Team Inc. (TISI, Financial) filed Quarterly Report for the period ended 2010-08-31.
Team Inc. has a market cap of $357.2 million; its shares were traded at around $18.81 with a P/E ratio of 23.4 and P/S ratio of 0.7. Team Inc. had an annual average earning growth of 17.1% over the past 10 years. GuruFocus rated Team Inc. the business predictability rank of 4-star.TISI is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, Ron Baron of Baron Funds, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Selling, General, and Administrative Expenses. Our SG&A for the three months ended August 31, 2010 was $25.1 million compared to $27.0 million for the three months ended August 31, 2009, a decrease of $1.9 million or 7%. The prior period included $1.1 million of non-routine costs associated with an FCPA investigation. SG&A, excluding investigation costs decreased $0.8 million as a result of cost reduction initiatives started late in the prior year. SG&A, excluding investigation costs, as a percentage of revenue was 24% for the three months ended August 31, 2010 and 26% for the three months ended August 31, 2009.
Taxes. The provision for income taxes was $2.5 million on pretax income of $6.3 million for the three months ended August 31, 2010. The provision for income taxes was $0.7 million on pretax income of $1.9 million for the three months ended August 31, 2009. The effective tax rate for the three months ended August 31, 2010 was 40% compared to 39% for the prior year. The rate differential is due to the mixture of non-deductible expenses in relation to taxable income and the mixture of state and foreign taxes to which the income is subject.
Cashflows Attributable to Our Operating Activities. For the three months ended August 31, 2010, cash provided by operating activities was $18.0 million. Positive operating cash flow was primarily attributable to net income of $3.8 million, depreciation and amortization of $3.1 million, non-cash compensation cost of $1.1 million and a decrease of $10.1 million in working capital.
Cashflows Attributable to Our Financing Activities. For the three months ended August 31, 2010, cash used by financing activities was $11.4 million consisting primarily of $10.1 million of cash used for repayment of debt and a $1.3 million treasury stock repurchase.
At August 31, 2010, our Venezuelan subsidiary had $1.2 million of net assets denominated in Venezuelan Bolivars and translated into U.S. Dollars. Because of the uncertain political environment in Venezuela, starting in the third quarter of fiscal year 2010, we began to account for Venezuelan operations pursuant to accounting guidance for hyperinflationary economies. We initially used the parallel exchange rate for Bolivar denominated bonds (6.70 Bolivars per U.S. Dollar at February 28, 2010) to translate our Venezuelan operations into U.S. dollars. In May 2010, the Venezuelan government ceased to legalize the parallel exchange rate system, precluding its continued use. At the end of our fourth quarter of fiscal year 2010 and still continued at August 31, 2010, we used the Venezuelan central banks official published rate (5.30 Bolivars per U.S. Dollar at August 31, 2010) to translate Venezuelan assets into dollars as no other legal rate was readily available. As a result, we recorded $0.3 million of currency related gains in our fourth quarter of fiscal year 2010. A 10% change in the exchange rate used to value the net assets of our Venezuelan subsidiary would have an effect on pretax earnings of $0.1 million.
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Team Inc. has a market cap of $357.2 million; its shares were traded at around $18.81 with a P/E ratio of 23.4 and P/S ratio of 0.7. Team Inc. had an annual average earning growth of 17.1% over the past 10 years. GuruFocus rated Team Inc. the business predictability rank of 4-star.TISI is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, Ron Baron of Baron Funds, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Gross Margin. Our gross margin for the three months ended August 31, 2010 was $31.5 million compared to $29.4 million for the three months ended August 31, 2009, an increase of $2.1 million or 7%. Gross margin as a percentage of revenue was 30% for the three months ended August 31, 2010 compared to 29% for the three months ended August 31, 2009. Gross margin improvements resulted from the realization of cost savings initiatives implemented in the prior fiscal year and increased utilization and leverage of indirect costs, which more than offset pricing pressures in the current competitive market conditions. Gross margin for our TCM division for the three months ended August 31, 2010 was $17.6 million compared to $16.5 million for the three months ended August 31, 2009, an increase of $1.1 million or 7%. Gross margin as a percentage of revenue for the TCM division was 30% for the three months ended August 31, 2010 period compared to 29% in the three months ended August 31, 2009. Gross margin for our TMS division was $14.0 million for the three months ended August 31, 2010 compared to $13.0 million for the three months ended August 31, 2009, an increase of $1.0 million or 8%. Gross margin as a percentage of revenue for the TMS division was 31% for the three months ended August 31, 2010 and 30% for the three months ended August 31, 2009.Selling, General, and Administrative Expenses. Our SG&A for the three months ended August 31, 2010 was $25.1 million compared to $27.0 million for the three months ended August 31, 2009, a decrease of $1.9 million or 7%. The prior period included $1.1 million of non-routine costs associated with an FCPA investigation. SG&A, excluding investigation costs decreased $0.8 million as a result of cost reduction initiatives started late in the prior year. SG&A, excluding investigation costs, as a percentage of revenue was 24% for the three months ended August 31, 2010 and 26% for the three months ended August 31, 2009.
Taxes. The provision for income taxes was $2.5 million on pretax income of $6.3 million for the three months ended August 31, 2010. The provision for income taxes was $0.7 million on pretax income of $1.9 million for the three months ended August 31, 2009. The effective tax rate for the three months ended August 31, 2010 was 40% compared to 39% for the prior year. The rate differential is due to the mixture of non-deductible expenses in relation to taxable income and the mixture of state and foreign taxes to which the income is subject.
Cashflows Attributable to Our Operating Activities. For the three months ended August 31, 2010, cash provided by operating activities was $18.0 million. Positive operating cash flow was primarily attributable to net income of $3.8 million, depreciation and amortization of $3.1 million, non-cash compensation cost of $1.1 million and a decrease of $10.1 million in working capital.
Cashflows Attributable to Our Financing Activities. For the three months ended August 31, 2010, cash used by financing activities was $11.4 million consisting primarily of $10.1 million of cash used for repayment of debt and a $1.3 million treasury stock repurchase.
At August 31, 2010, our Venezuelan subsidiary had $1.2 million of net assets denominated in Venezuelan Bolivars and translated into U.S. Dollars. Because of the uncertain political environment in Venezuela, starting in the third quarter of fiscal year 2010, we began to account for Venezuelan operations pursuant to accounting guidance for hyperinflationary economies. We initially used the parallel exchange rate for Bolivar denominated bonds (6.70 Bolivars per U.S. Dollar at February 28, 2010) to translate our Venezuelan operations into U.S. dollars. In May 2010, the Venezuelan government ceased to legalize the parallel exchange rate system, precluding its continued use. At the end of our fourth quarter of fiscal year 2010 and still continued at August 31, 2010, we used the Venezuelan central banks official published rate (5.30 Bolivars per U.S. Dollar at August 31, 2010) to translate Venezuelan assets into dollars as no other legal rate was readily available. As a result, we recorded $0.3 million of currency related gains in our fourth quarter of fiscal year 2010. A 10% change in the exchange rate used to value the net assets of our Venezuelan subsidiary would have an effect on pretax earnings of $0.1 million.
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