forma consolidated results of operations are shown below as if the acquisition of Furmanite and Qualspec had occurred at the beginning of fiscal year 2015. These results are not necessarily indicative of the results which would actually have occurred if the acquisitions had taken place at the beginning of fiscal year 2015, nor are they necessarily indicative of future results (in thousands, except per share data).
These amounts have been calculated after applying Team’s accounting policies and adjusting the results of Furmanite and Qualspec to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on January 1, 2015, together with the related tax effects. Additionally, these pro forma results exclude discontinued operations as well as the impact of costs related to the Furmanite and Qualspec acquisitions included in the historical results. Quest Integrity In November 2010, we purchased 95% of Quest Integrity Group, LLC, a leading provider of proprietary in-line inspection and advanced engineering and assessment services. Pursuant to a “Put/Call Agreement” that was executed at the time of the Quest Integrity acquisition, on August 31, 2015, we issued 728,266 shares of restricted common stock and paid $5.9 million in cash to acquire the non-controlling interest. Prior to August 31, 2015, these shares were included as dilutive securities in the earnings per share calculation as set forth herein. Other In June 2016, we acquired a mechanical furnace and pipe cleaning business in Europe, Turbinate International B.V. (“Turbinate”) for approximately $8 million. Recognized as a service leader in the European market, Turbinate specializes in de-coking and cleaning of fired heaters and unpiggable refinery assets as well as mechanical cleaning of furnaces and pipes from two to 18 inches by means of pigging, endoscopy and ultra sound inspection services. Turbinate is located in Vianen, the Netherlands. Turbinate is reported in the Quest Integrity segment. In April 2016, we acquired two related businesses in Europe: Quality Inspection Services (“QIS”) and TiaT Europe (“TiaT”) for a total of approximately $9 million. QIS is an NDT inspection company and TiaT is an NDT training school and consultancy and engineering company recognized as a specialist in aerospace inspections. Both companies are located in Roosendaal, the Netherlands. The businesses add about 65 employees to our organization in Europe and serve steel construction, ship repair, off-shore and storage tank customers, as well as the aerospace industry. QIS is the fourth largest NDT inspection company in the Netherlands and represents Team’s first inspection operation outside of North America. QIS and TiaT are reported in the TeamQualspec segment. In June 2015, we purchased DK Amans Valve, an advanced valve leader located in Long Beach, California, with a portfolio of projects from various sectors including oil and gas refining, pipelines and power generation for a total consideration of $12.3 million, net of cash acquired of $0.1 million. The purchase price included net working capital of $3.0 million, $0.6 million in fixed assets and $8.8 million in intangibles that includes $2.5 million allocated to goodwill, included in the TeamFurmanite segment. The purchase price also included $1.8 million of contingent consideration. The contingent consideration is based upon the achievement of certain performance targets over a three-year period for an additional amount of up to $4.0 million. During the three and six months ended June 30, 2016, we recorded a loss of $2.2 million associated with the revaluation of the contingent consideration based on actual performance to date. |
RECEIVABLES |
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RECEIVABLES | RECEIVABLES A summary of accounts receivable as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
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INVENTORY |
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INVENTORY | INVENTORY A summary of inventory as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
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PROPERTY, PLANT AND EQUIPMENT |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY, PLANT AND EQUIPMENT | PROPERTY, PLANT AND EQUIPMENT A summary of property, plant and equipment as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
At the end of 2013, we initiated the design and implementation of a new enterprise resource planning (“ERP”) system, which is expected to be installed by the end of calendar year 2017. Amortization of the ERP system development costs will be computed by the straight-line method, commencing in the period when substantial testing is completed and the asset is ready for its intended use. Through June 30, 2016, we have capitalized $35.2 million associated with the project that includes $0.9 million of capitalized interest. |
INTANGIBLE ASSETS |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS | INTANGIBLE ASSETS A summary of intangible assets as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
Amortization expense for the three months ended June 30, 2016 and 2015 was $4.1 million and $0.9 million, respectively. Amortization expense for the six months ended June 30, 2016 and 2015 was $7.2 million and $1.9 million, respectively. |
OTHER ACCRUED LIABILITIES |
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OTHER ACCRUED LIABILITIES | OTHER ACCRUED LIABILITIES A summary of other accrued liabilities as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
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LONG-TERM DEBT, DERIVATIVES AND LETTERS OF CREDIT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT, DERIVATIVES AND LETTERS OF CREDIT | LONG-TERM DEBT, LETTERS OF CREDIT AND DERIVATIVES In July 2015, we renewed our banking credit facility (the “Credit Facility”). In accordance with the second amendment to the Credit Facility, which was signed in February 2016, the Credit Facility has borrowing capacity of up to $600 million and consists of a $400 million, five-year revolving loan facility and a $200 million five-year term loan facility. The swing line facility is $35 million. The Credit Facility matures in July 2020, bears interest based on a variable Eurodollar rate option (LIBOR plus 2.25% margin at June 30, 2016) and has commitment fees on unused borrowing capacity (0.40% at June 30, 2016). The Credit Facility also contains financial covenants requiring the Company to maintain as of the end of each fiscal quarter (i) a maximum ratio of consolidated funded debt to consolidated EBITDA (as defined in the Credit Facility agreement) of not more than 4.00 to 1.00 (until June 30, 2016, at which point the ratio will decrease by 0.25 to 1.00 every other quarter until it reaches 3.00 to 1.00), (ii) a maximum ratio of senior secured debt to consolidated EBITDA of not more than 3.00 to 1.00 and (iii) an interest coverage ratio of less than 3.00 to 1.00. As of June 30, 2016, we are in compliance with these covenants. At June 30, 2016, we had $65.4 million of cash on hand and approximately $29 million of available borrowing capacity through our Credit Facility. In connection with the renewal of our Credit Facility, we are amortizing $2.6 million of associated debt issuance costs over the life of the Credit Facility. In order to secure our casualty insurance programs we are required to post letters of credit generally issued by a bank as collateral. A letter of credit commits the issuer to remit specified amounts to the holder, if the holder demonstrates that we failed to meet our obligations under the letter of credit. If this were to occur, we would be obligated to reimburse the issuer for any payments the issuer was required to remit to the holder of the letter of credit. We were contingently liable for outstanding stand-by letters of credit totaling $22.5 million at June 30, 2016 and $13.2 million at December 31, 2015. Outstanding letters of credit reduce amounts available under our Credit Facility and are considered as having been funded for purposes of calculating our financial covenants under the Credit Facility. ASC 815, Derivatives and Hedging (“ASC 815”), requires that derivative instruments be recorded at fair value and included in the balance sheet as assets or liabilities. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative and the resulting designation, which is established at the inception date of a derivative. Special accounting for derivatives qualifying as fair value hedges allows derivatives’ gains and losses to offset related results on the hedged item in the statement of income. For derivative instruments designated as cash flow hedges, changes in fair value, to the extent the hedge is effective, are recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. Hedge effectiveness is measured at least quarterly based on the relative cumulative changes in fair value between the derivative contract and the hedged item over time. Credit risks related to derivatives include the possibility that the counter-party will not fulfill the terms of the contract. We considered counterparty credit risk to our derivative contracts when valuing our derivative instruments. Our borrowing of €12.3 million under the Credit Facility serves as an economic hedge of our net investment in our European operations as fluctuations in the fair value of the borrowing attributable to the U.S. Dollar/Euro spot rate will offset translation gains or losses attributable to our investment in our European operations. At June 30, 2016, the €12.3 million borrowing had a U.S. Dollar value of $13.7 million. The amounts recognized in other comprehensive income (loss), and reclassified into income, for the three and six months ended June 30, 2016 and 2015, are as follows (in thousands):
The following table presents the fair value totals and balance sheet classification for derivatives designated as hedges under ASC 815 (in thousands):
In connection with our acquisition of Furmanite in February 2016, we assumed additional obligations under various non-cancellable operating leases, primarily consisting of facility and auto leases. Future payments under these additional operating leases, which expire at various dates, were estimated at approximately $33 million as of the acquisition date. |
RETIREMENT PLANS |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RETIREMENT PLANS | RETIREMENT PLANS In connection with our acquisition of Furmanite, we assumed liabilities associated with the defined benefit pension plans of two foreign subsidiaries, one plan covering certain United Kingdom employees (the “U.K. Plan”) and the other covering certain Norwegian employees (the “Norwegian Plan”). As the Norwegian Plan represents approximately three percent of both the Company’s total pension plan liabilities and total pension plan assets, only the schedule of net periodic pension cost includes combined amounts from the two plans, while assumption and narrative information relates solely to the U.K. Plan. Net periodic pension cost, from the date of the Furmanite acquisition, for the U.K. and Norwegian Plans includes the following components (in thousands):
The expected long-term rate of return on invested assets is determined based on the weighted average of expected returns on asset investment categories as follows: 4.9% overall, 6.2% for equities and 2.2% for bonds. We expect to contribute $1.3 million to the pension plan for 2016, of which $0.5 million has been contributed through June 30, 2016. |
FAIR VALUE MEASUREMENTS |
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FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS We apply the provisions of ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which among other things, requires enhanced disclosures about assets and liabilities carried at fair value. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best information available. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The use of unobservable inputs is intended to allow for fair value determinations in situations in which there is little, if any, market activity for the asset or liability at the measurement date. We are able to classify fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy such that “Level 1” measurements include unadjusted quoted market prices for identical assets or liabilities in an active market, “Level 2” measurements include quoted market prices for identical assets or liabilities in an active market which have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets, and “Level 3” measurements include those that are unobservable and of a highly subjective measure. The following table sets forth, by level within the fair value hierarchy, our financial assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2016 and December 31, 2015. As required by ASC 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):
__________________________ 1 Inclusive of both current and noncurrent portions. There were no transfers in and out of Level 1 & Level 2 during the six months ended June 30, 2016 and 2015. There was a transfer out of Level 3 of $5.8 million relating to a revaluation of contingent consideration during the year ended December 31, 2015 and no transfers in and out of Level 3 during the six months ended June 30, 2016. The fair value of contingent consideration liabilities classified in the table above were estimated using a discounted cash flow technique with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The significant inputs in the Level 3 measurement not supported by market activity include a combination of actual cash flows and probability-weighted assessments of expected future cash flows related to the acquired businesses, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the acquisition agreement. The following table represents the changes in the fair value of Level 3 contingent consideration (in thousands):
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SHARE-BASED COMPENSATION |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION We have adopted stock incentive plans and other arrangements pursuant to which our Board of Directors (the “Board”) may grant stock options, restricted stock, stock units, stock appreciation rights, common stock or performance awards to officers, directors and key employees. At June 30, 2016, there were approximately 1.0 million stock options, restricted stock units and performance awards outstanding to officers, directors and key employees. The exercise price, terms and other conditions applicable to each form of share-based compensation under our plans are generally determined by the Compensation Committee of our Board at the time of grant and may vary. Our share-based payments consist primarily of stock units, performance awards, common stock and stock options. The governance of our share-based compensation does not directly limit the number of future awards. However, the total number of shares ultimately issued may not exceed the total number of shares cumulatively authorized, which is 7,120,000 at June 30, 2016. Shares issued in connection with our share-based compensation are issued out of authorized but unissued common stock. In connection with the acquisition of Furmanite in February 2016, we assumed the share plan related to Furmanite employee grants. As provided for in the Merger Agreement, each option to purchase Furmanite common stock outstanding immediately prior to the closing of the acquisition was converted into an option to purchase Team common stock, adjusted by the 0.215 exchange ratio. Similarly, each previously existing Furmanite restricted share, restricted stock unit or performance stock unit outstanding immediately prior to the acquisition were converted into Team restricted stock units, also at the 0.215 exchange ratio. The converted awards generally have the same terms and conditions as the replaced awards, except the vesting of certain awards was accelerated to the acquisition date and any performance conditions associated with the Furmanite awards no longer apply. The fair value of the options was determined using a Black-Scholes model, while the fair value of the restricted stock units was determined based on the market price on the acquisition date. The fair value of the converted Furmanite awards was allocated between consideration transferred in the acquisition and future share-based compensation expense, based on past service completed and future service required. The converted Furmanite awards have been identified, as applicable, in the tables that follow. Compensation expense related to share-based compensation totaled $4.7 million and $2.4 million for the six months ended June 30, 2016 and 2015, respectively. At June 30, 2016, $13.3 million of unrecognized compensation expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of 2.5 years. The tax benefit derived when share-based awards result in a tax deduction for the Company was $0.1 million and $1.5 million for the six months ended June 30, 2016 and 2015, respectively. Stock units are settled with common stock upon vesting unless it is not legally feasible to issue shares, in which case the value of the award is settled in cash. We determine the fair value of each stock unit based on the market price on the date of grant. Stock units generally vest in annual installments over four years and the expense associated with the units is recognized over the same vesting period. We also grant common stock to our directors which typically vest immediately. Compensation expense related to stock units and director stock grants totaled $4.1 million and $2.0 million for the six months ended June 30, 2016 and 2015, respectively. Transactions involving our stock units and director stock grants during the six months ended June 30, 2016 and 2015 are summarized below:
Under a performance stock unit award program adopted on November 4, 2014, Long-Term Performance Stock Unit (“LTPSU”) awards granted to our executive officers are subject to a three-year performance period and a concurrent three-year service period. Under this program, the Company communicates “target awards” to the executive officers at the beginning of a performance period. The performance target is based on results of operations over the three-year performance period with possible payouts ranging from 0% to 300% of the “target awards”. LTPSU awards cliff vest with achievement of the performance goals and completion of the three year service period. Settlement occurs with common stock within 20 business days of vesting. We determine the fair value of each LTPSU award based on the market price on the date of grant. Compensation expense is recognized on a straight-line basis over the vesting term of three years based upon the probable performance target that will be met. Compensation expense related to performance awards totaled $0.4 million and $0.2 million for the six months ended June 30, 2016 and 2015, respectively. Transactions involving our performance awards during the six months ended June 30, 2016 and 2015 are summarized below:
Performance awards are settled with common stock upon vesting unless it is not legally feasible to issue shares, in which case the value of the award is settled in cash. We determine the fair value of each performance award based on the market price on the date of grant. Performance awards granted to our Chairman of our Board vest over the longer of four years or the achievement of performance goals based upon our future results of operations. Compensation expense related to performance awards totaled $0.2 million for both the six months ended June 30, 2016 and 2015. Transactions involving our performance awards during the six months ended June 30, 2016 and 2015 are summarized below:
We determine the fair value of each stock option at the grant date using a Black-Scholes model and recognize the resulting expense of our stock option awards over the period during which an employee is required to provide services in exchange for the awards, usually the vesting period. Compensation expense related to stock options for the six months ended June 30, 2016, related to the recently converted Furmanite awards, was not material. There was no compensation expense related to stock options for the six months ended June 30, 2015 as all stock option awards were fully vested. Our options typically vest in equal annual installments over a four-year service period. Expense related to an option grant is recognized on a straight line basis over the specified vesting period for those options. Stock options generally have a ten-year term. Transactions involving our stock options during the six months ended June 30, 2016 and 2015 are summarized below:
Options exercisable at June 30, 2016 had a weighted-average remaining contractual life of 2.0 years. For total options outstanding at June 30, 2016, the range of exercise prices and remaining contractual lives are as follows:
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ACCUMULATED OTHER COMPREHENSIVE LOSS |
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ACCUMULATED OTHER COMPREHENSIVE LOSS | ACCUMULATED OTHER COMPREHENSIVE LOSS A summary of changes in accumulated other comprehensive loss included within shareholders’ equity is as follows (in thousands):
The following table represents the related tax effects allocated to each component of other comprehensive income (loss) (in thousands):
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COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Con Ed Matter—We have, from time to time, provided temporary leak repair services for the steam operations of Consolidated Edison Company of New York (“Con Ed”) located in New York City. In July 2007, a Con Ed steam main located in midtown Manhattan ruptured causing one death and other injuries and property damage. As of June 30, 2016, ninety-two lawsuits are currently pending against Con Ed, the City of New York and Team in the Supreme Courts of New York located in Kings, New York and Bronx County, alleging that our temporary leak repair services may have contributed to the cause of the rupture. The lawsuits seek generally unspecified compensatory damages for personal injury, property damage and business interruption. Additionally, on March 31, 2008, we received a letter from Con Ed alleging that our contract with Con Ed requires us to indemnify and defend Con Ed for additional claims filed against Con Ed as a result of the rupture. Con Ed filed an action to join Team and the City of New York as defendants in all lawsuits filed against Con Ed that did not include Team and the City of New York as direct defendants. We are vigorously defending the lawsuits and Con Ed’s claim for indemnification. We are unable to estimate the amount of liability to us, if any, associated with these lawsuits and the claim for indemnification. We maintain insurance coverage, subject to a deductible limit of $250,000, which we believe should cover these claims. We have not accrued any liability in excess of the deductible limit for the lawsuits. We do not believe the ultimate outcome of these matters will have a material adverse effect on our financial position, results of operations, or cash flows. We anticipate trial on the merits during the first half of 2017. Patent Infringement Matters—In December 2014, our subsidiary, Quest Integrity, filed three patent infringement lawsuits against three different defendants, two in the U.S. District of Delaware (“Delaware Cases”) and one in the U.S. District of Western Washington (“Washington Case”). Quest Integrity alleges that the three defendants infringed Quest Integrity’s patent, entitled “2D and 3D Display System and Method for Furnace Tube Inspection”. This Quest Integrity patent generally teaches a system and method for displaying inspection data collected during the inspection of furnace tubes in petroleum and petro-chemical refineries. The subject patent litigation is specific to the visual display of the collected data and does not relate to Quest Integrity’s underlying advanced inspection technology. In these lawsuits Quest Integrity is seeking temporary and permanent injunctive relief, as well as monetary damages. Defendants have denied they infringe any valid claim of Quest Integrity’s patent, and have asserted declaratory judgment counterclaims that the patent at issue is invalid and/or unenforceable, and not infringed. In June 2015, the U.S. District of Delaware denied our motions for preliminary injunctive relief in the Delaware Cases (that is, our request that the defendants stop using our patented systems and methods during the pendency of the actions). The Delaware Cases are expected to proceed to trial in the first calendar quarter of 2017. The Washington Case does not have a trial date scheduled. We are involved in various other lawsuits and are subject to various claims and proceedings encountered in the normal conduct of business. In our opinion, any uninsured losses that might arise from these lawsuits and proceedings will not have a materially adverse effect on our consolidated financial statements. We establish a liability for loss contingencies, when information available to us indicates that is it probable that a liability has been incurred and the amount of loss can be reasonably estimated. |
ENTITY WIDE DISCLOSURES |
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ENTITY WIDE DISCLOSURES | ENTITY WIDE DISCLOSURES ASC 280, Segment Reporting, requires us to disclose certain information about our operating segments where operating segments are defined as “components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.” We conduct operations in three segments: TeamQualspec, TeamFurmanite and Quest Integrity. All three operating segments operate under a business segment manager who reports directly to Team’s Chief Executive Officer who operates as the chief operating decision maker. Furmanite, which we acquired in the first quarter of 2016 (see Note 2), is included in the TeamFurmanite segment, except that Furmanite’s corporate-related activities are included within corporate and shared support services in the tables below. Discontinued operations are not allocated to the segments. Segment data for our three operating segments are as follows (in thousands):
Separate measures of Team’s assets by operating segment are not produced or utilized by management to evaluate segment performance. A geographic breakdown of our revenues for the three and six months ended June 30, 2016 and 2015 and total assets as of June 30, 2016 and December 31, 2015 are as follows (in thousands):
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DISCONTINUED OPERATIONS |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS As part of our acquisition of Furmanite, we acquired a pipeline inspection business from Furmanite that primarily performs process management inspection services to contractors and operators participating primarily in the midstream oil and gas market in the United States. The business generates approximately $60 million in annual revenues. We have concluded that this business is not a strategic fit for Team and therefore we have decided not to retain it and are marketing the business to prospective buyers. We expect to complete the sale of the business within one year of the Furmanite acquisition date. We have concluded that this business qualifies as a discontinued operation upon its acquisition under GAAP. Therefore, we have classified the operating results and related assets and liabilities as discontinued operations in our condensed consolidated financial statements. Discontinued operations does not include any allocation of corporate overhead expense or interest expense. Income from discontinued operations, net of income tax, from the date of the Furmanite acquisition, consists of the following (in thousands):
Assets and liabilities of discontinued operations classified as held for sale in the condensed consolidated balance sheet as of June 30, 2016 consist of the following (in thousands):
As discussed in Note 2, the Furmanite purchase price allocation is based on provisional measurements and is subject to change. Accordingly, the amounts of assets and liabilities attributable to discontinued operations may be adjusted upon completion of the final valuation of the acquisition. For the three and six months ended June 30, 2016, there were no material amounts of depreciation, amortization, capital expenditures or significant operating or investing non-cash items related to discontinued operations. |
REPURCHASE OF COMMON STOCK |
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Equity [Abstract] | |
REPURCHASE OF COMMON STOCK | REPURCHASE OF COMMON STOCK On June 23, 2014, our Board authorized an increase in the stock repurchase plan limit to $50.0 million. We repurchased 274,110 shares for a total cost of $7.6 million during the six months ended June 30, 2016. At June 30, 2016, $7.9 million remained available to repurchase shares under the stock repurchase plan. Under the Credit Facility, the Company is limited in its ability to make stock repurchases unless the leverage ratio is below 2.50 to 1.00. Notwithstanding such provision, in the event the leverage ratio is equal to or greater than 2.50 to 1.00 but is at least 0.25 less than the maximum permitted leverage ratio, the Credit Facility generally permits the the Company to make stock repurchases provided that such repurchases, plus any payments of cash dividends, do not exceed $50.0 million in the aggregate. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis for presentation | Basis for presentation. These interim financial statements are unaudited, but in the opinion of our management, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods. The consolidated condensed balance sheet at December 31, 2015 is derived from the December 31, 2015 audited consolidated financial statements. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in our Transition Report on Form 10-K for the transition period from June 1, 2015 to December 31, 2015. |
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Consolidation | Consolidation. The consolidated financial statements include the accounts of Team, Inc. and our majority-owned subsidiaries where we have control over operating and financial policies. Investments in affiliates in which we have the ability to exert significant influence over operating and financial policies, but where we do not control the operating and financial policies, are accounted for using the equity method. All material intercompany accounts and transactions have been eliminated in consolidation. |
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Use of estimates | Use of estimates. Our accounting policies conform to Generally Accepted Accounting Principles in the U.S. (“GAAP”). Our most significant accounting policies are described below. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect our reported financial position and results of operations. We review significant estimates and judgments affecting our consolidated financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Estimates and judgments are based on information available at the time such estimates and judgments are made. Adjustments made with respect to the use of these estimates and judgments often relate to information not previously available. Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements. Estimates and judgments are used in, among other things, (1) aspects of revenue recognition, (2) valuation of acquisition-related tangible and intangible assets and assessments of all long-lived assets for possible impairment, (3) estimating various factors used to accrue liabilities for workers’ compensation, auto, medical and general liability, (4) establishing an allowance for uncollectible accounts receivable, (5) estimating the useful lives of our assets, (6) assessing future tax exposure and the realization of tax assets, (7) estimating the value associated with contingent consideration payment arrangements and (8) selecting assumptions used in the measurement of costs and liabilities associated with defined benefit pension plans. |
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Fair value of financial instruments | Fair value of financial instruments. Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts payable and debt obligations. The carrying amount of cash, cash equivalents, trade accounts receivable and trade accounts payable are representative of their respective fair values due to the short-term maturity of these instruments. The fair value of our banking facility is representative of the carrying value based upon the variable terms and management’s opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the banking facility. |
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Cash and cash equivalents | Cash and cash equivalents. Cash and cash equivalents consist of all demand deposits and funds invested in highly liquid short-term investments with original maturities of three months or less. Included in our cash and cash equivalents at June 30, 2016 and December 31, 2015 is $14.9 million and $17.5 million, respectively, of cash in certain foreign subsidiaries (located primarily in Europe and Canada) where earnings are considered by the Company to be permanently reinvested. In the event that some or all of this cash were to be repatriated, we would be required to accrue and pay additional taxes. While not legally restricted from repatriating this cash, we consider all undistributed earnings of these foreign subsidiaries to be indefinitely reinvested and access to cash to be limited. |
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Restricted cash | Restricted cash. We recorded $5.0 million in restricted cash on our balance sheet at December 31, 2015 to reflect the amount held in escrow for contingent consideration as stipulated by the Qualspec Group LLC (“Qualspec”) purchase agreement. Based on Qualspec’s results through December 31, 2015, the contingent consideration did not become due and, accordingly, this cash became unrestricted in the second quarter of 2016. |
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Inventory | Inventory. We use the first-in, first-out method to determine inventory cost, except that inventory cost of Furmanite Corporation (“Furmanite”) and its subsidiaries, which we acquired on February 29, 2016 (see Note 2), is determined based on weighted-average cost. Inventory includes material, labor and certain fixed overhead costs. Inventory is stated at the lower of cost or market. Inventory quantities on hand are reviewed periodically and carrying cost is reduced to net realizable value for inventories for which their cost exceeds their utility. The cost of inventories consumed or products sold are included in operating expenses. |
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Property, plant and equipment | Property, plant and equipment. Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Leasehold improvements are amortized over the shorter of their respective useful life or the lease term. Depreciation and amortization of assets are computed by the straight-line method over the following estimated useful lives of the assets:
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Goodwill and intangible assets | Goodwill and intangible assets. We allocate the purchase price of acquired businesses to their identifiable tangible assets and liabilities, such as accounts receivable, inventory, property, plant and equipment, accounts payable and accrued liabilities. We also allocate a portion of the purchase price to identifiable intangible assets, such as non-compete agreements, trademarks, trade names, patents, technology and customer relationships. Allocations are based on estimated fair values of assets and liabilities. The Company uses all available information to estimate fair values including quoted market prices, the carrying value of acquired assets, and widely accepted valuation techniques such as discounted cash flows. Certain estimates and judgments are required in the application of the fair value techniques, including estimates of future cash flows, selling prices, replacement costs, economic lives and the selection of a discount rate, and it involves using of Level 3 measurements as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosure (“ASC 820”). Deferred taxes are recorded for any differences between the assigned values and tax bases of assets and liabilities. Estimated deferred taxes are based on available information concerning the tax bases of assets acquired and liabilities assumed and loss carryforwards at the acquisition date, although such estimates may change in the future as additional information becomes known. Any remaining excess of cost over allocated fair values is recorded as goodwill. We typically engage third-party valuation experts to assist in determining the fair values for both the identifiable tangible and intangible assets. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, could materially impact the Company’s results of operations. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but are instead tested for impairment at least annually in accordance with the provisions of the ASC 350, Intangibles—Goodwill and Other (“ASC 350”). Intangible assets with estimated useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with ASC 350. We assess goodwill for impairment at the reporting unit level, which we have determined to be the same as our operating segments. Each reporting unit has goodwill relating to past acquisitions. The test for impairment is a two-step process that involved comparing the estimated fair value of each reporting unit to the reporting unit’s carrying value, including goodwill. If the fair value of a reporting unit exceeded its carrying amount, the goodwill of the reporting unit was not considered impaired; therefore, the second step of the impairment test would not be deemed necessary. If the carrying amount of the reporting unit exceeded its fair value, we would then perform a second step to the goodwill impairment test to measure the amount of goodwill impairment loss to be recorded. With the change in our fiscal year end to December 31 of each calendar year, our goodwill annual test date changed to December 1, effective December 1, 2015. Due to the changes in the underlying assumptions surrounding our goodwill testing as a result of significant acquisitions (see Note 2), we performed a quantitative analysis of goodwill to test for impairment at December 1, 2015 and concluded there was no impairment. The fair values of the reporting units at December 1, 2015 were determined using a method based on discounted cash flow models with estimated cash flows based on internal forecasts of revenue and expenses over a four-year period plus a terminal value period (the income approach). The income approach estimated fair value by discounting each reporting unit’s estimated future cash flows using a discount rate that approximated our weighted-average cost of capital. The fair value derived from the income approach, in the aggregate, approximated our market capitalization. At December 1, 2015, our market capitalization exceeded the carrying value of our consolidated net assets by approximately $482 million or 141%, and the fair value of each reporting unit significantly exceeded its respective carrying amount as of that date. There have been no events that have required an interim assessment of the carrying value of goodwill during 2016. There was $362.0 million and $256.7 million of goodwill at June 30, 2016 and December 31, 2015, respectively. See Note 2 for additional information related to the acquisitions that increased goodwill in the period. A rollforward of goodwill for the six months ended June 30, 2016 is as follows (in thousands):
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Income taxes | Income taxes. We follow the guidance of ASC 740, Income Taxes (“ASC 740”) which requires that we use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant temporary differences. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax payable and related tax expense together with assessing temporary differences resulting from differing treatment of certain items, such as depreciation, for tax and accounting purposes. These differences can result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. In accordance with ASC 740, we are required to assess the likelihood that our deferred tax assets will be realized and, to the extent we believe that it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized, we must establish a valuation allowance. We consider all available evidence to determine whether, based on the weight of the evidence, a valuation allowance is needed. Evidence used includes information about our current financial position and our results of operations for the current and preceding years, as well as all currently available information about future years, including our anticipated future performance, the reversal of existing taxable temporary differences and tax planning strategies. For the six months ended June 30, 2016, income tax expense as a percentage of pre-tax income from continuing operations was 3.1% compared to 35.7% for the six months ended June 30, 2015. The effective tax rate for the current year was impacted by the effects of discrete items, primarily the settlement of prior years with the Internal Revenue Service, and permanent differences that had significant impacts on the effective rate due to the relatively low amount of pre-tax income from continuing operations. During the three months ended June 30, 2016, we calculated a measurement-period adjustment associated with our acquisition of Furmanite (Note 2) that increased deferred tax liabilities and goodwill by $47.9 million. This adjustment represents the acquisition-date deferred tax liability associated with the accumulated undistributed earnings of Furmanite’s foreign subsidiaries, which we do not consider to be indefinitely reinvested outside the United States. |
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Workers' compensation, auto, medical and general liability accruals | Workers’ compensation, auto, medical and general liability accruals. In accordance with ASC 450, Contingencies, we record a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We review our loss contingencies on an ongoing basis to ensure that we have appropriate reserves recorded on our balance sheet. These reserves are based on historical experience with claims incurred but not received, estimates and judgments made by management, applicable insurance coverage for litigation matters, and are adjusted as circumstances warrant. For workers’ compensation, our self-insured retention is $1.0 million and our automobile liability self-insured retention is currently $500,000 per occurrence. For general liability claims we have an effective self-insured retention of $3.0 million per occurrence. For medical claims, our self-insured retention is $175,000 per individual claimant determined on an annual basis. For environmental liability claims, our self-insured retention is $1.0 million per occurrence. We maintain insurance for claims that exceed such self-retention limits. The insurance is subject to terms, conditions, limitations and exclusions that may not fully compensate us for all losses. Furmanite was generally incorporated into our existing insurance coverage during the second quarter of 2016, but for certain items it continues to maintain separate insurance policies and accordingly has separate self-insurance retention amounts, with such self-retention amounts generally below the levels noted above. Our estimates and judgments could change based on new information, changes in laws or regulations, changes in management’s plans or intentions, or the outcome of legal proceedings, settlements or other factors. If different estimates and judgments were applied with respect to these matters, it is likely that reserves would be recorded for different amounts. |
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Revenue recognition | Revenue recognition. We determine our revenue recognition guidelines for our operations based on guidance provided in applicable accounting standards and positions adopted by the FASB and the Securities and Exchange Commission (“SEC”). Most of our projects are short-term in nature and we predominantly derive revenues by providing a variety of industrial services on a time and material basis. For all of these services, our revenues are recognized when services are rendered or when product is shipped to the job site and risk of ownership passes to the customer. However, due to various contractual terms with our customers, at the end of any reporting period, there may be earned but unbilled revenue that is accrued to properly match revenues with related costs. At June 30, 2016 and December 31, 2015, the amount of earned but unbilled revenue included in accounts receivable was $73.3 million and $47.1 million, respectively. |
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Allowance for doubtful accounts | Allowance for doubtful accounts. In the ordinary course of business, a portion of our accounts receivable are not collected due to billing disputes, customer bankruptcies, dissatisfaction with the services we performed and other various reasons. We establish an allowance to account for those accounts receivable that will eventually be deemed uncollectible. The allowance for doubtful accounts is based on a combination of our historical experience and management’s review of long outstanding accounts receivable. |
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Concentration of credit risk | Concentration of credit risk. No single customer accounts for more than 10% of consolidated revenues. |
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Earnings (loss) per share | Earnings per share. Basic earnings per share is computed by dividing income from continuing operations, income from discontinued operations or net income available to Team shareholders by the weighted-average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing income from continuing operations, income from discontinued operations or net income available to Team shareholders, less income or loss for the period attributable to the non-controlling interest, by the sum of (1) the weighted-average number of shares of common stock, outstanding during the period, (2) the dilutive effect of the assumed exercise of share-based compensation using the treasury stock method and (3) the dilutive effect of the assumed conversion of our non-controlling interest to our common stock prior to the acquisition of that interest. Amounts used in basic and diluted earnings per share, for the three and six months ended June 30, 2016 and 2015, are as follows (in thousands):
There were 0.3 million and 0.4 million stock options outstanding during the three months and six months ended June 30, 2016, respectively, excluded from the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of common shares during the periods. There were no stock options outstanding during the three and six months ended June 30, 2015 excluded from the computation of diluted earnings per share. |
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Foreign currency | Foreign currency. For subsidiaries whose functional currency is not the U.S. Dollar, assets and liabilities are translated at period ending rates of exchange and revenues and expenses are translated at period average exchange rates. Translation adjustments for the asset and liability accounts are included as a separate component of accumulated other comprehensive loss in shareholders’ equity. Foreign currency transaction gains and losses are included in our consolidated statements of income. We utilize monthly foreign currency swap contracts to reduce exposures to changes in foreign currency exchange rates related to our largest exposures including, but not limited to, the Australian Dollar, Brazilian Real, British Pound, Euro, Malaysian Ringgit and Mexican Peso. The impact from these swap contracts was not material for the three months or six months ended June 30, 2016 nor as of the balance sheet dates of June 30, 2016 and December 31, 2015. |
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Defined Benefit Pension Plans | Defined Benefit Pension Plans. Pension benefit costs and liabilities are dependent on assumptions used in calculating such amounts. The primary assumptions include factors such as discount rates, expected investment return on plan assets, mortality rates and retirement rates. These rates are reviewed annually and adjusted to reflect current conditions. These rates are determined based on reference to yields. The expected return on plan assets is derived from detailed periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks (standard deviations) and correlations of returns among the asset classes that comprise the plans’ asset mix. While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return. Mortality and retirement rates are based on actual and anticipated plan experience. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense in future periods. While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the pension obligation and future expense. |
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Newly Adopted Accounting Principles and Accounting Principles Not Yet Adopted | Newly Adopted Accounting Principles ASU No. 2015-03 and ASU No. 2015-15. In April 2015, the FASB issued ASU No. 2015-03, Interest—Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), which requires that debt issuance costs be presented as a direct deduction from the carrying amount of the related debt liability, consistent with the presentation of debt discounts. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as other assets, separate from the related debt liability. ASU 2015-03 does not change the recognition and measurement requirements for debt issuance costs. In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (“ASU 2015-15”), that adds SEC paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015, Emerging Issues Task Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, ASU 2015-15 states the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Team adopted ASU 2015-15 effective upon adoption of ASU 2015-03 on January 1, 2016. Because essentially all of Team’s deferred debt issuance costs relate to line-of-credit arrangements, we have elected to continue presenting such costs as an asset. Therefore, adoption of ASU 2015-03 and ASU 2015-15 did not have any impact on our results of operations, financial position or cash flows. ASU No. 2015-16. In September 2015, the FASB issued ASU No. 2015-16, Business Combinations- Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”), that requires the acquirer in a business combination to recognize in the reporting period in which adjustment amounts are determined, any adjustments to provisional amounts that are identified during the measurement period, calculated as if the accounting had been completed at the acquisition date. Prior to the issuance of ASU 2015-16, an acquirer was required to restate prior period financial statements as of the acquisition date for adjustments to provisional amounts. Team adopted the update effective January 1, 2016. The adoption of ASU 2015-16 did not have a material impact on our results of operations, financial position or cash flows. We have included the required disclosures with respect to measurement-period adjustments in Note 2. Accounting Principles Not Yet Adopted ASU No. 2014-09. In May 2014, the FASB issued Accounting Standards Update (“ASU”) ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The new standard is effective for us on January 1, 2018, with early application permitted as of January 1, 2017. ASU 2014-09 permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method or determined the effect ASU 2014-09 will have on our ongoing financial reporting. ASU No. 2015-11. In July 2015, the FASB issued ASU 2015-11, Inventory—Simplifying the Measurement of Inventory (“ASU 2015-11”), which requires entities that measure inventory using the first-in, first-out or average cost methods to measure inventory at the lower of cost and net realizable value to more closely align the measurement of inventory in GAAP with International Financial Reporting Standards (“IFRS”). Net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016 on a prospective basis, with earlier application permitted. The adoption of this update is not expected to have a material impact on our results of operations, financial position or cash flows. ASU No. 2015-17. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The adoption of this update is not expected to have a material impact on our results of operations, financial position or cash flows. ASU No. 2016-02. In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which changes the accounting for leases, including a requirement to record all leases on the consolidated balance sheets as assets and liabilities. This update is effective for fiscal years beginning after December 15, 2018. We will adopt ASU 2016-02 effective January 1, 2019. We are currently evaluating the impact this standard will have on our ongoing financial reporting. ASU No. 2016-09. In March 2016, the FASB issued ASU No. 2016-09, Compensation–Stock Compensation: Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which makes several modifications to GAAP related to share-based payments including the accounting for forfeitures, employee taxes and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The adoption of ASU 2016-09 is not expected to have a material impact on our financial position or cash flows. Upon adoption, on a prospective basis, our income tax expense will be impacted by future excess tax benefits or deficiencies that under previous GAAP were recognized within stockholders’ equity rather than through the statement of income. ASU No. 2016-13. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends GAAP by introducing a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable. The standard is effective for interim and annual reporting periods beginning after December 15, 2019, although it may be adopted one year earlier, and requires a modified retrospective transition approach. We are currently evaluating the impact this standard will have on our ongoing financial reporting. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Useful Lives of Assets | Depreciation and amortization of assets are computed by the straight-line method over the following estimated useful lives of the assets:
A summary of property, plant and equipment as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
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Schedule of Rollforward Goodwill | A rollforward of goodwill for the six months ended June 30, 2016 is as follows (in thousands):
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Amounts Used In Basic and Diluted Earnings (Loss) Per Share | Amounts used in basic and diluted earnings per share, for the three and six months ended June 30, 2016 and 2015, are as follows (in thousands):
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ACQUISITIONS (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Purchase Price Allocation | The following table presents the purchase price allocation for Qualspec (in thousands):
The acquisition-date fair value of the consideration transferred totaled $282.3 million, which consisted of the following (in thousands, except shares):
The following table presents the preliminary purchase price allocation for Furmanite (in thousands):
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Summary of Pro Forma Consolidated Statement of Operations | Our condensed consolidated statements of income (unaudited) include the activity of Furmanite beginning on the acquisition date of February 29, 2016. Pro Forma Information - Furmanite and Qualspec Our unaudited pro forma consolidated results of operations are shown below as if the acquisition of Furmanite and Qualspec had occurred at the beginning of fiscal year 2015. These results are not necessarily indicative of the results which would actually have occurred if the acquisitions had taken place at the beginning of fiscal year 2015, nor are they necessarily indicative of future results (in thousands, except per share data).
These amounts have been calculated after applying Team’s accounting policies and adjusting the results of Furmanite and Qualspec to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on January 1, 2015, together with the related tax effects. Additionally, these pro forma results exclude discontinued operations as well as the impact of costs related to the Furmanite and Qualspec acquisitions included in the historical results. |
RECEIVABLES (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Accounts Receivable | A summary of accounts receivable as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
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INVENTORY (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Inventory | A summary of inventory as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
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PROPERTY, PLANT AND EQUIPMENT (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Property, Plant and Equipment | Depreciation and amortization of assets are computed by the straight-line method over the following estimated useful lives of the assets:
A summary of property, plant and equipment as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
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INTANGIBLE ASSETS (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Intangible Assets | A summary of intangible assets as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
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OTHER ACCRUED LIABILITIES (Tables) |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Other Accrued Liabilities | A summary of other accrued liabilities as of June 30, 2016 and December 31, 2015 is as follows (in thousands):
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LONG-TERM DEBT, DERIVATIVES AND LETTERS OF CREDIT (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amounts Recognized In Other Comprehensive Income, and Reclassified Into Income | The amounts recognized in other comprehensive income (loss), and reclassified into income, for the three and six months ended June 30, 2016 and 2015, are as follows (in thousands):
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Fair Value Totals and Balance Sheet Classification for Derivatives Designated As Hedges | The following table presents the fair value totals and balance sheet classification for derivatives designated as hedges under ASC 815 (in thousands):
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RETIREMENT PLANS (Tables) |
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Periodic Pension Cost | Net periodic pension cost, from the date of the Furmanite acquisition, for the U.K. and Norwegian Plans includes the following components (in thousands):
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FAIR VALUE MEASUREMENTS (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Assets and Liabilities Measured on Recurring Basis | The following table sets forth, by level within the fair value hierarchy, our financial assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2016 and December 31, 2015. As required by ASC 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):
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Summary of Changes in Fair Value of Level 3 Contingent Consideration | The following table represents the changes in the fair value of Level 3 contingent consideration (in thousands):
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SHARE-BASED COMPENSATION (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Transactions Involving Stock Units and Director Stock Grants | Transactions involving our stock units and director stock grants during the six months ended June 30, 2016 and 2015 are summarized below:
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Summary of Transactions Involving Performance Awards | Transactions involving our performance awards during the six months ended June 30, 2016 and 2015 are summarized below:
Transactions involving our performance awards during the six months ended June 30, 2016 and 2015 are summarized below:
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Summary of Transactions Involving Stock Options | Transactions involving our stock options during the six months ended June 30, 2016 and 2015 are summarized below:
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Total Options Outstanding, Range of Exercise Prices and Remaining Contractual Lives | Options exercisable at June 30, 2016 had a weighted-average remaining contractual life of 2.0 years. For total options outstanding at June 30, 2016, the range of exercise prices and remaining contractual lives are as follows:
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ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Changes in Accumulated Other Comprehensive Loss Included Within Shareholders' Equity | A summary of changes in accumulated other comprehensive loss included within shareholders’ equity is as follows (in thousands):
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Related Tax Effects Allocated to Each Component of Other Comprehensive Loss | The following table represents the related tax effects allocated to each component of other comprehensive income (loss) (in thousands):
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ENTITY WIDE DISCLOSURES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Data for our Three Operating Segments | Segment data for our three operating segments are as follows (in thousands):
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Geographic Breakdown of Revenues and Total Assets | A geographic breakdown of our revenues for the three and six months ended June 30, 2016 and 2015 and total assets as of June 30, 2016 and December 31, 2015 are as follows (in thousands):
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DISCONTINUED OPERATIONS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Income from Discontinued Operations, Net of Tax and Assets and Liabilities of Discontinued Operations | Income from discontinued operations, net of income tax, from the date of the Furmanite acquisition, consists of the following (in thousands):
Assets and liabilities of discontinued operations classified as held for sale in the condensed consolidated balance sheet as of June 30, 2016 consist of the following (in thousands):
As discussed in Note 2, the Furmanite purchase price allocation is based on provisional measurements and is subject to change. Accordingly, the amounts of assets and liabilities attributable to discontinued operations may be adjusted upon completion of the final valuation of the acquisition. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES - Schedule of Rollforward Goodwill (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Goodwill [Roll Forward] | |
Balance at beginning of period | $ 256,654 |
Acquisitions | 103,995 |
Foreign currency adjustments | 1,312 |
Balance at end of period | 361,961 |
Team Qualspec | |
Goodwill [Roll Forward] | |
Balance at beginning of period | 207,497 |
Acquisitions | 5,955 |
Foreign currency adjustments | 917 |
Balance at end of period | 214,369 |
Team Furmanite | |
Goodwill [Roll Forward] | |
Balance at beginning of period | 19,874 |
Acquisitions | 93,903 |
Foreign currency adjustments | 159 |
Balance at end of period | 113,936 |
Quest Integrity | |
Goodwill [Roll Forward] | |
Balance at beginning of period | 29,283 |
Acquisitions | 4,137 |
Foreign currency adjustments | 236 |
Balance at end of period | $ 33,656 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES - Amounts Used In Basic and Diluted Earnings Per Share (Details) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Accounting Policies [Abstract] | ||||
Weighted-average number of basic shares outstanding (in shares) | 29,452 | 20,296 | 26,738 | 20,366 |
Stock options, stock units and performance awards (in shares) | 76 | 315 | 70 | 324 |
Conversion of non-controlling interest (in shares) | 0 | 728 | 0 | 728 |
Total shares and dilutive securities (in shares) | 29,528 | 21,339 | 26,808 | 21,418 |
ACQUISITIONS - Consideration Transferred (Details) - Furmanite Corporation $ in Thousands |
Feb. 29, 2016
USD ($)
shares
|
---|---|
Business Acquisition [Line Items] | |
Common stock (8,208,006 shares) | $ 209,529 |
Converted share-based payment awards | 2,001 |
Cash | 70,811 |
Total consideration | $ 282,341 |
Number of common shares issued | shares | 8,208,006 |
ACQUISITIONS - Activity in Acquiree (Details) - Furmanite Corporation $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Business Acquisition [Line Items] | |
Revenue | $ 97.4 |
Net loss | $ 1.6 |
ACQUISITIONS - Summary of Pro Forma Consolidated Results of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Business Acquisition [Line Items] | |||
Revenues | $ 370,616 | $ 631,064 | $ 693,167 |
Income from continuing operations attributable to Team shareholders | $ 14,087 | $ 2,620 | $ 18,300 |
Earnings per share from continuing operations: | |||
Basic (in usd per share) | $ 0.49 | $ 0.09 | $ 0.64 |
Diluted (in usd per share) | $ 0.48 | $ 0.09 | $ 0.62 |
ACQUISITIONS - Quest Integrity (Additional Information) (Details) - Quest Integrity - USD ($) $ in Millions |
Aug. 31, 2015 |
Nov. 30, 2010 |
---|---|---|
Business Acquisition [Line Items] | ||
Business acquisition, percentage acquired | 95.00% | |
Number of restricted common shares issued | 728,266 | |
Business acquisition, cash payment | $ 5.9 |
RECEIVABLES (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Receivables [Abstract] | ||
Trade accounts receivable | $ 214,779 | $ 170,774 |
Unbilled revenues | 73,284 | 47,098 |
Allowance for doubtful accounts | (5,739) | (3,548) |
Total | $ 282,324 | $ 214,324 |
INVENTORY (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 8,163 | $ 3,167 |
Work in progress | 5,037 | 1,018 |
Finished goods | 41,055 | 23,751 |
Total | $ 54,255 | $ 27,936 |
PROPERTY, PLANT AND EQUIPMENT - Additional Information (Details) - Capitalized ERP system development costs $ in Millions |
Jun. 30, 2016
USD ($)
|
---|---|
Property, Plant and Equipment [Line Items] | |
Capitalized project amount | $ 35.2 |
Capitalized interest | $ 0.9 |
INTANGIBLE ASSETS - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 4.1 | $ 0.9 | $ 7.2 | $ 1.9 |
OTHER ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Payables and Accruals [Abstract] | ||
Payroll and other compensation expenses | $ 34,476 | $ 21,878 |
Insurance accruals | 10,102 | 7,008 |
Property, sales and other non-income related taxes | 6,009 | 3,058 |
Deferred revenue | 3,136 | 1,355 |
Acquisition-related costs | 229 | 370 |
Contingent consideration | 5,966 | 3,638 |
Lease commitments | 2,411 | 1,721 |
Accrued commission | 1,854 | 1,159 |
Accrued interest | 591 | 984 |
Volume discount | 626 | 1,280 |
Other | 9,712 | 7,345 |
Total | $ 75,112 | $ 49,796 |
LONG-TERM DEBT, DERIVATIVES AND LETTERS OF CREDIT - Amounts Recognized in Other Comprehensive Income, and Reclassified Into Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized in Other Comprehensive Income (Loss) | $ 310 | $ (302) | $ (243) | $ 1,305 |
Net Investment Hedge | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (Loss) Recognized in Other Comprehensive Income (Loss) | 310 | (302) | (243) | 1,305 |
Gain (Loss) Reclassified from Other Comprehensive Income (Loss) to Earnings | $ 0 | $ 0 | $ 0 | $ 0 |
LONG-TERM DEBT, DERIVATIVES AND LETTERS OF CREDIT - Fair Value Totals and Balance Sheet Classification for Derivatives Designated as Hedges (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Long-term Debt | Designated as Hedging Instrument | Net Investment Hedge | ||
Derivatives, Fair Value [Line Items] | ||
Fair value liability | $ (4,324) | $ (4,567) |
LONG-TERM DEBT, DERIVATIVES AND LETTERS OF CREDIT - Operating leases (Details) $ in Millions |
Feb. 29, 2016
USD ($)
|
---|---|
Furmanite Corporation | |
Other Commitments [Line Items] | |
Operating lease payment obligations assumed in acquisition | $ 33 |
RETIREMENT PLANS - Additional Information (Details) - Foreign Pension Plan $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
plan
| |
Defined Benefit Plan Disclosure [Line Items] | |
Number of pension plans | plan | 2 |
Weighted average of expected returns on asset investment, percentage | 4.90% |
Expected contributions for 2016 | $ | $ 1.3 |
Total contributions to date | $ | $ 0.5 |
Equities | |
Defined Benefit Plan Disclosure [Line Items] | |
Weighted average of expected returns on asset investment, percentage | 6.20% |
Bonds | |
Defined Benefit Plan Disclosure [Line Items] | |
Weighted average of expected returns on asset investment, percentage | 2.20% |
United Kingdom | |
Defined Benefit Plan Disclosure [Line Items] | |
Number of pension plans | plan | 1 |
Norway | |
Defined Benefit Plan Disclosure [Line Items] | |
Subsidiary's percentage of total defined benefit plans | 3.00% |
RETIREMENT PLANS - Net Periodic Pension Cost (Details) - Foreign Pension Plan - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Service cost | $ 22 | $ 0 | $ 29 | $ 0 |
Interest cost | 801 | 0 | 1,068 | 0 |
Expected return on plan assets | (820) | 0 | (1,093) | 0 |
Net periodic pension cost | $ 3 | $ 0 | $ 4 | $ 0 |
FAIR VALUE MEASUREMENTS - Additional Information (Details) - USD ($) |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2016 |
Dec. 31, 2015 |
Jun. 30, 2015 |
|
Fair Value Disclosures [Abstract] | |||
Transfer from Level 1 to Level 2 | $ 0 | $ 0 | |
Transfer from Level 2 to Level 1 | 0 | $ 0 | |
Transfer out of Level 3 measurement | 0 | $ 5,800,000 | |
Transfer in to Level 3 measurement | $ 0 |
FAIR VALUE MEASUREMENTS - Summary of Changes in Fair Value of Level 3 Contingent Consideration (Details) - Contingent Consideration $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Balance, beginning of period | $ 3,638 |
Accretion of liability | 144 |
Revaluation | 2,184 |
Acquisitions | 1,660 |
Balance, end of period | $ 7,626 |
SHARE-BASED COMPENSATION - Summary of Transactions Involving Stock Units and Director Stock Grants (Details) - Stock and Stock Units - $ / shares shares in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
No. of Stock Units | ||
Balance at beginning of period (in shares) | 371 | 328 |
Changes during the period: | ||
Granted (in shares) | 86 | 0 |
Assumed - Furmanite acquisition (in shares) | 40 | 0 |
Vested and settled (in shares) | (34) | (4) |
Cancelled (in shares) | (9) | (22) |
Balance at end of period (in shares) | 454 | 302 |
Weighted Average Fair Value | ||
Balance at beginning of period (in usd per share) | $ 36.26 | $ 36.14 |
Changes during the period: | ||
Granted (in usd per share) | 26.19 | 0.00 |
Assumed - Furmanite acquisition (in usd per share) | 25.63 | 0.00 |
Vested and settled (in usd per share) | 27.87 | 30.73 |
Cancelled (in usd per share) | 27.81 | 35.32 |
Balance at end of period (in usd per share) | $ 34.22 | $ 36.27 |
SHARE-BASED COMPENSATION - Summary of Transactions Involving Stock Options (Details) - $ / shares shares in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
No. of Options | ||
Shares under option, beginning of period | 376 | 691 |
Changes during the period: | ||
Granted (in shares) | 0 | 0 |
Assumed - Furmanite acquisition (in shares) | 132 | 0 |
Exercised (in shares) | (69) | (201) |
Cancelled (in shares) | (4) | 0 |
Expired (in shares) | (4) | 0 |
Shares under option, end of period | 431 | 490 |
Exercisable at end of period (in shares) | 427 | 490 |
Weighted Average Exercise Price | ||
Shares under option, beginning of period (in usd per share) | $ 25.71 | $ 21.26 |
Changes during the period: | ||
Granted (in usd per share) | 0.00 | 0.00 |
Assumed - Furmanite acquisition (in usd per share) | 33.20 | 0.00 |
Exercised (in usd per share) | 15.52 | 12.65 |
Cancelled (in usd per share) | 44.62 | 0.00 |
Expired (in usd per share) | 30.33 | 0.00 |
Shares under option, end of period (in usd per share) | 29.39 | 24.80 |
Exercisable at end of period (in usd per share) | $ 29.30 | $ 24.80 |
ACCUMULATED OTHER COMPREHENSIVE LOSS - Related Tax Effects Allocated to Each Component of Other Comprehensive Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Gross Amount | $ 2,807 | $ (5,594) | ||
Tax Effect | $ (167) | $ (432) | (1,318) | 554 |
Net Amount | 1,489 | (5,040) | ||
Foreign currency translation adjustments | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Gross Amount | 3,050 | (6,899) | ||
Tax Effect | (1,414) | 1,036 | ||
Net Amount | 1,636 | (5,863) | ||
Foreign currency hedge | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Gross Amount | (243) | 1,305 | ||
Tax Effect | 96 | (482) | ||
Net Amount | $ (147) | $ 823 |
COMMITMENTS AND CONTINGENCIES (Details) |
1 Months Ended | ||
---|---|---|---|
Dec. 31, 2014
patent
defendant
|
Jun. 30, 2016
USD ($)
lawsuit
|
Jul. 31, 2007
death
|
|
Quest Integrity | |||
Loss Contingencies [Line Items] | |||
Number of patents allegedly infringed upon | patent | 3 | ||
Number of defendants | 3 | ||
Con Ed Matter | |||
Loss Contingencies [Line Items] | |||
Number of deaths | death | 1 | ||
Number of lawsuits | lawsuit | 92 | ||
Insurance coverage subject to deductible limit | $ | $ 250,000 | ||
Delaware Cases | Quest Integrity | |||
Loss Contingencies [Line Items] | |||
Number of defendants | 2 | ||
Washington Case | Quest Integrity | |||
Loss Contingencies [Line Items] | |||
Number of defendants | 1 |
ENTITY WIDE DISCLOSURES - Additional Information (Details) |
6 Months Ended |
---|---|
Jun. 30, 2016
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 3 |
ENTITY WIDE DISCLOSURES - Geographic Breakdown of Revenues and Total Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Total revenues | $ 336,440 | $ 235,399 | $ 587,294 | $ 427,806 | |
Total assets | 1,223,024 | 1,223,024 | $ 798,991 | ||
United States | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Total revenues | 241,064 | 168,519 | 443,117 | 317,483 | |
Total assets | 995,136 | 995,136 | 682,124 | ||
Canada | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Total revenues | 41,836 | 39,241 | 63,821 | 62,943 | |
Total assets | 61,350 | 61,350 | 59,626 | ||
Europe | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Total revenues | 33,152 | 13,287 | 50,041 | 25,358 | |
Total assets | 115,468 | 115,468 | 33,271 | ||
Other foreign countries | |||||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||||
Total revenues | 20,388 | $ 14,352 | 30,315 | $ 22,022 | |
Total assets | $ 51,070 | $ 51,070 | $ 23,970 |
DISCONTINUED OPERATIONS (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Discontinued Operations and Disposal Groups [Abstract] | |||||
Annual revenues generated by the business | $ 60,000 | ||||
Time until expected disposal of discontinued operations | 1 year | ||||
Revenues | $ 15,906 | $ 21,674 | |||
Operating expenses | 14,686 | 19,961 | |||
Gross margin | 1,220 | 1,713 | |||
Selling, general and administrative expenses | 577 | 858 | |||
Income from discontinued operations, before income tax | 643 | 855 | |||
Less: Provision for income taxes | 257 | 343 | |||
Income from discontinued operations, net of income tax | 386 | $ 0 | 512 | $ 0 | |
Receivables | 14,467 | 14,467 | |||
Prepayments and other assets | 343 | 343 | |||
Total assets of discontinued operations | 14,810 | 14,810 | $ 0 | ||
Other accrued liabilities | $ 2,328 | $ 2,328 |
REPURCHASE OF COMMON STOCK (Details) |
6 Months Ended | ||
---|---|---|---|
Jun. 23, 2014
USD ($)
|
Jun. 30, 2016
USD ($)
shares
|
Jun. 30, 2015
USD ($)
|
|
Equity, Class of Treasury Stock [Line Items] | |||
Stock repurchase program, authorized amount | $ 50,000,000 | ||
Number of shares repurchased | shares | 274,110 | ||
Total cost of shares repurchased | $ 7,593,000 | $ 21,138,000 | |
Remaining stock available to repurchase | $ 7,900,000 | ||
Maximum | |||
Equity, Class of Treasury Stock [Line Items] | |||
Stock repurchases leverage ratio | 2.50 | ||
Minimum | |||
Equity, Class of Treasury Stock [Line Items] | |||
Stock repurchases leverage ratio | 0.25 |
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