Team Inc 10-K for FY2024
Team Inc (TISI)
10-K
2025-03-19
For: 2024-12-31
View Original
Added on
April 10, 2026
About this 10-K
Team Inc filed this 10-K on March 19, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $852.27M
- down 1.2% from $862.62M a year earlier
- Net loss
- $38.27M
- compared with a net loss of $75.72M a year earlier
- Diluted EPS
- -$8.64
- compared with -$17.32 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended | |||||
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
| For the transition period from to | |||||
Commission File Number 001-08604
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
(281 ) 331-6154
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | Accelerated Filer | ☐ | |||||||||||||||||
þ | Smaller reporting company | |||||||||||||||||||
| Emerging growth company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No þ
The aggregate market value of the voting stock held by non-affiliates on June 30, 2024 was approximately $20.2 million, determined using the closing price of shares of common stock on the New York Stock Exchange on that date of $8.88.
For purposes for the foregoing calculation only, all directors, executive officers, the Team, Inc. Salary Deferral Plan and Trust and known 10% or greater beneficial owners have been deemed affiliates.
The Registrant had 4,493,391 shares of common stock, par value $0.30, outstanding as of March 17, 2025.
Documents Incorporated by Reference
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Certain items required in Part III of this Annual Report on Form 10-K can be found in our 2025 Proxy Statement and are incorporated herein by reference. A copy of the 2025 Proxy Statement will be provided, without charge, to any person who receives a copy of this Annual Report on Form 10-K and submits a written request to Team, Inc., Attn: Corporate Secretary, 13131 Dairy Ashford, Suite 600, Sugar Land, Texas 77478.
PART I
CAUTIONARY STATEMENT FOR THE PURPOSE OF
SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf in other materials we release to the public including all statements, other than statements of historical facts, included or incorporated by reference in this Annual Report on Form 10-K, that address activities, events or developments which we expect or anticipate will or may occur in the future. You can generally identify our forward-looking statements by the words “anticipate,” “believe,” “expect,” “plan,” “intend,” “estimate,” “project,” “projection,” “predict,” “budget,” “forecast,” “goal,” “guidance,” “target,” “will,” “could,” “should,” “may” and similar expressions.
We based our forward-looking statements on our reasonable beliefs and assumptions, and our current expectations, estimates and projections about ourselves and our industry. We caution that these statements are not guarantees of future performance and involve risks, uncertainties and assumptions about events and circumstances that we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. New risk factors emerge from time to time, and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Accordingly, forward-looking statements cannot be relied upon as a guarantee of future results and involve a number of risks and uncertainties that could cause actual results to differ materially from those projected in the statements, including, but not limited to the statements under “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this report. Such risks, uncertainties and other important factors include, among others, risks related to:
•our ability to generate sufficient cash from operations, access our credit facilities or amounts available under our term loans to support our operations, or maintain our compliance with covenants under our debt arrangements;
•our ability to manage inflationary pressures in our operating costs;
•negative market conditions, including domestic and global inflationary pressures, impact of tariffs, future economic uncertainties, and impacts from epidemics and pandemics, particularly in industries in which we are heavily dependent;
•delays in the commencement of major projects;
•seasonal and other variations, such as severe weather conditions (including conditions influenced by climate change) and the nature of our customers’ industry;
•our ability to expand into new markets (including low carbon energy transition) and attract customers in new industries may be limited due to our competition’s breadth of service offerings and intellectual property;
•our significant debt and high leverage which could have a negative impact on our financing options, liquidity position and ability to manage increases in interest rates;
•our ability to access capital and liquidity provided by the financial and capital markets;
•the timing of new customer contracts and termination of existing contracts may result in unpredictable fluctuations in our cash flows and financial results;
•risk of non-payment and/or delays in payment of receivables from our customers;
•our ability to maintain compliance with the New York Stock Exchange’s (“NYSE”) continued listing requirements and rules, and the risk that the NYSE may delist our common stock, which could negatively affect our company, the price of our common stock and our shareholders’ ability to sell our common stock in the event we are unable to list our common stock on another exchange;
•our financial forecasts being based upon estimates and assumptions that may materially differ from actual results;
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•our incurrence of liabilities and suffering of negative financial or reputational impacts relating to occupational health and safety matters;
•our ability to continue as a going concern;
•changes in laws or regulations in the local jurisdictions that we conduct our business;
•the inherently uncertain outcome of current and future litigation; and
•acts of terrorism, war or political or civil unrest in the United States or elsewhere, changes in laws and regulations, or the imposition of economic or trade sanctions affecting international commercial transactions.
ITEM 1. BUSINESS
General Development of Business
Introduction. Unless otherwise indicated, the terms “Team,” “the Company,” “we,” “our” and “us” are used in this report to refer to either Team, Inc., to one or more of our consolidated subsidiaries, or to all of them taken as a whole. Our stock is traded on the NYSE under the symbol “TISI”.
We are a global, leading provider of specialty industrial services offering customers access to a full suite of conventional, specialized, and proprietary mechanical, heat-treating, and inspection services. We deploy conventional to highly specialized inspection, condition assessment, maintenance and repair services that result in greater safety, reliability and operational efficiency for our customers’ most critical assets. We conduct operations in two segments: Inspection and Heat Treating (“IHT”) and Mechanical Services (“MS”). Through the capabilities and resources in these two segments, we believe that we are uniquely qualified to provide integrated solutions involving: inspection to assess condition; engineering assessment to determine fitness for purpose in the context of industry standards and regulatory codes; and mechanical services to repair, rerate or replace based upon the customer’s election. In addition, we are capable of escalating with the customer’s needs, as dictated by the severity of the damage found and the related operating conditions, from standard services to some of the most advanced services and integrated asset integrity and reliability management solutions available in the industry. We also believe that we are unique in our ability to provide these services in three distinct customer demand profiles: (i) turnaround or project services, (ii) call-out services, and (iii) nested or run-and-maintain services.
IHT provides conventional and advanced non-destructive testing services primarily for the process, pipeline and power sectors, pipeline integrity management services, and field heat treating services, as well as associated engineering and condition assessment services. These services can be offered while facilities are running (onstream), during facility turnarounds or during new construction or expansion activities. In addition, IHT provides comprehensive non-destructive testing services and metallurgical and chemical processing services to the aerospace and other industries covering a range of components including finished machined and in-service components. IHT also provides advanced digital imaging including remote digital video imaging.
MS provides solutions designed to serve customers’ unique needs during both the operational (onstream) and off-line states of their assets. Our onstream services include our range of standard to custom-engineered leak repair and composite solutions; emissions control and compliance; hot tapping and line stopping; and online valve insertion solutions, which are delivered while assets are in an operational condition, which maximizes customer production time. Asset shutdowns can be planned, such as a turnaround maintenance event, or unplanned, such as those due to component failure or equipment breakdowns. Our specialty maintenance, turnaround and outage services are designed to minimize customer downtime and are primarily delivered while assets are off-line, often through the use of cross-certified technicians, whose multi-craft capabilities deliver the production needed to achieve tight time schedules. These critical services include on-site field machining; bolted-joint integrity; vapor barrier plug testing; and valve management solutions.
We market our services to companies in a diverse array of heavy industries which include:
•Energy (refining, power, renewables, nuclear, offshore oil and gas, and liquefied natural gas);
•Manufacturing and Process (chemical, petrochemical, pulp and paper industries, automotive and mining);
•Midstream (valves, terminals and storage, and pipeline);
•Infrastructure (construction and building, roads, dams, amusement parks, bridges, ports, and railways); and
•Aerospace and Defense.
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Description of Business
Inspection and Heat Treating Segment:
IHT offers standard to specialty inspection services as well as heat treating services and digital imaging services. Heat treating services are generally associated with turnaround, project and new construction activities. Core IHT services are as follows:
•Non-Destructive Evaluation and Testing Services.
•Radiographic Testing.
•Ultrasonic Testing.
•Magnetic Particle Inspection.
•Liquid Penetrant Inspection.
•Positive Material Identification.
•Electromagnetic Testing.
•Alternating Current Field Measurement.
•Eddy Current Testing.
•Long-Range Guided Ultrasonics.
•Phased Array Ultrasonic Testing.
•Terminals and Storage Inspection and Management Programs.
•Rope Access.
•Mechanical Integrity Services.
•Pipeline Integrity Services.
•Heat Treating Services.
Mechanical Services Segment:
MS provides onstream services engineered to keep customer assets on-line and producing, and specialty maintenance, turnaround and outage services, which are performed while assets are off-line, and are designed to reduce customer downtime. Core MS services listed below are delivered in on-call, project-managed, and full-time nested capacities.
•Leak Repair Services.
•Engineered Composite Repair.
•Emissions Control/Compliance Services.
•Hot Tapping Services.
•Valve Insertion Services.
•Field Machining Services.
•Bolted Joint Integrity Services.
•Vapor Barrier Plug and Weld Testing Services.
•Valve Management Solutions.
Marketing, Customers and Competition
Our industrial services are marketed principally by personnel based at our service locations. We believe that these service locations are situated to facilitate timely responses to customer needs with on-call expertise, which is an important feature of selling and providing our services. The capacity and capability scope of our discrete and integrated services also allows us to benefit from the procurement trends of many of our customers who are seeking to reduce the number of contractors and vendors
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in their facilities, as well as to outsource more of such services. No single customer accounted for 10% or more of consolidated revenues during the years ended December 31, 2024 and 2023, respectively.
Generally, customers are billed on a time and materials basis, although some work may be performed pursuant to a fixed-price bid. Services are usually performed pursuant to purchase orders issued under written customer agreements. While most purchase orders provide for the performance of a single job, some provide for services to be performed on a run-and-maintain basis. Substantially all our agreements and contracts may be terminated by either party on short notice. The agreements generally specify the range of services to be performed and the hourly rates for labor and equipment. While many contracts cover specific plants or locations, we also enter into multiple-site regional or national contracts which cover multiple plants or locations.
In general, competition stems from a large number of other outside service contractors. More than 100 different competitors are currently active in our markets. We believe we have a competitive advantage over most service contractors due to the quality, training and experience of our technicians, our rigorous safety training and procedures, our North America and international service capability, the breadth and depth of our services, our ability to provide such services on an integrated, more turnkey basis, and our technical engineered support coupled with our manufacturing capabilities supporting the service network.
Seasonality
We experience some seasonal fluctuations. Historically, the refining industry has scheduled plant shutdowns (commonly referred to as “turnarounds”) for the fall and spring seasons. The power industry follows a similar seasonal schedule for their plant maintenance. The timing of large turnarounds or outages can significantly impact our revenues. The pipeline industry follows and depends in part on weather conditions where the ability to access pipeline infrastructure for or after inspections may be impeded by more severe cold weather conditions.
Compliance with Government Regulations
A significant portion of our business activities are subject to foreign, federal, state and local laws and regulations. These regulations are administered by various foreign, federal, state and local health and safety and environmental agencies and authorities, including Occupational Safety and Health Administration (“OSHA”) of the U.S. Department of Labor and the U.S. Environmental Protection Agency (the “EPA”). Failure to comply with these laws and regulations may involve civil and criminal liability. From time to time, we are also subject to a wide range of reporting requirements, certifications and compliance as prescribed by various federal and state governmental agencies that include, but are not limited to, the EPA, the Nuclear Regulatory Commission, OSHA, the Department of Transportation and the Federal Aviation Administration. Also, many states where we operate regulate health, safety and environmental activities, such as California OSHA and the Texas Commission on Environmental Quality. Expenditures relating to such regulations are made in the normal course of our business and are neither material nor place us at any competitive disadvantage. We do not currently expect that compliance with such laws and regulations will require us to make material expenditures.
From time to time, during the operation of our environmental consulting and engineering services, the assets of which were sold in 1996, we handled small quantities of certain hazardous wastes or other substances generated by our customers. Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (the “Superfund Act”), the EPA is authorized to take administrative and judicial action to either cause parties who are responsible under the Superfund Act for cleaning up any unauthorized release of hazardous substances to do so, or to clean up such hazardous substances and to seek reimbursement of the costs thereof from the responsible parties, who are jointly and severally liable for such costs under the Superfund Act. The EPA may also bring suit for treble damages from responsible parties who unreasonably refuse to voluntarily participate in such a clean-up or funding thereof. Similarly, private parties who bear the costs of cleanup may seek to recover all or part of their costs from responsible parties in cost recovery or contribution actions. Responsible parties include anyone who owns or operates the facility where the release occurred (either currently and/or at the time such hazardous substances were disposed of), or who by contract arranges for disposal, treatment, transportation for disposal or treatment of a hazardous substance, or who accepts hazardous substances for transport to disposal or treatment facilities selected by such person from which there is a release. We believe that our risk of liability is minimal since our environmental consulting and engineering services consisted solely of maintaining and storing small samples of materials for laboratory analysis that are classified as hazardous. Due to its prohibitive costs, we accordingly do not currently carry insurance to cover any potential liabilities under the Superfund Act or similar environmental statutes.
Human Capital
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Due to the seasonal nature of our business, our employee headcount varies during the year. During 2024, we averaged approximately 5,400 employees, with approximately 4,100 employed in the United States and 1,300 internationally. Human capital management, combined with our core values and talent management initiatives, is a key driver of our employee retention program. We invest in our talent by providing our employees with targeted training, mentoring and career development opportunities, all of which enable us to hire and retain skilled, high-performing employees. We work to prioritize our safety-first culture and our diversity and inclusion initiatives, and we seek to retain employees through our employee engagement efforts and our competitive compensation and benefits packages.
Business ethics and core values
Our core values anchor every aspect of our business in a set of commonly held beliefs and commitments. They represent what we stand for, the values our employees embody, what our customers can expect in the delivery of our services and what our services and products contribute to the market. These statements are deeply ingrained in our culture, guiding employee behavior and our decisions and actions.
•Safety First/Quality Always – In everything we do;
•Integrity – Uncompromising standards of integrity and ethical conduct;
•Service Leadership – Leading service quality, professionalism and responsiveness;
•Innovation – Supporting continuous growth and improvement;
•Pride and Respect – For our customers, for each other and for all of our stakeholders; and
•Teamwork – Global teamwork and collaboration.
Diversity and inclusion
We believe that a diverse, inclusive and engaged workforce is critical to our success, and we work hard to create an environment where our employees feel valued, engaged and inspired to do their best work. We are proud that a diverse group of people from a variety of backgrounds, religions, nationalities, gender identity, sexual orientations and races make up our team. It continues to be our goal to create an inclusive environment and eliminate bias wherever it exists through strategic employee-engaged initiatives.
We are an Equal Employment Opportunity employer and it is our policy to provide equal employment opportunities to all qualified persons. We seek to attract and retain a diverse workforce, in particular for our technician population, which comprises more than 77% of our overall global workforce.
| Corporate Leadership | General & Administrative | Global Workforce1 | |||||||||||||||
| Female | 13% | 56% | 11% | ||||||||||||||
| Male | 87% | 44% | 89% | ||||||||||||||
_________________
1 Global workforce includes technicians.
As part of our university recruiting efforts, we have developed diversity focused strategies through collaboration with the career centers at the universities where we recruit. We seek to recruit the most qualified candidates, including by recruiting from a broad range of places.
Health, safety and training
We have “12 Life Saving Rules” across our organization to further enhance our safety focused culture. The 12 Life Saving Rules (the “LSRs”) are clear and simple rules designed to address those activities that potentially place Team employees at risk. The LSRs include six behaviors that are always enforced and six behaviors that are never allowed. All Team employees complete online training covering all of the LSRs and expectations and must acknowledge that they have read them. The rules are posted internally, communicated throughout our organization through safety bulletins, and are printed in multiple languages. In 2022 Team established our Hand Safety Rules. The intent of the Hand Safety Rules is to define the specific high hazard tasks where the potential for hand injuries is most common. The Hand Safety Rules focus on types of hand hazards, hand placement, equipment guarding, and when to stop the job and reassess potential hazards.
We have several online training and distance learning classes as part of our curriculum to help meet the needs of a rapidly changing workplace environment. These are administered and tracked globally though our Learning Management System. In addition, Team Stress and Anxiety Management Program (“STAMP”) provides several tools and resources to help employees effectively manage stress and prevent depression and other mental illnesses. STAMP provides informative live sessions
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covering various mental health topics such as mindfulness, post-traumatic stress disorder (PTSD) and resiliency. We coordinate this program with our Employee Assistance Program that offers mental health and depression benefits for our employees and their families. STAMP has received much praise and support from our employees, their families and our customers.
We recognize the importance of providing training to continually support career growth and development. Our talent management programs are designed to empower and inspire our team members to personalize their career journeys by building critical job skills, gaining hands-on experience, providing ongoing access to world class training, assigning relevant career mentors and paving the way toward career paths that provide long-term advancement within our organization.
We have incorporated more flexibility in our work environment by offering eligible employees the ability to work remotely or on-site, and by offering flexible working schedules. We expect to continue offering such flexibility to eligible employees moving forward.
Employee engagement
Periodically, our employees participate in engagement surveys, which provide us with valuable insight as we seek to improve our overall employee engagement and satisfaction. Acting upon employee feedback generated from our surveys, we review our regional health benefits, communication strategy and training efforts on an ongoing basis. We believe the significant response rates to our surveys are indicative of the intensity of our employee’s connection to our organization, marked by a committed effort to achieve goals in environments that support productivity and maintain personal well-being. In 2023, we celebrated Team’s 50th anniversary. We held employee celebrations across the globe, commemorated the milestone with a signature gift for all employees and presented a 50th anniversary video showcasing our employees and highlighting some of Team’s most significant accomplishments over the years. Additionally in 2024, we continued our focus on regular communications with our employees, which included global town hall meetings and the monthly CEO Connection newsletters.
Wages and benefits
Across the globe, we strive to provide our employees with competitive wages, salaries and benefits based upon employee skills, experience and job levels. Additionally, we provide employees with a comprehensive set of benefits, including health and welfare benefits, wellness benefits, employee assistance plans, defined contribution and defined benefit retirement benefits (United Kingdom employees only), paid time off, educational support and a variety of other ancillary employee benefits.
Environmental, social and governance
General ESG approach
We strive to promote and support business practices that are environmentally sustainable, socially conscious, and aligned with strong corporate governance practices. We are committed to conducting our business in a manner that protects the environment and the health and safety of our employees, our customers, our suppliers and contractors and the general public. We provide training to support career growth opportunities for our diverse team of employees and actively contribute to the local communities in which we operate. We strive to be an industry leader in the fields of health, safety and environmental management and work with government organizations and industry organizations in support of laws, regulations, standards and other programs that safeguard the workplace and our environment. To meet this commitment, we maintain management systems designed to ensure compliance with all applicable laws, regulations and internal requirements, as well as to facilitate the continuous improvement of our processes, products, and personnel.
Many of our services, including our inspection, emissions monitoring and leak repair services, are crucial in assisting our customers to identify, assess and reduce their carbon and greenhouse gas emissions. We provide inspection, condition assessment, maintenance and repair services and support our customers’ diversification efforts into sources of renewable energy. We work closely with our customers across the world to assist them in meeting their environmental sustainability goals.
We sponsor and support numerous charitable organizations and encourage our employees to donate their time and financial support to serving the needs of their communities. These contributions help to support the work of nonprofit organizations of all sizes, working in areas such as disability services and support, disaster response, and hunger prevention around the globe.
Our Company management is responsible for the day-to-day operation of ESG matters. Our General Counsel & Secretary, who reports directly to our CEO, has general oversight responsibility with respect to matters of sustainability and social responsibility and is the executive sponsor of our ESG Council. Under its charter, the ESG Council, which is a management committee formed to assist our General Counsel & Secretary in oversight responsibilities, is responsible for recommending our ESG objectives, monitoring the implementation and performance of our ESG objectives, overseeing the progress made against our social and environmental goals and reporting on our ESG performance. At the Board level, our Corporate Governance and Nominating Committee has responsibility for maintaining oversight over Team’s corporate governance principles and corporate social responsibility and sustainability matters, including our public reporting on corporate
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social responsibility and sustainability. The Corporate Governance and Nominating Committee receives regular updates from our ESG Council regarding the considerations and actions taken by us with respect to ESG.
APSC Board Rights
On November 1, 2022, we entered into the Board Rights Agreement (the “APSC Board Rights Agreement”) with Atlantic Park Strategic Capital Fund, L.P. (“APSC”), pursuant to which APSC, acting as investor representative on behalf of itself and its affiliates (together with APSC, the “APSC Investors”) that beneficially own our common stock (inclusive of the APSC Warrants), may, subject to common stock ownership thresholds and other terms provided in the APSC Board Rights Agreement, designate an individual to serve as a non-voting observer at all meetings of our Board of Directors (the “Board”) and nominate an individual designated by APSC to serve on the Board (the “APSC Investor Director”). The right to nominate the APSC Investor Director is subject to certain qualification requirements and the discretion of our Corporate Governance and Nominating Committee under limited circumstances. The APSC Investors’ rights under the APSC Board Rights Agreement are a continuation of existing rights under a prior term loan credit agreement dated December 18, 2020 and a prior commitment letter dated as of November 9, 2021 (the “2021 Commitment Letter”) by and among us, APSC and Corre Partners Management, LLC (“Corre”).
In the event of the resignation, death or removal (for cause or otherwise) of the APSC Investor Director from the Board, APSC, acting on behalf of the APSC Investors, will have the right, but not the obligation, to designate a successor APSC Investor Director to the Board to fill the resulting vacancy on the Board (and any applicable committee thereof), subject to certain qualification requirements specified in the APSC Board Rights Agreement.
Corre Board Rights
Corre was previously granted certain board nomination and observer rights pursuant to the 2021 Commitment Letter and a prior credit agreement dated November 9, 2021. On June 16, 2023, in connection with, and effective upon, the consummation of the transactions contemplated by the A&R Term Loan Credit Agreement and ABL Amendment No. 3 (as defined below), we, Corre and the other parties thereto, entered into a new Board Rights Agreement (the “Corre Board Rights Agreement”), pursuant to which Corre, acting on behalf of itself and its affiliates (together with Corre, the “Corre Investors”) that beneficially own our common stock (inclusive of the Corre Warrants), may, subject to common stock ownership thresholds and/or indebtedness and commitment thresholds and other terms provided in the Corre Board Rights Agreement, designate an individual to serve as a non-voting observer at all meetings of the Board, nominate one individual to serve as Chairman of the Board (the “Chairperson”), and nominate two additional individuals to serve on the Board (such individuals, together with the Chairperson, the “Corre Investor Directors”). The right to nominate the Corre Investor Directors is subject to certain qualification requirements and the discretion of our Corporate Governance and Nominating Committee under limited circumstances.
In the event of the resignation, death or removal (for cause or otherwise) of the Corre Investor Directors from the Board, Corre, acting on behalf of the Corre Investors, will have the right, but not the obligation, to designate a successor Corre Investor Director, as applicable, to the Board to fill the resulting vacancy on the Board (and any applicable committee thereof), subject to certain qualification requirements specified in the Corre Board Rights Agreement.
Available Information
Our internet website address is www.teaminc.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments and exhibits to these reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available on our website, free of charge, as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. Alternatively, you may access these reports at the SEC’s website at http://www.sec.gov. We post our code of ethical conduct, our governance principles, our social responsibility policy and the charters of our Board committees on our website. Our governance documents are available in print to any shareholder that submits a written request to Team, Inc., Attn: Corporate Secretary, 13131 Dairy Ashford, Suite 600, Sugar Land, Texas 77478. Information contained on our website is not part of this Annual Report on Form 10-K.
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ITEM 1A. RISK FACTORS
Our business, financial condition, results of operations, cash flows and/or stock price could be materially adversely affected by any of the risks and uncertainties described below, individually or in combination. Such risk factors and uncertainties could also affect whether any forward-looking statements in this Annual Report on Form 10-K ultimately prove to be accurate.
Risks Related to Financing Our Business
We are subject to risks associated with indebtedness under our credit facilities, including the risk of failure to maintain compliance with financial covenants, the risk of being unable to make interest and principal payments when due and the risk of rising interest rates. Additionally, our significant debt and high leverage could have a negative impact on our financing options and liquidity position. We have a significant amount of debt as discussed below, and our overall leverage and the terms of our financing arrangements could:
•limit our ability to obtain additional financing in the future for working capital, capital expenditures, to fund growth or for general corporate purposes;
•make it more difficult for us to satisfy the terms of our debt obligations;
•make it more difficult for us to manage increases in interest rates;
•limit our ability to refinance our existing debt on terms acceptable to us, or at all;
•require us to dedicate a substantial portion of our cash flow from operations to make interest and principal payments on our debt, thereby limiting the availability of our cash flow to fund future investments, capital expenditures, working capital, business activities and other general corporate requirements; and
•create a competitive disadvantage by reducing our flexibility in responding to increased competition from competitors who hold a lower level on indebtedness.
Our ability to meet expenses and debt service obligations will depend on our future performance, which will be affected by financial, business, economic and other factors. If we do not generate enough cash to pay our debt service obligations, we may be required to refinance all or part of our debt, sell assets, borrow more money or raise additional equity capital.
Disclosure of our debt instruments appears under Note 11 – Debt of the consolidated financial statements.
Our ability to maintain compliance with the financial covenants pursuant to the debt instruments we are party to is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties. Additionally, these risks and uncertainties may, among other factors, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all, and affect our future need or ability to borrow under our credit agreements. In addition to our current sources of funding our business, the effects of such events may impact our liquidity or our need to revise our allocation or sources of capital, implement further cost reduction measures and/or change our business strategy.
We rely primarily on cash flows from our operations to make required interest and principal payments on our debt. If we are unable to generate sufficient cash flows from our operations, we may be unable to pay interest and principal obligations on our debt when they become due. Failure to comply with these obligations or failure to comply with the financial covenants discussed above could result in an event of default, which would permit our lenders to accelerate the repayment of the debt. If our lenders accelerate the repayment of debt, there is no assurance that we could refinance such debt on terms favorable to us or at all.
Our largest shareholder (Corre and certain of its affiliates) owns a meaningful percentage of our outstanding equity securities, which could limit the ability of other shareholders to influence corporate matters. As of March 17, 2025, Corre and certain of its affiliates beneficially owned approximately 41.2% of the total voting power held by shareholders of our outstanding common stock (including common stock issued pursuant to the common stock subscription agreement with certain Corre holders and shares issuable upon exercise, subject to beneficial ownership limitation, of certain Warrants, as defined below, held by our largest shareholder in each case). As a result, this shareholder may be able to exert influence over our management, business plans and policies, as well as matters submitted to our stockholders for approval, such as the selection of directors and amendments of our organizational documents. This concentrated ownership could limit the ability of the remaining shareholders to influence corporate matters, and the interests of the large shareholder may not coincide with our interests or the interests of the remaining shareholders.
Risks Related to Our Operations
If we are not able to implement commercially competitive services in a timely manner in response to changes in the market, customer requirements, competitive pressures and technology trends, our business and results of operations could be materially and adversely affected. Competition can place downward pressure on our prices and profitability. Our share of the market for our services is characterized by continual technological developments to provide better and more cost-effective services. If we are not able to implement commercially competitive services and products in a timely manner in response to
changes in the market, customer requirements, competitive pressures, inflationary pressures and technology trends, our business and results of operations could be materially and adversely affected. Likewise, if our proprietary technologies, equipment, facilities, or work processes become obsolete, we may no longer be competitive, and our business and results of operations could be materially and adversely affected.
No assurances can be made that we will be successful in hiring or retaining members of a skilled technical workforce. We have a skilled technical workforce and an industry recognized technician training program for each of our service lines that prepares new employees as well as further trains our existing employees. The competition for these individuals is intense. The failure to retain these individuals, or failure to attract new employees, could adversely affect our ability to perform our obligations on our customers’ projects or maintenance and consequently could negatively impact our ability to meet the demand for our products and services.
Unsatisfactory quality of service execution, including safety performance, can affect customer relationships, eliminate or reduce revenue streams from our largest customers, result in higher operating costs and negatively impact our ability to hire and retain a skilled technical workforce. The services we provide could incur quality of execution issues that may be caused by our workforce personnel and/or components we manufacture or purchase from other manufacturers or suppliers. If the quality of our services does not meet our customers’ expectations or satisfaction, then our sales and operating earnings, and, ultimately, our reputation, could be negatively impacted. Additionally, our workers are subject to the normal hazards associated with providing services at industrial facilities. Even with proper safety precautions, these hazards can lead to personal injury, loss of life, destruction of property, plant and equipment, lower employee morale and environmental damage. While we are intensely focused on maintaining a strong safety environment and minimizing the risk of accidents, there can be no assurance that these efforts will be effective. Poor safety performance may limit or eliminate potential revenue streams, including from many of our largest customers, and may materially increase our operating costs, including increasing our required insurance deductibles, self-insured retention and insurance premium costs.
Our business depends upon the maintenance of our proprietary technologies and information. We depend on our proprietary technologies and information, many of which are no longer subject to patent protection. We regularly enter into confidentiality agreements with our key employees, customers, potential customers and other third parties and limit access to and distribution of our trade secrets and other proprietary information. However, these measures may not be adequate to prevent misappropriation of our technologies or to ensure that our competitors will not independently develop technologies that are substantially equivalent or superior to our technologies. In addition, because we operate worldwide, the laws of other countries in which we operate may not protect our proprietary rights to the same extent as the laws of the United States. We are also subject to the risk of adverse claims and litigation alleging infringement of intellectual property rights.
No assurances can be made that we will be successful in maintaining or renewing our contracts with our customers. A significant portion of our contracts and agreements with customers may be terminated by either party on short notice. Although we actively pursue the renewal of our contracts, we cannot assure that we will be able to renew these contracts or that the terms of the renewed contracts will be as favorable as the existing contracts. If we are unable to renew or replace these contracts, or if we renew on less favorable terms, we may suffer a material reduction in revenue and earnings.
The loss or unavailability of any of our executive officers or other key personnel could have a material adverse effect on our business. We depend greatly on the efforts of our executive officers and other key employees to manage and exercise leadership over our operations. The loss or unavailability of any of our executive officers or other key employees could have a material adverse effect on our business operations.
Additional impairments of our intangible and other long-lived assets, and changes in the estimated useful lives of intangible assets could have a material adverse impact on our results of operations and financial condition. Our long-lived assets, including our finite-lived intangible assets, are tested for impairment when circumstances indicate that the carrying amount may not be recoverable. A decrease in our market capitalization or profitability or unfavorable changes in market, economic and industry conditions would increase the risk of impairment.
GAAP requires that we evaluate the useful lives of our intangible assets subject to amortization each reporting period. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life. To the extent the revised useful life of an intangible asset is less than originally estimated, our future amortization expense will increase, which could have a material impact on our results of operations and financial condition.
Improvements in operating results from expected savings in operating costs from workforce reductions and other cost saving and business improvement initiatives may not be realized, may take longer to be realized, or could be realized only for a limited period. Since January 2021, we have implemented a new strategic organizational structure and reduced our operating costs through headcount reductions and other steps to better position ourselves to deliver improved margins and cash flow from operations and to continue service diversification and enhance customer value. These organizational changes resulted in restructuring charges and other cost-saving opportunities. However, to implement this or any other future cost savings or
business improvement initiatives, we expect to incur additional expenses, which could adversely impact our financial results prior to the realization of the expected benefits associated with the initiatives. Due to numerous factors or future developments, we may not achieve cost reductions or other business improvements consistent with our expectations or the benefits may be delayed. These factors or future developments could include (i) the incurrence of higher than expected costs or delays in reassigning and retraining remaining employees or outsourcing or eliminating duties and functions of eliminated employees, (ii) unanticipated delays in discharging employees in eliminated positions as a result of regulatory or legal limitations on employee terminations in certain jurisdictions, (iii) actual savings differing from anticipated cost savings, (iv) anticipated benefits from business improvement initiatives not materializing and (v) disruptions to normal operations or other unintended adverse impacts resulting from the initiatives, including negatively impacting our ability to grow our business.
We may also decide to reduce, suspend or terminate our cost-saving and business improvement initiatives at any time before achieving the estimated benefits or after a limited period of time. The elimination of current employees can also result in increased future costs in hiring, training and mobilizing new employees or rehires in the event of a future increase in demand for our services, resulting in a slower recovery of results from operations. Our initiatives may negatively affect our ability to retain and attract qualified personnel, who may experience uncertainty about their future roles with us.
Economic, political and other risks associated with international operations could adversely affect our business. A portion of our operations are conducted and located outside the U.S., and accordingly, our business is subject to risks associated with doing business internationally, including changes in foreign currency exchange rates, instability in political or economic conditions, difficulty in repatriating cash proceeds, differing employee relations, differing regulatory environments, trade protection measures, and difficulty in administering and enforcing corporate policies which may be different than the normal business practices of local cultures. Further, the presence of our offices and operations throughout the world creates greater financial and operational risks due to the nature of our operations being conducted at various locations. Our international business operations may include projects in countries where corruption is prevalent. Although we have implemented and continue to enforce policies and procedures designed to ensure compliance with the U.S. Foreign Corrupt Practices Act and the United Kingdom Bribery Act, as well as internal controls, policies and procedures, and employee training and compliance programs to deter prohibited practices more generally, there can be no assurance that all of our employees, contractors or agents, including those representing us in countries where practices which violate such anti-corruption laws may be customary, will not take actions in violation of, or circumventing, our policies and procedures. Any violation of foreign or U.S. laws by our employees, contractors or agents, even if such violation is prohibited by our policies and procedures, could have a material adverse effect on our results of operations, financial position or cash flows.
Business acquisitions and divestitures entail risk for investors. From time to time, we seek growth through strategic acquisitions while also evaluating our portfolio for potential divestitures in specialty maintenance and specialty industrial services, including inspection, engineering assessment and mechanical services to complement, diversify or rationalize our existing business. We may also acquire other businesses that enhance our services or geographic scope and/or divest certain businesses or service offerings to rationalize our operations and take advantage of strategic opportunities. We may not be able to expand our market presence through acquisitions, and acquisitions may present unforeseen integration difficulties or costs. No assurances can be made that we will realize the cost savings, synergies or revenue enhancements that we may anticipate from any acquisition or divestiture, or that we will realize such benefits within the time frame that we expect. If we are not able to address the challenges associated with acquisitions and successfully integrate acquired businesses, or if our integrated product and service offerings fail to achieve market acceptance, or if we are not able to successfully separate divested operations, our business could be adversely affected. The transactions may also affect our share price or future financial results depending on the structure of such considerations. To the extent we issue stock or other rights to purchase stock, including options or other rights, existing shareholders may be diluted and earnings per share may decrease. In addition, acquisitions may result in the incurrence of additional debt of the acquired businesses, or we may incur additional debt to finance such acquisitions.
The price of our outstanding securities may be volatile. It is possible that in some future quarter (or quarters) our revenues, operating results or other measures of financial performance will not meet the expectations of investors, which could cause the price of our outstanding securities to decline or be volatile. Historically, our quarterly and annual sales and operating results have fluctuated. We expect fluctuations to continue in the future. In addition to general economic and political conditions, and in addition to the other factors identified under this Item 1A “Risk Factors”, the following factors may affect our sales and operating results: the timing of significant customer orders, the timing of planned maintenance projects at customer facilities, changes in competitive pricing, wide variations in profitability by product line, variations in operating expenses, rapid increases in raw material and labor costs, the timing of announcements or introductions of new products or services by us, our competitors or our respective customers, the acceptance of those services, our ability to adequately meet staffing requirements with qualified personnel, relative variations in manufacturing efficiencies and costs, and the relative strength or weakness of international markets. Since our quarterly and annual revenues and operating results vary, we believe that period-to-period comparisons are not necessarily meaningful and should not be relied upon as indicators of our future performance.
Our business may be adversely impacted by work stoppages, staffing shortages and other labor matters. Although we believe that our relations with our employees are good and we have had no strikes or work stoppages, no assurances can be made that we will not experience these and other types of conflicts with labor unions, works councils, other groups representing employees, or our employees in general, or that any future negotiations with our labor unions will not result in significant increases in the cost of labor.
We extend credit to customers for purchases of our services which subjects us to potential credit risk that could, if realized, adversely affect our financial condition, results of operations and cash flows. If we are unable to collect amounts owed to us, or retain amounts paid to us, our cash flows would be reduced and we could experience losses. We would also recognize losses with respect to any receivables that are impaired as a result of our customers’ financial difficulties or bankruptcies. The risk of loss may increase for capital projects where we provide services over a longer period of time. Credit losses could materially and adversely affect our financial condition, results of operations and cash flows.
We may experience inflationary pressures in our operating costs and cost overruns on our projects. A small portion of our customers are serviced under fixed price contracts or contracts including a combination of fixed and variable elements, where we bear a portion of the risk for cost overruns. Under such contracts, prices are established in part on cost and scheduling estimates, which are based on a number of assumptions, including assumptions about future economic conditions, prices and availability of subcontractors, materials and other exigencies of our services. Our profitability for these contracts depends heavily on our ability to make accurate estimates. Inaccurate estimates, or changes in other circumstances, such as unanticipated technical problems, difficulties obtaining permits or approvals, changes in local laws or labor conditions, weather delays, cost of raw materials, trade disputes and tariffs, currency fluctuations, inflation pressures or our suppliers’ or subcontractors’ inability to perform could result in substantial losses, as such changes adversely affect the revenues and profitability recognized on each project. Current and future inflationary volatility driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies as well as geopolitical conflicts such as the ongoing military conflict between Russia and Ukraine and in the Middle East, and other geopolitical issues impacting global trade could further impact our ability to make accurate estimates, which could have an adverse impact on our business, cash flows and profitability.
Increasing scrutiny and changing expectations from investors, customers and other market participants with respect to sustainability or environmental, social and governance (“ESG”) matters may impose additional costs on us or expose us to reputational or other risks. Companies across all industries and around the globe are facing increasing scrutiny relating to their ESG policies, initiatives and activities by investors, lenders, regulators, customers and other market participants. While we have policies and initiatives in place related to our ESG practices, the recent increased focus on ESG matters may impact our access to capital, as investors and lenders may reconsider their capital investment allocation as a result of their assessment of our ESG practices. Our ESG initiatives, intentions and expectations are subject to change and there can be no assurance that our ESG policies and procedures will continue. Further, regulatory requirements related to ESG continue to evolve and may increase our costs of compliance. If we do not adapt to or comply with investor or other stakeholder expectations and standards on ESG matters as they continue to evolve or if we are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a regulatory or legal requirement to do so, we may be exposed to the risk of investigation, inquiry, or legal challenges or suffer reputational damage.
While we may create and publish voluntary disclosures regarding ESG matters from time to time, we could be criticized for the accuracy, adequacy or completeness of the disclosure related to our ESG-related practices and initiatives, commitments and goals, and progress toward those goals. Certain statements in those voluntary disclosures are based on hypothetical expectations and assumptions that may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith. Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to misinterpretation given the long timelines involved and lack of an established, single approach to identifying, measuring and reporting on many ESG issues. If our ESG-related data, processes or reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our ESG-related goals on a timely basis, or at all, our reputation could be adversely affected.
In addition, organizations that provide rating information to investors on ESG matters may assign unfavorable ratings to Team or our industries, which may lead to negative investor sentiment and the diversion of investment to other companies or industries, which could have a negative impact on our stock price and our costs of capital. To the extent ESG matters negatively impact our reputation, we may not be able to compete as effectively to recruit or retain employees, which may adversely affect our operations. Such ESG matters may also impact our customers, which may result in reduced demand for certain of our products and services.
Risks Related to Market Conditions
Demand for our services is sensitive to oil and gas prices, global oil supply and other factors which impact our customer’s current and future spending levels. Global oil and gas supply and demand are impacted by several factors including global economic conditions, geopolitical events, widespread public health crises, epidemics and pandemics, and domestic and global inflationary pressures which may reduce the availability of liquidity and credit and, in many cases, reduce demand for our customers’ products. Disruptions or volatility in these markets could also adversely affect our customers’ decisions to fund ongoing maintenance and new capital projects, resulting in contract cancellations or suspensions, capital project delays, repurposing of infrastructure, and infrastructure closures. These factors may also adversely affect our ability to collect payment for work we have previously performed. Such disruptions, should they occur, could materially impact our results of operations, financial position, credit capacity or cash flows.
Extended periods of low prices for crude oil can have a material adverse impact on our results of operations, financial condition, and liquidity. While we continue our efforts to expand our market presence in the areas of aerospace and defense, renewable energy, construction, chemical processing, manufacturing, power generation, and public infrastructure, among other industries, economic downturns within the oil and gas industry including falling crude oil prices, have resulted in, and could in the future, result in reduced demand for our services.
Our revenues are heavily dependent on certain industries. Sales of our services are dependent on customers in certain industries, particularly the refining and petrochemical industries. As we have experienced in the past, and as we expect to occur in the future, downturns characterized by diminished demand for services in these industries as well as potential changes due to consolidation or changes in customer businesses or governmental regulations, could have a material impact on our results of operations, financial position or cash flows. Certain industries and customers have employees represented by unions and could be subject to temporary work stoppages which could impact our activity level.
We sell our services in highly competitive markets, which can limit our ability to increase prices and maintain or increase the market share of our services. Our competition generally stems from other outside service contractors, many of whom offer similar services. Future economic uncertainty could generally reduce demand for industrial services and thus create a more competitive bidding environment for new and existing work. No assurances can be made that we will continue to maintain our pricing model or increase our market share or profitability.
Our ongoing investments in new customer markets involve significant risks, could disrupt our current operations and may not produce the long-term benefits that we expect. Our ability to compete successfully in new customer markets depends on our ability to continue to deliver innovative, relevant and useful services to our customers in a timely manner. As a result, we have invested, and expect to continue to invest, resources in developing products and services to market to new customers. Such investments may not prioritize short-term financial results and may involve significant risks and uncertainties, including encountering new, well-established competitors. We may fail to generate sufficient revenue, operating margin or other value to justify our investments in such new customer markets, thereby harming our ability to generate revenue.
We may not be able to maintain compliance with the NYSE’s continued listing requirements and rules, and the NYSE may delist our common stock, which could negatively affect the Company, the price of our common stock and our shareholders’ ability to sell our common stock. The NYSE has several listing requirements set forth in the NYSE Listed Company Manual. Section 802.01B of the NYSE Listed Company Manual requires that either our average global market capitalization (inclusive of common and preferred equity) or our total shareholders’ equity exceed $50.0 million.
On March 14, 2024, the Company received a written notice (the “Written Notice”) from the NYSE that the Company was not in compliance with the continued listing standards set forth in Rule 802.01B of the NYSE Listed Company Manual because its average global market capitalization over a consecutive 30 trading-day period was less than $50.0 million and, at the same time, its last reported shareholders’ equity was less than $50.0 million. As required by the NYSE, the Company timely notified the NYSE of its intent to cure the deficiency and restore its compliance with the NYSE continued listing standards. On April 29, 2024, in accordance with applicable NYSE procedures, the Company submitted a plan (the “Plan”) advising the NYSE of the definitive actions the Company has taken, and is taking, that would bring it into compliance with the minimum global market capitalization listing standard within 12 months of receipt of the Written Notice. The NYSE accepted the Plan, and the Company’s common stock continued to be listed and traded on the NYSE during the 12-month period beginning March 14, 2024, subject to the Company’s compliance with other NYSE continued listing standards and continued periodic review by the NYSE of the Company’s progress with respect to the Plan. The Written Notice had no immediate impact on the listing of the Company’s common stock, which continued to trade on the NYSE during the applicable cure period and did not result in a default under the Company’s material debt or other agreements.
On March 14, 2025, we received notice from the NYSE that we had regained compliance with the NYSE listing standards. There is no assurance that we will remain in compliance with Section 802.01B or other NYSE continued listing standards in the future. If we are unable to list our common stock on an alternate exchange, a delisting of our common stock from the NYSE could negatively impact us by, among other things, reducing the liquidity and market price of our common stock; reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability
to raise equity financing; limiting our ability to issue additional securities or obtain additional financing in the future; decreasing the amount of news and analyst coverage of us; and causing us reputational harm with investors, our employees, and parties conducting business with us.
Risks Related to Information Systems
Our business and operations could suffer in the event of computer system failures, cyber-attacks or deficiencies in our cyber-security or those of third-party providers. In the ordinary course of our business, we continue to increase dependencies on digital technologies to conduct our business. Sensitive data is also transmitted on our networks and systems, including our intellectual property and proprietary information that is confidential to the business, to our customers and our business partners. We have also outsourced significant elements of our information technology infrastructure and, as a result, third parties may or could have access to our confidential information. The secure maintenance of this information is critical to our business and reputation. Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, ransomware, cyber fraud, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, encrypted, lost or stolen. Any such access, inappropriate disclosure of confidential or proprietary information or other loss of information, including our data being breached at third-party providers, could result in legal claims or proceedings, liability or financial loss under laws that protect the privacy of personal information, disruption of our operations with increases in costs and decline in revenues, damage to intellectual property or our product development programs and damage to our reputation, which could adversely affect our business.
Furthermore, we and our third-party providers rely on electronic communications and information systems to conduct our operations. We and our third-party providers have been, and may continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate bank account information, passwords, or other personal information or to introduce viruses or other malware to our information systems.
Interruptions in the proper functioning of our information systems could disrupt operations and cause increases in costs and/or decreases in revenues. The proper functioning of our information systems is critical to the successful operation of our business. Although our information systems are protected through physical and software safeguards, our information systems are still vulnerable to natural disasters, power losses, telecommunication failures and other problems. If critical information systems fail or are otherwise unavailable, our business operations could be adversely affected.
Risks Related to Regulations
Unanticipated fluctuations in our effective tax rate and our tax obligations, changes in legislation or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial results. We are subject to taxes in the U.S. and in various foreign jurisdictions. Significant judgment is required in determining our worldwide income tax provision, which includes assessing the restrictions on tax credits, offset gains or repatriation of cash proceeds, tax assets and accruals for other taxes. There are many transactions and calculations where the ultimate tax determination is uncertain. Our future effective income tax rates could be subject to volatility or adversely affected by our profit levels, changes in our business, reorganization of our business and operating structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the elections we make or changes in the valuation allowance for deferred tax assets, as well as other factors.
The Organization for Economic Co-operation and Development (the “OECD”), an international association comprised of 38 countries, including the United States, has issued proposals that change long-standing tax principles including on a global minimum tax initiative. On December 12, 2022, the European Union member states agreed to implement the OECD’s Base Erosion and Profit Shifting (BEPS) 2.0 Pillar Two global corporate minimum tax rate of 15% on companies with revenues over a specific threshold, which was scheduled to go into effect in 2024. To date, various jurisdictions have enacted, or are in the process of enacting, legislation on these rules, and the OECD continues to release additional guidance. While it is uncertain whether the U.S. will enact legislation to adopt the minimum tax directive, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement the minimum tax directive. Further, the OECD issued administrative guidance providing transition and safe harbor rules that could delay the impact of the minimum tax directive. We will continue to monitor the implementation of these rules by the countries in which we operate.
Our future effective tax rates could also be adversely affected by changes in tax laws, both domestically and internationally, or the interpretation of application thereof. From time to time, the U.S. Congress and foreign, state and local governments consider legislation that could increase our effective tax rate. We cannot determine whether, or in what form, other future tax legislation will ultimately be enacted or what impact any such legislation could have on our profitability.
We are also currently subject to audit in various jurisdictions, and these jurisdictions may assess additional income or other tax liabilities against us. Developments in an audit, litigation, or relevant laws, regulations, administrative practices, principles, and interpretations could have a material effect on our operating results or cash flows in the period or periods for which that development occurs, as well as for prior and subsequent periods.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. Our ability to use our net operating losses and other tax attributes would be substantially limited if we experience an “ownership change,” as such term is defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). A company generally experiences an ownership change if the percentage of the value of its stock owned by certain “5-percent shareholders,” as such term is defined in Section 382 of the Code, increases by more than 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Our ability to use net operating losses to reduce future taxable income and liabilities may also be subject to annual limitations as a result of prior ownership changes and ownership changes that may occur in the future. Notwithstanding the foregoing, it is possible that we will not generate taxable income in time to use such net operating losses before their expiration, or at all.
Our operations and properties are subject to extensive environmental, health and safety regulations. We are subject to a variety of U.S. federal, state, local and international laws and regulations relating to the environment and worker health and safety, among other things. These laws and regulations are complex, change frequently, are becoming increasingly stringent, and can impose substantial sanctions for violations or require operational changes that may limit our services. We must conform our operations to comply with applicable regulatory requirements and adapt to changes in such requirements in all locations in which we operate. These requirements can be expected to increase the overall costs of providing our services over time. Some of our services involve handling or monitoring highly regulated materials, including volatile organic compounds or hazardous wastes. Environmental laws and regulations generally impose limitations and standards for the characterization, handling, disposal, discharge or emission of regulated materials and require us to obtain permits and comply with various other requirements. The improper characterization, handling, or disposal of regulated materials or any other failure by us to comply with increasingly complex and strictly-enforced federal, state, local, and international environmental, health and safety laws and regulations or associated permits could subject us to the assessment of administrative, civil and/or criminal penalties, the imposition of investigatory or remedial obligations or capital expenditure requirements, or the issuance of injunctions that could restrict or prevent our ability to operate our business and complete contracted services. A defect in our services or faulty workmanship could result in an environmental liability if, as a result of the defect or faulty workmanship, a contaminant is released into the environment. In addition, the modification or interpretation of existing environmental, health and safety laws or regulations, the more vigorous enforcement of existing laws or regulations, or the adoption of new laws or regulations may also negatively impact industries in which our customers operate, which in turn could have a negative impact on us.
Our business is subject to risks arising from climate change, including climate change legislation or regulations restricting emissions of greenhouse gases, changes in consumer preferences and technology and physical impacts of climate change, all of which could have a negative impact on our business and results of operations. There has been an increased focus on climate change in response to findings that emissions of carbon dioxide, methane and other greenhouse gases present an endangerment to public health and the environment. As a result, there have been a variety of regulatory developments, proposals or requirements and legislative initiatives that have been introduced in the U.S. and other parts of the world that are focused on restricting the emission of greenhouse gases and enhancing greenhouse gas emissions disclosure requirements, including increased fuel efficiency standards, carbon taxes or cap and trade systems, restrictive permitting and incentives for renewable energy. The adoption of new or more stringent legislation or regulatory programs limiting greenhouse gas emissions from customers, particularly those in refining and petrochemical industries, for whom we provide inspection, repair and maintenance services, or reducing the demand for those customers’ products, could in turn affect demand for our products and services. Similarly, changing consumer preferences for goods or services relating to alternative sources of energy or emissions reductions and technological advances in fuel economy and energy generation devices or other technological advances could materially affect our customers, which in turn could negatively impact demand for our services and adversely affect our results of operations, financial condition, and liquidity. Additionally, some of our customers are modifying their plants and facilities and may adopt new technology in efforts to align their operations and products with the energy transition, but there is no assurance that such modified facilities or technological advancements will require the same level of services and products that we currently provide. In addition, our manufacturing centers use electricity generated by burning fossil fuels, which releases carbon dioxide. Increased energy or compliance costs and expenses as a result of any increased legal or regulatory requirements to limit and/or track greenhouse gas emissions may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our products.
Scientists have concluded that increasing greenhouse gas concentrations in the atmosphere may produce physical effects of climate change, such as increased severity and frequency of storms, droughts, floods and other climate events. Such climate events have the potential to adversely affect our operations or those of our customers or suppliers, including by damaging our manufacturing facilities, disrupting our supply chain and causing our suppliers to incur significant costs in responding to such impacts, which in turn could have a negative effect on us, including by adversely impacting our results of operations, financial
condition and cash flows. Such events, if increasing in their severity and frequency, may also adversely affect our ability to insure against the risks associated with such events, thus leading to greater financial risk for us in the conduct of our operations against the backdrop of such events.
We are subject to privacy and data security/protection laws in the jurisdictions in which we operate and may be exposed to substantial costs and liabilities associated with such laws and regulations. The regulatory environment surrounding information security and privacy is increasingly demanding, with frequent imposition of new and changing requirements. Compliance with changes in privacy and information security laws and standards may result in significant expense due to increased investment in technology and the development of new operational processes, which could have a material adverse effect on our financial condition and results of operations. In addition, the payment of potentially significant fines or penalties in the event of a breach or other privacy and information security laws, as well as the negative publicity associated with such a breach, could damage our reputation and adversely impact demand for our services and customer relationships.
Risks Related to Legal Liability
Our insurance coverage will not fully indemnify us against certain claims or losses. Further, our insurance has limits and exclusions and not all losses or claims are insured. We perform services in hazardous environments on or around high-pressure, high temperature systems and our employees are exposed to a number of hazards, including exposure to hazardous materials, explosion hazards and fire hazards. Incidents that occur at these large industrial facilities or systems, regardless of fault, may be catastrophic and adversely impact our employees and third parties by causing serious personal injury, loss of life, damage to property or the environment, and interruption of operations. We maintain limited insurance coverage against these and other risks associated with our business. Our contracts typically require us to name a customer as an additional insured under our insurance policies and indemnify our customers for injury, damage or loss arising out of our presence at our customers’ location, regardless of fault, or the performance of our services and provide for warranties for materials and workmanship. We maintain a $6.0 million retention for indemnity coverage. This insurance may not protect us against liability for certain events, including events involving pollution, product or professional liability, losses resulting from business interruption or acts of terrorism or damages from our breach of contract. We cannot assure you that our insurance will be adequate in risk coverage or policy limits to cover all losses or liabilities that we may incur. Moreover, in the future, due to evolving market conditions, our higher risk profile due to the nature of our operations and claims history, and expected impact on pricing, we cannot assure that we will be able to maintain insurance at levels of risk coverage or policy limits that we deem adequate. Any future damages caused by our products or services that are not covered by insurance or are in excess of policy limits could have a material adverse effect on our results of operations, financial position or cash flows.
We are involved and are likely to continue to be involved in legal proceedings or governmental or regulatory inquiries, which will increase our costs and, if adversely determined, could have a material effect on our results of operations, financial position or cash flows. We are currently a defendant in legal proceedings arising from the operation of our business and it is reasonable to expect that we will be named in future actions. Most of the legal proceedings against us arise out of the normal course of performing services at customer facilities, and include claims for workers’ compensation, personal injury and property damage. Legal proceedings can be expensive to defend and can divert the attention of management and other personnel for significant periods of time, regardless of the ultimate outcome. An unsuccessful defense of a liability claim could have an adverse effect on our business, results of operations, financial position or cash flows.
8
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Overall Process and Governance
In managing material risks from cybersecurity threats, we require that a security and technical architecture review is conducted for all new software and applications, and for all changes to the underlying IT infrastructure that manages, processes, stores, or transmits our data or data of our customers, vendors, suppliers, joint ventures, or employees. Any deviations from our IT security policies and standards are assessed by our IT security team. Any critical and high-risk levels are identified, documented, addressed and reported to relevant key stakeholders.
The Audit Committee is responsible for the oversight of risks from cybersecurity threats. Our Vice President - IT and the IT security team update the Audit Committee on our cyber risk management program during each of its quarterly meetings. This update includes metrics on the effectiveness of technical and human security controls, cybersecurity training program compliance, internal and third-party cybersecurity incidents, and cybersecurity risks. The Audit Committee also receives a detailed annual update on our cybersecurity program and strategy including cybersecurity risks.
Third Party Security Experts
We engage third party security experts for cyber security assessments, penetration tests and program enhancements, including vulnerability assessments, security framework maturity assessments and identification of areas for continued focus and improvement. In addition, our third-party experts work with us to conduct cybersecurity tabletop exercises and internal phishing awareness campaigns. We use the findings of these exercises to improve our practices, training, procedures, and technologies. We also engage third party security experts to support our cybersecurity threat and incident response management and maintain information security risk insurance coverage.
Incidents & Risks
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ITEM 2. PROPERTIES
We provide our services globally through more than 138 locations in 13 countries. There are several materially important physical properties used in our operations. We own a facility in Alvin, Texas that consists of our primary training facility, equipment center and International Organization for Standardization-9001 certified manufacturing facility for clamps, enclosures, and sealants. Additionally, we operate two manufacturing facilities in Houston, Texas (one of which is owned and the other is leased), which are included in our MS segment. Further, we lease office space for our corporate headquarters in Sugar Land, Texas. Additional district service locations considered materially important in our IHT and MS segments are as follows: we lease facilities in Mobile, Alabama; Benicia, California; Harbor City, California; Hammond, Indiana; Columbus, Ohio; Pasadena, Texas (two locations); and Edmonton, Alberta, Canada. We own a facility in Pasadena, Texas and three facilities in the United Kingdom in Kendal, Carlisle and Scunthorpe.
We believe that our property and equipment are adequate for our current needs, although additional investments are expected to be made for expansion of property and equipment and replacement of assets at the end of their useful lives.
ITEM 3. LEGAL PROCEEDINGS
Information regarding our legal proceedings can be found in Note 16 - Commitments and Contingencies to the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our stock is traded on the NYSE under the symbol “TISI”.
Holders
There were 313 holders of record of our common stock as of March 17, 2025, excluding beneficial owners of stock held in street name.
Dividends
No cash dividends were declared or paid during the years ended December 31, 2024 or 2023. We are limited in our ability to pay cash dividends without the consent of our lenders. Accordingly, we have no present intention of paying cash dividends in the foreseeable future. Additionally, any future dividend payments will continue to depend on our financial condition, market conditions and other matters deemed relevant by the Board.
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ITEM 6. RESERVED
12
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to the accompanying consolidated financial statements and notes to help provide an understanding of our financial condition, changes in financial condition, and results of operations. The following should be read in conjunction with Item 1 “Business,” Item 1A “Risk Factors,” Item 2 “Properties,” and Item 8 “Consolidated Financial Statements and Supplementary Data,” included in this Annual Report on Form 10-K.
Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future developments and/or otherwise are not statements of historical fact. See Item 1 at the beginning of this Annual Report.
Overview of Business
We are a global, leading provider of specialty industrial services offering customers access to a full suite of conventional, specialized, and proprietary mechanical, heat-treating, and inspection services. We deploy conventional to highly specialized inspection, condition assessment, maintenance and repair services that result in greater safety, reliability and operational efficiency for our customers’ most critical assets. We conduct operations in two segments: Inspection and Heat Treating (“IHT”) and Mechanical Services (“MS”). Through the capabilities and resources in these two segments, we believe that we are uniquely qualified to provide integrated solutions involving: inspection to assess condition; engineering assessment to determine fitness for purpose in the context of industry standards and regulatory codes; and mechanical services to repair, rerate or replace based upon the customer’s election. In addition, we are capable of escalating with the customer’s needs, as dictated by the severity of the damage found and the related operating conditions, from standard services to some of the most advanced services and integrated asset integrity and reliability management solutions available in the industry. We also believe that we are unique in our ability to provide these services in three distinct customer demand profiles: (i) turnaround or project services, (ii) call-out services, and (iii) nested or run-and-maintain services.
Significant Factors Impacting Results and Recent Developments
Our revenues, gross margins and other results of operations can be influenced by a variety of factors in any given period, including those described in Cautionary Note Regarding Forward-Looking Statements above and Part 1, Item 1A. “Risk Factors” included in this report, and have caused fluctuations in our results in the past and are expected to cause fluctuations in our results in the future. Additional information with respect to certain factors are described below.
Financing Transactions. On September 30, 2024, we entered into certain amendments with our lenders. Refer to Note 11 - Debt of the consolidated financial statements for additional details. On March 12, 2025, we entered into certain debt refinancing transactions with our existing and new lenders (collectively, the “Refinancing Transactions”). Refer to Note 19 - Subsequent Events of the consolidated financial statements for additional details about the transactions.
Listing Notice from NYSE. On March 14, 2024, we were notified by the NYSE of our non-compliance with their continued listing standards, as our total market capitalization and shareholders’ equity had fallen below the NYSE listing requirements. As required by the NYSE, we notified the NYSE of our intent to cure the market capitalization and/or shareholders’ equity deficiency and restore our compliance with NYSE continued listing standards.
In accordance with applicable NYSE procedures, on April 29, 2024, we submitted a plan advising the NYSE of the definitive actions we have taken and are taking that would bring us into compliance with NYSE continued listing standards within 12 months of receipt of the written notice. The NYSE accepted the plan, and our common stock continued to be listed and traded on the NYSE during the 12-month period beginning March 14, 2024, subject to our compliance with other NYSE continued listing standards and continued periodic review by the NYSE of our progress with respect to our plan.
On March 14, 2025, we received notice from the NYSE that we had regained compliance with the NYSE listing standards. We can provide no assurances that we will be able to maintain the listing of our shares on the NYSE. In the event we are unable to maintain the listing of our shares on the NYSE, we may look to list our shares on alternative exchanges.
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Results of Operations
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
The following table sets forth the components of revenue and operating income (loss) from our operations for the twelve months ended December 31, 2024 and 2023 (in thousands):
| Twelve Months Ended December 31, | Favorable (Unfavorable) | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | ||||||||||||||||||||
| Revenues by business segment: | |||||||||||||||||||||||
| IHT | $ | 426,722 | $ | 429,559 | $ | (2,837) | (0.7) | % | |||||||||||||||
| MS | 425,550 | 433,056 | (7,506) | (1.7) | % | ||||||||||||||||||
| Total revenues | $ | 852,272 | $ | 862,615 | $ | (10,343) | (1.2) | % | |||||||||||||||
| Operating income (loss): | |||||||||||||||||||||||
| IHT | 37,012 | 24,220 | 12,792 | 52.8 | % | ||||||||||||||||||
| MS | 27,287 | 27,759 | (472) | (1.7) | % | ||||||||||||||||||
| Corporate and shared support services | (54,163) | (65,255) | 11,092 | 17.0 | % | ||||||||||||||||||
Total operating income (loss) | $ | 10,136 | $ | (13,276) | $ | 23,412 | 176.3 | % | |||||||||||||||
| Interest expense, net | (47,808) | (55,181) | 7,373 | 13.4 | % | ||||||||||||||||||
| Loss on debt extinguishment | — | (1,585) | 1,585 | 100.0 | % | ||||||||||||||||||
Other income (expense), net | 2,682 | (1,102) | 3,784 | 343.4 | % | ||||||||||||||||||
| Loss before income taxes | $ | (34,990) | $ | (71,144) | $ | 36,154 | 50.8 | % | |||||||||||||||
| Provision for income taxes | (3,276) | (4,578) | 1,302 | 28.4 | % | ||||||||||||||||||
| Net loss | $ | (38,266) | $ | (75,722) | $ | 37,456 | 49.5 | % | |||||||||||||||
Revenues. Total revenues decreased by $10.3 million or 1.2% from the prior year. Total revenue was negatively impacted by $0.2 million of unfavorable foreign exchange rate movements during 2024. IHT revenues decreased by $2.8 million or 0.7%, driven by a $10.3 million decrease in Canada operations revenue attributable to reduced scope in certain customer turnaround projects versus the prior year, and a $2.7 million decrease in international regions revenue, primarily in Europe and the United Kingdom. These decreases were partially offset by a $7.1 million increase in U.S. operations, primarily due to higher callout and turnaround activities in various locations attributable to higher demand for our non-destructive testing services, and a $3.0 million increase in revenue related to aerospace driven by improved utilization at our Cincinnati facility. MS revenues decreased by $7.5 million or 1.7%, over prior year, driven by a $7.7 million decrease in Canada turnaround activity, and a $2.3 million decrease in revenue from our international operations attributable to lower activity in leak repair, machining and bolting, and hot tapping services primarily in Europe and the United Kingdom. These decreases were offset by revenue increases in U.S. operations of $2.5 million due to higher turnaround activities.
Operating income (loss). Overall operating income improved by $23.4 million to $10.1 million in 2024 as compared to a loss of $13.3 million in the prior year. IHT’s operating income increased by $12.8 million or 52.8%, primarily driven by lower costs and higher gross margins in U.S. operations, partially offset by a decrease in operating income from Canada driven mainly by the factors described above. MS operating income decreased by $0.5 million year over year to $27.3 million for 2024, mainly due to decreased revenue levels in Canada and other international locations, partially offset by a $5.3 million increase in operating income from U.S. operations driven by higher margins. Corporate operating loss decreased by $11.1 million year over year, mainly due to lower personnel and professional costs in the current year as compared to the prior year and lower overall costs due to our ongoing cost reduction program. The impact of our cost reduction efforts has been partially offset by continued cost inflation in several areas across all segments, such as raw materials, transportation, and labor.
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The operating income for the current year includes net expenses totaling $5.6 million which we do not believe are connected to our core operating activities, while the same period in the prior year included $16.3 million of such items.
The detail of operating income (loss) excluding non-core expenses is below (unaudited) (in thousands): | |||||||||||||||||||||||
| Twelve Months Ended December 31, | Favorable (Unfavorable) | ||||||||||||||||||||||
| 2024 | 2023 | $ | % | ||||||||||||||||||||
Operating income (loss) | $ | 10,136 | $ | (13,276) | $ | 23,412 | 176.3 | % | |||||||||||||||
| Professional fees and other | 4,111 | 9,121 | 5,010 | 54.9 | % | ||||||||||||||||||
Legal costs | 124 | 5,635 | 5,511 | 97.8 | % | ||||||||||||||||||
| Severance charges, net | 1,323 | 1,564 | 241 | 15.4 | % | ||||||||||||||||||
| Total non-core expenses | 5,558 | 16,320 | 10,762 | 65.9 | % | ||||||||||||||||||
| Total operating income, excluding non-core expenses | $ | 15,694 | $ | 3,044 | $ | 12,650 | 415.6 | % | |||||||||||||||
Excluding the impact of these identified non-core expenses in both periods, operating income increased by $12.7 million from $3.0 million to $15.7 million. See our non-GAAP reconciliation for additional details of our non-core expenses.
Interest expense, net. Interest expense for 2024 was $47.8 million, a decrease of $7.4 million compared to the prior year. The decrease was primarily attributable to a decrease in accelerated amortization due to the “Maturity Reserve Trigger Date” provision that was previously applicable. This effect was partially offset by increases in interest expense due to higher balances outstanding following the debt refinancing transactions, cash interest rate increases on the Uptiered Loan and paid-in-kind (“PIK”) interest increase due to the increased principal balance of the Uptiered Loan.
Cash interest paid for the years ended December 31, 2024 and 2023 amounted to $24.9 million and $19.5 million, respectively.
Loss on debt extinguishment. There was no loss on debt extinguishment for the year ended December 31, 2024. The loss on debt extinguishment for the year ended December 31, 2023 of $1.6 million was mainly due to the early payment premium incurred as part of the payoff of the remaining balance of the APSC Term Loan in June 2023.
Other income (expense), net. Other income (expense), net changed by $3.8 million, from an expense of $1.1 million in the prior year to income of $2.7 million in 2024. This was primarily driven by the foreign currency transaction gains in the current year period reflecting the effects of positive fluctuations in the value of the U.S. dollar relative to the foreign currencies to which we have exposure.
Taxes. The provision for income tax was $3.3 million on the pre-tax loss of $35.0 million in the current year compared to the provision for income tax of $4.6 million on pre-tax loss of $71.1 million in the prior year. The provision for income tax was primarily driven by jurisdictions outside the United States. The effective tax rate was a provision of 9.4% and 6.4% for years ended December 31, 2024 and 2023, respectively.
Non-GAAP Financial Measures and Reconciliations
We use supplemental non-GAAP financial measures which are derived from the consolidated financial information including adjusted net income (loss); adjusted net income (loss) per share; earnings before interest and taxes (“EBIT”); adjusted EBIT; adjusted earnings before interest, taxes, depreciation, and amortization (“adjusted EBITDA”) and free cash flow to supplement financial information presented on a GAAP basis.
We define adjusted net income (loss) and adjusted net income (loss) per share to exclude the following items: non-routine legal costs and settlements, non-routine professional fees, (gain) loss on debt extinguishment, certain severance charges, non-routine write off of assets and certain other items that we believe are not indicative of core operating activities. Consolidated adjusted EBIT, as defined by us, excludes the costs excluded from adjusted net income (loss) as well as income tax expense (benefit), interest charges, foreign currency (gain) loss, pension credit, and items of other (income) expense. Consolidated adjusted EBITDA further excludes depreciation, amortization, and non-cash share-based compensation costs from consolidated adjusted EBIT. Segment adjusted EBIT is equal to segment operating income (loss) excluding costs associated with non-routine legal costs and settlements, non-routine professional fees, certain severance charges, and certain other items as determined by management. Segment adjusted EBITDA further excludes depreciation, amortization, and non-cash share-based compensation
15
costs from segment adjusted EBIT. Free Cash Flow is defined as net cash provided by (used in) operating activities minus capital expenditures paid in cash.
We believe these non-GAAP financial measures are useful to both management and investors in their analysis of our financial position and results of operations. In particular, adjusted net income (loss), adjusted net income (loss) per share, consolidated adjusted EBIT, and consolidated adjusted EBITDA are meaningful measures of performance which are commonly used by industry analysts, investors, lenders, and rating agencies to analyze operating performance in our industry, perform analytical comparisons, benchmark performance between periods, and measure our performance against externally communicated targets. Our segment adjusted EBITDA is also used as a basis for the Chief Operating Decision Maker (Chief Executive Officer) to evaluate the performance of our reportable segments. Free cash flow is used by our management and investors to analyze our ability to service and repay debt and return value directly to stakeholders.
Non-GAAP measures have important limitations as analytical tools because they exclude some, but not all, items that affect net earnings and operating income. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures and should be read only in conjunction with financial information presented on a GAAP basis. Further, our non-GAAP financial measures may not be comparable to similarly titled measures of other companies who may calculate non-GAAP financial measures differently, limiting the usefulness of those measures for comparative purposes. The liquidity measure of free cash flow does not represent a precise calculation of residual cash flow available for discretionary expenditures. Reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure are presented below.
The following tables set forth the reconciliation of Adjusted Net Income (Loss), EBIT and EBITDA to their most comparable GAAP financial measurements on a consolidated and segmented basis:
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| TEAM, INC. AND SUBSIDIARIES | ||||||||||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||||||||||||
| (unaudited, in thousands except per share data) | ||||||||||||||
| Twelve Months Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Adjusted Net Loss: | ||||||||||||||
| Net loss | $ | (38,266) | $ | (75,722) | ||||||||||
Professional fees and other1 | 4,111 | 9,121 | ||||||||||||
Legal costs and other2 | 124 | 5,635 | ||||||||||||
Severance charges, net3 | 1,323 | 1,564 | ||||||||||||
Loss on debt extinguishment4 | — | 1,585 | ||||||||||||
Write-off of other assets5 | — | 1,295 | ||||||||||||
Tax impact of adjustments and other net tax items6 | (210) | (159) | ||||||||||||
| Adjusted Net Loss | $ | (32,918) | $ | (56,681) | ||||||||||
| Adjusted Net Loss per common share: | ||||||||||||||
| Basic and Diluted | $ | (7.43) | $ | (12.97) | ||||||||||
| Consolidated Adjusted EBIT and Adjusted EBITDA: | ||||||||||||||
| Net loss | $ | (38,266) | $ | (75,722) | ||||||||||
Provision for income taxes | 3,276 | 4,578 | ||||||||||||
| Interest expense, net | 47,808 | 55,181 | ||||||||||||
| Foreign currency loss (gain) | (2,231) | 734 | ||||||||||||
| Gain on sale of assets | (5) | (291) | ||||||||||||
Professional fees and other1 | 4,111 | 9,121 | ||||||||||||
Legal costs and other2 | 124 | 5,635 | ||||||||||||
Severance charges, net3 | 1,323 | 1,564 | ||||||||||||
Loss on debt extinguishment4 | — | 1,585 | ||||||||||||
Write-off of other assets5 | — | 1,295 | ||||||||||||
Pension credit7 | (446) | (640) | ||||||||||||
| Consolidated Adjusted EBIT | 15,694 | 3,040 | ||||||||||||
| Depreciation and amortization | ||||||||||||||
| Amount included in operating expenses | 13,730 | 14,555 | ||||||||||||
| Amount included in SG&A expenses | 22,565 | 23,317 | ||||||||||||
| Total depreciation and amortization | 36,295 | 37,872 | ||||||||||||
| Non-cash share-based compensation costs | 2,273 | 1,590 | ||||||||||||
| Consolidated Adjusted EBITDA | $ | 54,262 | $ | 42,502 | ||||||||||
| Free Cash Flow: | ||||||||||||||
Cash provided by (used in) operating activities | $ | 22,767 | $ | (10,986) | ||||||||||
| Capital expenditures | (9,465) | (10,430) | ||||||||||||
| Free Cash Flow | $ | 13,302 | $ | (21,416) | ||||||||||
____________________________________
1 The twelve months ended December 31, 2024, includes $3.8 million related to costs associated with debt financing, and $0.3 million for lease extinguishment charges, support and other costs. The twelve months ended December 31, 2023, includes $6.7 million related to costs associated with debt financing, and $2.4 million, for lease extinguishment charges, support and other costs.
2 Primarily relates to accrued legal matters, adjustments to legal reserves and other non-routine matters. Twelve months ended December 31, 2024 includes $3.8 million of legal fees, partially offset by $3.7 million related to the reversal of a reserve established for the potential repayment of pandemic related subsidies (see Note 16 - Commitments and Contingencies). Twelve months ended December 31, 2023 includes $3.9 million related to accruals for the potential repayment of pandemic related subsidies in foreign jurisdiction.
3 Represents customary severance costs associated with staff reductions across multiple departments.
4 Represents loss on the early payoff of the remaining APSC Term Loan in June 2023.
5 The twelve months ended December 31, 2023 represents $0.7 million loss on settlement of a note receivable and an additional $0.6 million for the write-off of software related costs.
6 Represents the tax effect of the adjustments.
7 Represents pension credits for the U.K. pension plan based on the difference between the expected return on plan assets and the amount of the discounted pension liability. The pension plan was frozen in 1994 and no new participants have been added since that date.
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| TEAM, INC. AND SUBSIDIARIES | ||||||||||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued) | ||||||||||||||
| (unaudited, in thousands) | ||||||||||||||
| Twelve Months Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| IHT | ||||||||||||||
| Operating income | $ | 37,012 | $ | 24,220 | ||||||||||
Professional fees and other1 | 162 | 941 | ||||||||||||
Severance charges, net3 | 551 | 492 | ||||||||||||
| Adjusted EBIT | 37,725 | 25,653 | ||||||||||||
| Depreciation and amortization | 11,778 | 12,402 | ||||||||||||
| Adjusted EBITDA | $ | 49,503 | $ | 38,055 | ||||||||||
| MS | ||||||||||||||
| Operating income | $ | 27,287 | $ | 27,759 | ||||||||||
Professional fees and other1 | 140 | 147 | ||||||||||||
Legal costs and other2 | 41 | — | ||||||||||||
Severance charges, net3 | 588 | 792 | ||||||||||||
| Adjusted EBIT | 28,056 | 28,698 | ||||||||||||
| Depreciation and amortization | 18,061 | 18,755 | ||||||||||||
| Adjusted EBITDA | $ | 46,117 | $ | 47,453 | ||||||||||
| Corporate and shared support services | ||||||||||||||
| Net loss | $ | (102,565) | $ | (127,701) | ||||||||||
| Provision for income taxes | 3,276 | 4,578 | ||||||||||||
| Gain on sale of assets | (5) | (291) | ||||||||||||
| Interest expense, net | 47,808 | 55,181 | ||||||||||||
| Foreign currency loss (gain) | (2,231) | 734 | ||||||||||||
Professional fees and other1 | 3,809 | 8,033 | ||||||||||||
Legal costs and other2 | 83 | 5,635 | ||||||||||||
Severance charges, net3 | 184 | 280 | ||||||||||||
Loss on debt extinguishment4 | — | 1,585 | ||||||||||||
Write-off of other assets5 | — | 1,295 | ||||||||||||
Pension credit6 | (446) | (640) | ||||||||||||
| Adjusted EBIT | (50,087) | (51,311) | ||||||||||||
| Depreciation and amortization | 6,456 | 6,715 | ||||||||||||
| Non-cash share-based compensation costs | 2,273 | 1,590 | ||||||||||||
| Adjusted EBITDA | $ | (41,358) | $ | (43,006) | ||||||||||
_________________
1 The twelve months ended December 31, 2024, includes $3.8 million related to costs associated with debt financing, and $0.3 million for lease extinguishment charges, support and other costs. The twelve months ended December 31, 2023, includes $6.7 million related to costs associated with debt financing, and $2.4 million, for lease extinguishment charges, support and other costs.
2 Primarily relates to accrued legal matters, adjustments to legal reserves and other non-routine matters. Twelve months ended December 31, 2024 includes $3.8 million of legal fees, partially offset by $3.7 million related to the reversal of a reserve established for the potential repayment of pandemic related subsidies (see Note 16 - Commitments and Contingencies). Twelve months ended December 31, 2023 includes $3.9 million related to accruals for the potential repayment of pandemic related subsidies in foreign jurisdiction.
3 Represents customary severance costs associated with staff reductions across multiple departments.
4 Represents loss on the early payoff of the remaining APSC Term Loan in June 2023.
5 The twelve months ended December 31, 2023 represents $0.7 million loss on settlement of a note receivable and an additional $0.6 million for the write-off of software related costs.
6 Represents pension credits for the U.K. pension plan based on the difference between the expected return on plan assets and the amount of the discounted pension liability. The pension plan was frozen in 1994 and no new participants have been added since that date.
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Liquidity and Capital Resources
Prior to consummation of the Refinancing Transactions on March 12, 2025, financing for operations consisted primarily of our 2022 ABL Credit Agreement (which includes the Revolving Credit Loans, the Delayed Draw Term Loan and the ME/RE Loans (each as defined herein)), the A&R Term Loan Credit Agreement (which includes the Uptiered Loan and the Incremental Term Loan (each as defined herein)), and cash flows from our operations.
We have evaluated our liquidity within one year after the date of issuance of the accompanying audited consolidated financial statements to assess the Company’s ability to fund its operations. In the preparation of this liquidity assessment, we applied judgment to estimate the projected cash flows of the Company, including the following: (i) projected cash outflows, (ii) projected cash inflows, and (iii) projected availability under the Company’s existing debt arrangements. The cash flow projections were based on known or planned cash requirements for operating and financing costs and include management’s best estimate regarding future customer activity levels, pricing for its services and for its supplies and other factors. Actual results could vary significantly from those projections. Based upon such liquidity assessment, we believe that the Company’s current working capital, forecasted cash flows from operations, expected availability under our existing debt arrangements and capital expenditure financing is sufficient to fund our operations, service our indebtedness, and maintain compliance with our debt covenants for the next twelve months, and based on current expectations, the long-term. We based this assessment on assumptions that may prove to be inaccurate, and we could exhaust our available capital resources sooner than we expect in the event that we fail to meet our current projections. See Note 11 - Debt of the consolidated financial statements for a further discussion of our liquidity.
We closely monitor the amounts and timing of our sources and uses of funds. Our ability to maintain a sufficient level of liquidity to fund our operations and meet our financial obligations will be dependent upon our future performance, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. For example, the threat of recession and related economic repercussions could have a significant adverse effect on our financial position and business condition, as well as that of our customers and suppliers. Additionally, these events may, among other factors, impact our ability to generate cash flows from operations, access the capital markets on acceptable terms or at all, service our indebtedness, maintain compliance with the financial covenants contained in our various credit agreements and affect our future need or ability to borrow under our credit agreements. Our ability to access the capital markets will depend on financial, economic and market conditions, many of which are outside of our control, and we may be unable to raise financing when needed, or on terms favorable to us, or at all. In addition, we may seek to engage in one or more of the following, such as refinancing and/or extending the maturities of all or part of our existing indebtedness, seeking covenant relief from our lenders, entering into a strategic partnership with one or more parties, or the sale or divestiture of assets, but there can be no assurance that we would be able to enter into such a transaction or transactions on a timely basis or on terms favorable to us, or at all. Our failure to raise capital through our operations, refinancings or strategic alternatives as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. In addition to impacting our current sources of funding, the effects of such events may also impact our liquidity or require us to revise our allocation or sources of capital, reduce capital expenditures, implement further cost reduction measures and/or change our business strategy. Political economic repercussions could also have a broad range of effects on our liquidity sources and will depend on future developments that cannot be predicted at this time.
Our ability to generate operating cash flow, sell assets, access capital markets or take any other action to improve our liquidity and manage our debt is subject to the risks discussed herein and other risks and uncertainties that exist in our industry, some of which we may not be able to anticipate at this time or control. Such risks include the following:
•loss of customers or other unforeseen deterioration in demand for our services;
•seasonal fluctuations, such as severe weather and other variations in our customers’ industries that may impede or delay the timing of customer orders and the delivery of our services;
•rapid increases in raw materials and labor costs that may hinder our ability to meet our forecasted operating expenses;
•persisting or increasing levels of inflation domestically and internationally and the impact of such inflation on our ability to meet our current forecast;
•changes in regulations governing our operations and unplanned costs to comply with such regulatory changes;
•counterparty credit risk related to our ability to collect our receivables; and
•unexpected or prolonged fluctuations in interest rates and their impact on our forecasted costs of raising additional capital.
See Item 1A “Risk Factors” in this Annual Report on Form 10-K for additional information.
19
On September 30, 2024, we entered into certain amendments with our lenders. Refer to Note 11 - Debt of the consolidated financial statements for additional details about the amendments.
ABL Amendment No.5 significantly improved availability under our Revolving Credit Loans and as of December 31, 2024, we had approximately $45.9 million of available borrowing capacity under our various credit facilities, consisting of $35.9 million available under the 2022 ABL Credit Facility and $10.0 million available under the A&R Term Loan Credit Agreement. Our principal uses of cash and liquidity are for working capital needs, capital expenditures and operations.
As of December 31, 2024 we are in compliance with our debt covenants. Our ability to maintain compliance with the financial covenants contained in our credit agreements is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.
On March 12, 2025, we entered into certain debt refinancing transactions with our existing and new lenders. Refer to Note 19 - Subsequent Events of the consolidated financial statements for additional details about the transactions.
As of March 17, 2025, we had consolidated cash and cash equivalents of $10.1 million, excluding $4.3 million of restricted cash used mainly as collateral for outstanding letters of credit and commercial card programs, and approximately $16.1 million of undrawn availability under our various credit facilities, resulting in total liquidity of $26.2 million.
Refer to Note 11 - Debt and Note 19 - Subsequent Events for additional information about our debt instruments.
Cash Flows
The following table summarizes cash flows from Operating, Investing and Financing activities (in thousands):
Twelve Months Ended December 31, | |||||||||||||||||||||||||||||||||||||||||
| Cash flows provided by (used in): | 2024 | 2023 | Favorable (Unfavorable) | ||||||||||||||||||||||||||||||||||||||
| Operating activities | $ | 22,767 | $ | (10,986) | $ | 33,753 | |||||||||||||||||||||||||||||||||||
| Investing activities | (9,298) | (10,016) | 718 | ||||||||||||||||||||||||||||||||||||||
| Financing activities | (12,747) | (1,899) | (10,848) | ||||||||||||||||||||||||||||||||||||||
| Effect of exchange rate changes on cash | (604) | 253 | (857) | ||||||||||||||||||||||||||||||||||||||
| Net change in cash and cash equivalents | $ | 118 | $ | (22,648) | $ | 22,766 | |||||||||||||||||||||||||||||||||||
Cash and cash equivalents. Our cash and cash equivalents as of December 31, 2024 totaled $35.5 million, of which $5.1 million was in foreign accounts, primarily in Europe, Canada and Australia, including $1.1 million of cash located in countries where currency restrictions exist.
Our cash and cash equivalents as of December 31, 2023 totaled $35.4 million, of which $12.0 million was in foreign accounts, primarily in Europe, Canada and Australia, including $0.6 million of cash located in countries where currency restrictions exist.
Cash flows attributable to our operating activities. For the year ended December 31, 2024, net cash provided by operating activities was $22.8 million. We incurred a net loss of $38.3 million, further adjusted for a decrease in net working capital of $4.7 million, offset by the effect of depreciation and amortization of $36.3 million, non-cash amortization of debt issuance costs and debt discount of $6.2 million and paid-in-kind interest of $14.4 million.
For the year ended December 31, 2023, net cash used in operating activities was $11.0 million. We incurred a net loss of $75.7 million, further adjusted for a decrease in net working capital of $7.5 million, partially offset by the effect of depreciation and amortization of $37.9 million, non-cash amortization of debt issuance costs and debt discount of $18.7 million and paid-in-kind interest of $14.5 million.
Cash flows attributable to our investing activities. For the year ended December 31, 2024, net cash used in investing activities was $9.3 million, consisting of $9.5 million of capital expenditures offset by net proceeds from asset disposals of $0.2 million.
For the year ended December 31, 2023, net cash used in investing activities was $10.0 million, consisting of $10.4 million of capital expenditures offset by net proceeds from asset disposals of $0.4 million.
20
Cash flows attributable to our financing activities. For the year ended December 31, 2024, net cash used in financing activities was $12.7 million, consisting primarily of $8.5 million of debt issuance costs, $2.8 million of principal payments under the ME/RE Loans and $1.4 million of principal payments under the Incremental Term Loan, partially offset by the net borrowings on our 2022 ABL Credit Facility of $0.5 million.
For the year ended December 31, 2023, net cash used in financing activities was $1.9 million, consisting primarily of the $37.1 million payoff of the APSC Term Loan, $41.2 million payoff of the Notes (as defined herein), and $9.1 million of term loan debt issuance costs, partially offset by $47.2 million of borrowings under the Incremental Term Loan, $27.4 million of borrowings under the ME/RE Loans and net borrowings on our 2022 ABL Credit Facility of $13.5 million.
Effect of exchange rate changes on cash. For the year ended December 31, 2024, the effect of foreign exchange rate changes on cash was a negative impact of $0.6 million.
For the year ended December 31, 2023, the effect of foreign exchange rate changes on cash was a positive impact of $0.3 million.
Off-Balance Sheet Arrangements
From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to material off-balance sheet obligations. See Note 11 - Debt for additional details on our off-balance sheet arrangements.
21
Critical Accounting Policies
The process of preparing financial statements in accordance with GAAP requires us to make estimates and judgments. It is possible that materially different amounts could be recorded if these estimates and judgments change or if actual results differ from these estimates and judgments. We believe that the following critical accounting policies comprise the more significant estimates and assumptions used in the preparation of our consolidated financial statements.
Income taxes. We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted rates in effect for the year in which the differences are expected to reverse. The effect of the change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be unable to realize our deferred tax assets, we would make an adjustment to the deferred tax asset valuation allowance.
We establish reserves for uncertain tax positions when it is not more likely than not that the position will be sustained upon challenge. When facts and circumstances change, we adjust these reserves through our provision for income taxes. To the extent interest and penalties may be assessed by taxing authorities on any related underpayment of income tax, such amounts have been accrued and are classified as a component of income tax expense.
New Accounting Principles
For information about newly adopted accounting principles as well as information about new accounting principles pending adoption, see Note 1 - Summary of Significant Accounting Policies and practices to the consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item 7A.
22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL TABLE OF CONTENTS
23
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Team, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Team, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Sufficiency of audit evidence over revenue
As discussed in Note 2 to the consolidated financial statements, and as presented in the consolidated statement of operations, the Company reported revenue of $852,272 thousand for the year ended December 31, 2024. As discussed in Note 1, the Company recognizes revenue as (or when) the performance obligations are satisfied by transferring control over a service or product to the customer. Most of the Company’s performance obligations qualify for recognition over time, and they are generally able to elect the right-to-invoice practical expedient, which permits them to recognize revenue in the amount to which they have a right to invoice the customer.
We identified the evaluation of sufficiency of audit evidence over revenue as a critical audit matter. Subjective auditor judgment was required to determine the nature and extent of procedures to perform over revenue related to the transfer of control to the customer and the Company’s right to invoice the customer.
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The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over revenue. We evaluated the design and tested the operating effectiveness of certain internal controls related to the revenue process. We performed a software-assisted data analysis to test relationships among certain revenue transactions. For a sample of transactions, we compared the amounts recognized as revenue for consistency with relevant underlying documentation, including contracts and other third-party evidence. We evaluated the sufficiency of the audit evidence obtained over revenue by assessing the results of the procedures performed, including the appropriateness of the nature and extent of such evidence.
/s/ KPMG LLP
We have served as the Company’s auditor since 2002.
March 19, 2025
25
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowance of $ | |||||||||||
| Inventory | |||||||||||
| Income tax receivable | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Defined benefit pension asset | |||||||||||
| Other assets, net | |||||||||||
| Deferred tax asset | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current portion of long-term debt and finance lease obligations | $ | $ | |||||||||
| Current portion of operating lease obligations | |||||||||||
| Accounts payable | |||||||||||
| Other accrued liabilities | |||||||||||
| Income tax payable | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt and finance lease obligations | |||||||||||
| Operating lease obligations | |||||||||||
| Deferred tax liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Equity: | |||||||||||
Preferred stock, | |||||||||||
Common stock, par value $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
26
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenues | $ | $ | |||||||||
| Operating expenses | |||||||||||
| Gross margin | |||||||||||
| Selling, general and administrative expenses | |||||||||||
| Operating income (loss) | ( | ||||||||||
| Interest expense, net | ( | ( | |||||||||
| Loss on debt extinguishment | ( | ||||||||||
| Other income (expense), net | ( | ||||||||||
| Loss before income taxes | ( | ( | |||||||||
| Provision for income taxes (see Note 10) | ( | ( | |||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Loss per common share: | |||||||||||
| Basic and diluted | ( | ( | |||||||||
| Weighted-average number of shares outstanding: | |||||||||||
| Basic and diluted | |||||||||||
See accompanying notes to consolidated financial statements.
27
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Other comprehensive income (loss) before tax: | |||||||||||
| Foreign currency translation adjustment | ( | ||||||||||
| Defined benefit pension plans: | |||||||||||
Net actuarial loss arising during period | ( | ( | |||||||||
| Amortization of prior service cost | |||||||||||
Amortization of net actuarial loss | |||||||||||
| Other comprehensive income (loss), before tax | ( | ||||||||||
| Tax benefit (provision) attributable to other comprehensive income (loss) | ( | ||||||||||
| Other comprehensive income (loss), net of tax | ( | ||||||||||
| Total comprehensive loss | $ | ( | $ | ( | |||||||
See accompanying notes to consolidated financial statements.
28
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
| Common Shares | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Defined benefit pension plans, net of tax | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Non-cash compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Net settlement of vested stock awards | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Defined benefit pension plans, net of tax | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Non-cash compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Net settlement of vested stock awards | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
29
TEAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Loss on debt extinguishment | |||||||||||
| Write-off of software cost | |||||||||||
| Amortization of debt issuance costs, debt discounts, and deferred financing costs | |||||||||||
| Paid-in-kind (PIK) interest | |||||||||||
| Allowance for credit losses | |||||||||||
| Foreign currency loss (gain) | ( | ||||||||||
| Deferred income taxes | ( | ||||||||||
| Loss (gain) on asset disposal | ( | ||||||||||
| Non-cash compensation costs | |||||||||||
| Other, net | ( | ( | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Inventory | ( | ( | |||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
| Accounts payable | |||||||||||
| Other accrued liabilities | ( | ( | |||||||||
| Income taxes | ( | ||||||||||
| Net cash provided by (used in) operating activities | ( | ||||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from disposal of assets | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Borrowings under Revolving Credit Loans | |||||||||||
| Payments under Revolving Credit Loans | ( | ( | |||||||||
Borrowings under Incremental Term Loan | |||||||||||
Payments under Incremental Term Loan | ( | ( | |||||||||
| Repayment of Convertible Debt | ( | ||||||||||
| Borrowings under ME/RE Loans | |||||||||||
| Payments under ME/RE Loans | ( | ( | |||||||||
| Repayment of APSC Term Loan | ( | ||||||||||
| Payments for debt issuance costs | ( | ( | |||||||||
| Other | ( | ||||||||||
Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash | ( | ||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
Cash paid during the year for: | |||||||||||
| Interest | $ | $ | |||||||||
Income taxes | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
30
TEAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
31
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
Description of Business. Unless otherwise indicated, the terms “Team,” “the Company,” “we,” “our” and “us” are used in this report to refer to either Team, Inc., to one or more of our consolidated subsidiaries, or to all of them taken as a whole.
We are a global, leading provider of specialty industrial services offering customers access to a full suite of conventional, specialized, and proprietary mechanical, heat-treating, and inspection services. We deploy conventional to highly specialized inspection, condition assessment, maintenance and repair services that result in greater safety, reliability and operational efficiency for our customers’ most critical assets. We conduct operations in two segments: Inspection and Heat Treating (“IHT”) and Mechanical Services (“MS”). Through the capabilities and resources in these two segments, we believe that we are uniquely qualified to provide integrated solutions involving: inspection to assess condition; engineering assessment to determine fitness for purpose in the context of industry standards and regulatory codes; and mechanical services to repair, rerate or replace based upon the customer’s election. In addition, we are capable of escalating with the customer’s needs, as dictated by the severity of the damage found and the related operating conditions, from standard services to some of the most advanced services and integrated asset integrity and reliability management solutions available in the industry. We also believe that we are unique in our ability to provide these services in three distinct customer demand profiles: (i) turnaround or project services, (ii) call-out services, and (iii) nested or run-and-maintain services.
IHT provides conventional and advanced non-destructive testing services primarily for the process, pipeline and power sectors, pipeline integrity management services, and field heat treating services, as well as associated engineering and condition assessment services. These services can be offered while facilities are running (onstream), during facility turnarounds or during new construction or expansion activities. In addition, IHT provides comprehensive non-destructive testing services and metallurgical and chemical processing services to the aerospace and other industries covering a range of components including finished machined and in-service components. IHT also provides advanced digital imaging including remote digital video imaging.
MS provides solutions designed to serve customers’ unique needs during both the operational (onstream) and off-line states of their assets. Our onstream services include our range of standard to custom-engineered leak repair and composite solutions; emissions control and compliance; hot tapping and line stopping; and online valve insertion solutions, which are delivered while assets are in an operational condition, which maximizes customer production time. Asset shutdowns can be planned, such as a turnaround maintenance event, or unplanned, such as those due to component failure or equipment breakdowns. Our specialty maintenance, turnaround and outage services are designed to minimize customer downtime and are primarily delivered while assets are off-line, often through the use of cross-certified technicians, whose multi-craft capabilities deliver the production needed to achieve tight time schedules. These critical services include on-site field machining; bolted-joint integrity; vapor barrier plug testing; and valve management solutions.
We market our services to companies in a diverse array of heavy industries which include:
•Energy (refining, power, renewables, nuclear, offshore oil and gas and liquefied natural gas);
•Manufacturing and Process (chemical, petrochemical, pulp and paper industries, automotive and mining);
•Midstream (valves, terminals and storage, and pipeline);
•Infrastructure (construction and building, roads, dams, amusement parks, bridges, ports, and railways); and
•Aerospace and Defense.
Basis for presentation. These consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of results for such periods.
Consolidation. The consolidated financial statements include the accounts of our subsidiaries where we have control over operating and financial policies. All material intercompany accounts and transactions have been eliminated in consolidation.
Related party transactions. A related party transaction is any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including the incurrence or issuance of any indebtedness or the guarantee of indebtedness) in which (1) the Company or any of its subsidiaries is a participant, and (2) any Related Party (as defined herein) has or will have a direct or indirect material interest.
A related party is any person who is, or, at any time since the beginning of the Company’s last fiscal year, was (1) an executive officer, director or nominee for election as a director of the Company or any of its subsidiaries, (2) a person with greater than five percent (5%) beneficial interest in the Company, (3) an immediate family member of any of the individuals or
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entities identified in (1) or (2) of this paragraph, and (4) any firm, corporation or other entity in which any of the foregoing individuals or entities is employed or is a general partner or principal or in a similar position or in which such person or entity has a five percent (5%) or greater beneficial interest. Immediate family members include a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and anyone residing in such person’s home, other than a tenant or employee.
Use of estimates. Our accounting policies conform to GAAP in the United States. The preparation of consolidated financial statements in conformity with GAAP requires us 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) assessments of all long-lived assets for possible impairment, (2) estimating various factors used to accrue liabilities for workers’ compensation, auto, medical and general liability, (3) establishing an allowance for uncollectible accounts receivable, (4) estimating the useful lives of our assets, (5) assessing future tax exposure and the realization of tax assets, (6) selecting assumptions used in the measurement of costs and liabilities associated with defined benefit pension plans, (7) assessments of fair value, and (8) estimating achievement of the milestones for compensation cost recognition on our performance-based stock units. Our most significant accounting policies are described below.
Revenue recognition. In accordance with ASC Topic 606, Revenue from Contracts with Customers, (“ASC 606”), we follow a five-step process to recognize revenue: 1) identify the contract with the customer, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations and 5) recognize revenue when the performance obligations are satisfied.
Most of our contracts with customers are short-term in nature and billed on a time and materials basis, while certain other contracts are at a fixed price. Certain contracts may contain a combination of fixed and variable elements. We may act as a principal and have performance obligations to provide the service itself or oversee the services provided by any subcontractors. Revenue is measured based on consideration specified in a customer contract and excludes amounts collected on behalf of third parties, such as taxes assessed by governmental authorities. Generally, in contracts where the amount of consideration is variable, the amount is determinable each period based on our right to invoice (as discussed further below) the customer for services performed to date. As most of our contracts contain only one performance obligation, the allocation of a contract’s transaction price to multiple performance obligations is generally not applicable. Customers are generally billed as we satisfy our performance obligations and payment terms typically range from 30 to 120 days from the invoice date. Billings under certain fixed-price contracts may be based upon the achievement of specified milestones, while some arrangements may require advance customer payment. Our contracts do not include significant financing components since the contracts typically span less than one year.
Revenue is recognized as (or when) the performance obligations are satisfied by transferring control over a service or product to the customer. Revenue recognition guidance prescribes two recognition methods (over time or point in time). Most of our performance obligations qualify for recognition over time because we typically perform our services on customer facilities or assets and customers receive the benefits of our services as we perform. Where a performance obligation is satisfied over time, the related revenue is also recognized over time using the method deemed most appropriate to reflect the measure of progress and transfer of control. For our time and materials contracts, we are generally able to elect the right-to-invoice practical expedient, which permits us to recognize revenue in the amount to which we have a right to invoice the customer if that amount corresponds directly with the value to the customer of our performance completed to date. For our fixed price contracts, as they are short term in nature, we recognize revenue as jobs are completed or costs are incurred. For contracts where control is transferred at a point in time, revenue is recognized at the time control of the asset is transferred to the customer, which is typically upon delivery and acceptance by the customer.
The timing of revenue recognition, billings, and cash collections results in the recognition of trade accounts receivable, contract assets and contract liabilities on the consolidated balance sheets. Trade accounts receivable include billed and unbilled amounts currently due from customers and represent unconditional rights to receive consideration. The amounts due are stated at their net estimated realizable value. Refer to Note 3 - Accounts Receivable for additional information on our trade receivables, unbilled revenue and the allowance for credit losses. Contract assets include unbilled amounts when the revenue recognized exceeds the amount billed to the customer. Amounts may not exceed their net realizable value. Contract assets are included in “Prepaid expenses and other current assets” on our consolidated balance sheet. If we receive advances or deposits from our customers, a contract liability is recorded. Additionally, a contract liability arises if items of variable consideration result in less revenue being recorded than what is billed. We did not have a material amount of contract assets or contract liabilities as of December 31, 2024 and 2023.
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We recognize the incremental costs of obtaining contracts as selling, general and administrative expenses when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less. Costs to fulfill a contract are recorded as assets if they relate directly to a contract or a specific anticipated contract, the costs are incurred to generate or enhance resources that will be used in satisfying performance obligations in the future, and the costs are expected to be recovered. Costs to fulfill a contract recognized as assets primarily consist of labor and material costs and generally relate to engineering and set-up costs incurred prior to when the satisfaction of performance obligations begins. Assets recognized for costs to fulfill a contract are included in the “Prepaid expenses and other current assets” line of the consolidated balance sheet and were not material as of December 31, 2024 and 2023. Such assets are recognized as expenses as we transfer the related goods or services to the customer and recognize the related revenue. All other costs to fulfill a contract are expensed as incurred.
Fair value of financial instruments. As defined in Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value Measurements and Disclosure (“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.
Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts payable, pension assets and debt obligations. The carrying amount of cash, cash equivalents, trade accounts receivable and accounts payable are representative of their respective fair values due to the short-term maturity of these instruments. For additional information regarding our pension assets, see Note 15 - Employee Benefit Plan. The fair value of our debt obligations approximates their carrying value due to the respective interest rate 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 debt obligations. For additional information regarding our debt obligations, see Note 11 - Debt.
Inventory. Except for certain inventories that are valued based on standard cost, we use the first-in, first-out method to value our inventory. Inventory amounts includes material, labor, and certain fixed overhead costs. Inventory is stated at the lower of cost and net realizable value. Inventory quantities on hand are reviewed periodically and carrying value 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:
| Classification | Useful Life | |||||||
| Buildings | ||||||||
| Enterprise Resource Planning (“ERP”) System | ||||||||
| Leasehold improvements | ||||||||
| Machinery and equipment | ||||||||
| Furniture and fixtures | ||||||||
| Computers and computer software | ||||||||
| Automobiles | ||||||||
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Intangible assets. Intangible assets with finite lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with ASC 360-10, Impairment or Disposal of Long-Lived Assets (“ASC 360”).
Cloud-based software arrangements. The costs incurred to implement cloud computing arrangements hosted by third party vendors are capitalized when incurred during the application development phase and recognized as Prepaid expenses and other current assets for the current portion or Other assets for the long-term portion. Implementation costs are subsequently amortized on a straight-line basis over the expected term of the related cloud service, beginning on the date the related software or module is ready for its intended use. The amortization of cloud-based software implementation costs is recorded as a component of Selling, general, and administrative expenses, the same line item as the expense for the associated hosting arrangement. The carrying value of cloud computing implementation costs are tested for impairment when an event or circumstance indicates that the asset might be impaired. Cloud computing arrangement implementation costs are classified within operating activities in the consolidated statements of cash flows.
Impairment of long-lived assets. We review our property and equipment, intangible assets subject to amortization and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset class may not be recoverable. Indicators of potential impairment include: an adverse change in legal factors or in the business climate that could affect the value of the asset in that asset class; an adverse change in the extent or manner in which the asset is used or is expected to be used, or in its physical condition; and current or forecasted operating or cash flow losses demonstrate continuing losses associated with the use of the asset. If indicators of impairment are present, the asset is tested for recoverability by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset. If the expected undiscounted cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying value is written down to fair value, based on the related estimated discounted cash flows. There were no
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 or receivable and related tax expense or benefit 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 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 the reversal of existing taxable temporary differences, taxable income in prior carryback years if carryback is permitted by tax law, 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 and tax planning strategies.
We regularly assess whether it is more likely than not that we will realize the deferred tax assets in the jurisdictions we operate in. We believe future sources of taxable income, reversing temporary differences and other tax planning strategies will be sufficient to realize the deferred tax assets for which no valuation allowance has been established. Our valuation allowance primarily relates to net operating loss carryforwards. While we have considered these factors in assessing the need for additional valuation allowance, there is no assurance that additional valuation allowance would not need to be established in the future if information about future years change. Any changes in valuation allowance would impact our income tax provision and net income (loss) in the period in which such a determination is made. As of December 31, 2024, our deferred tax assets were $119.9 million, less a valuation allowance of $102.2 million. As of December 31, 2024, our deferred tax liabilities were $21.1 million.
Significant judgment is required in assessing the timing and amounts of deductible and taxable items for tax purposes. In accordance with ASC 740-10, we establish reserves for uncertain tax positions when, despite our belief that our tax return positions are supportable, we believe that it is not more likely than not that the position will be sustained upon challenge. When facts and circumstances change, we adjust these reserves through our provision for income taxes. To the extent interest and penalties may be assessed by taxing authorities on any related underpayment of income tax, such amounts have been accrued and are classified as a component of income tax expense (benefit) in our consolidated statements of operations. As of December 31, 2024, our gross unrecognized tax benefits, excluding penalties and interest related to uncertain tax positions, were $1.3 million.
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Workers’ compensation, auto, medical and general liability accruals. In accordance with ASC 450, Contingencies (“ASC 450”), 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 consolidated balance sheet. These reserves are based on historical experience with claims incurred but not received, estimates and judgments made by us, applicable insurance coverage for litigation matters, and are adjusted as circumstances warrant. For workers’ compensation, our retention is $1.0 million and our automobile liability retention is currently $2.0 million. For professional liability claims, our retention is $2.0 million. For general liability claims, we have a retention of $6.0 million. For environmental liability claims, our retention is $1.0 million. We maintain insurance for claims that exceed such retention limits. In 2023, our health care plan for U.S. employees was self-funded and administered by a third party. We purchased appropriate stop-loss coverage for self-funded insurance in 2023. We moved our U.S. employees to a fully funded healthcare policy in 2024 and no longer self-fund our health care plan for U.S. employees. Our insurance is subject to terms, conditions, limitations, and exclusions that may not fully compensate us for all losses. Our estimates and judgments could change based on new information, changes in laws or regulations, changes in our 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.
Accounts receivable and allowance for credit losses. In the ordinary course of business, a portion of our accounts receivable are not collected due to billing disputes, customer bankruptcies or other various reasons. We establish an allowance to account for those accounts receivable that we estimate will eventually be deemed uncollectible. The allowance for credit losses is based on a combination of our historical experience and our review of long outstanding accounts receivable.
We measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This applies to financial assets measured at amortized cost, including trade and unbilled accounts receivable, and requires immediate recognition of lifetime expected credit losses. Significant factors that affect the expected collectability of our receivables include macroeconomic trends and forecasts in the oil and gas, refining, power, and petrochemical markets and changes in our forecasts. For unbilled receivables, we consider them as short-term in nature as they are normally converted to trade receivables within 90 days, thus future changes in economic conditions will not have a significant effect on the credit loss estimate. We have identified the following factors that primarily impact the collectability of our receivables and therefore determine the pools utilized to calculate expected credit losses: (i) the aging of the receivable, (ii) any identification of known collectability concerns with specific receivables and (iii) variances in economic risk characteristics across geographic regions.
For trade receivables, customers typically are provided with payment due date terms in the range of 30 to 120 days upon issuance of an invoice. We have tracked historical loss information for our trade receivables and compiled historical credit loss percentages for different aging categories. We believe that the historical loss information we have compiled is a reasonable basis on which to determine expected credit losses for trade receivables because the composition of the trade receivables is consistent with that used in developing the historical credit-loss percentages as typically our customers and payment terms do not change significantly. Generally, the longer a receivable is outstanding the higher the percentage of the outstanding balance is reported as current expected credit losses. We update the historical loss information for current conditions and reasonable and supportable forecasts that affect the expected collectability of the trade receivable using a loss-rate approach. We have not seen a negative trend in the current economic environment that significantly impacts our historical credit-loss percentages; however, we will continue to monitor for changes that would indicate the historical loss information is no longer a reasonable basis for the determination of our expected credit losses. Our forecasted loss rates inherently incorporate expected macroeconomic trends. A loss-rate method for estimating expected credit losses on a pooled basis is applied for each aging category for receivables that continue to exhibit similar risk characteristics.
To measure expected credit losses for individual receivables with specific collectability risk, we identify specific factors based on customer-specific facts and circumstances that are unique to each customer. Customer accounts with different risk characteristics are separately identified and a specific reserve is determined for these accounts based on the assessed credit risk.
We have also identified the following geographic regions in which to distinguish our trade receivables: (i) the United States, (ii) Canada, (iii) the European Union, (iv) the United Kingdom, and (v) other countries. These geographic regions are considered appropriate as they each operate in different economic environments with different foreign currencies and therefore share similar economic risk characteristics. For each geographic region, we evaluate the historical loss information and determine credit-loss percentages to apply to each aging category and individual receivable with specific risk characteristics. We estimate future expected credit losses based on forecasted changes in gross domestic product and oil demand for each region.
We consider one year from the financial statement reporting date as representing a reasonable forecast period as this period aligns with the expected collectability of our trade receivables. Financial distress experienced by our customers could have an adverse impact on us in the event our customers are unable to remit payment for the products or services we provide
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or otherwise fulfill their obligations to us. In determining the current expected credit losses, we review macroeconomic conditions, market specific conditions, and internal forecasts to identify potential changes in our assessment.
Concentration of credit risk. No single customer accounted for more than 10% of consolidated revenues during the year ended December 31, 2024 or 2023.
Accounting for warrants. We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance.
As of December 31, 2024 and 2023, we had the following warrants:
•Equity-classified warrants issued in connection with the APSC Term Loan (fully paid off in 2023) (“APSC Warrants”), and
•Equity-classified warrants issued in connection with our Subordinated Term Loan Credit Agreement (“Corre Warrants”).
The warrants were accounted for as a component of additional paid-in capital and a debt warrant discount (See Note 11 - Debt). The discount is amortized over the term of the related debt. As of December 31, 2024 and 2023, the unamortized balance of the remaining Corre Warrant discount amounted to $0.1 million and $0.2 million, respectively.
Earnings (loss) per share. The Company computes earnings (loss) per share in accordance with ASC 260-10-45, Earnings per Share, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing net income (loss) 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 exercise of outstanding warrants under the treasury stock method.
Non-cash investing and financing activities. Non-cash investing and financing activities are excluded from the consolidated statements of cash flows and are as follows (in thousands):
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Assets acquired under finance lease | $ | $ | |||||||||
Also, we had $0.4 million, and $2.4 million, of accrued capital expenditures as of December 31, 2024, and 2023 respectively, which are excluded from the consolidated statements of cash flows until paid.
Foreign currency. For subsidiaries whose functional currency is not the U.S. dollar, assets and liabilities are translated at the exchange rates as of end of the period 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 income (loss) in the consolidated statements of shareholders’ equity. Foreign currency transaction gains and losses are included in our statements of operations.
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 and 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
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with GAAP, actual results that differ from the assumptions are accumulated and are subject to amortization 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.
Share-based compensation. We account for share-based compensation to employees in accordance with ASC 718, Compensation—Stock Compensation (“ASC 718”). Under ASC 718, we measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and, for those awards subject only to service condition, recognizes the costs on a straight-line basis over the period the employee is required to provide service in exchange for the award, which generally is the vesting period. For awards with performance and service conditions, we begin recording share-based compensation when achieving the performance criteria is probable.
The fair value of restricted stock units and performance of stock units is determined based on the number of shares granted and the quoted price of our common stock. We estimate a forfeiture rate to calculate the share-based compensation expense related to our awards. Estimated forfeitures are determined based on historical data and we continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Quarterly changes in the estimated forfeiture rate can have a significant impact on our share-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture estimate is changed.
Our performance stock units vest based on certain performance criteria. Achievement of the milestones must be probable before we begin recording share-based compensation expense. When the performance-based vesting criteria is considered probable, we begin to recognize compensation expense at that time. In the period that achievement of the performance-based criteria is deemed probable, US GAAP requires the immediate recognition of all previously unrecognized compensation since the original grant date. As a result, compensation expense recorded in the period that achievement is deemed probable could include a substantial amount of previously unrecorded compensation expense related to the prior periods. For any share-based awards where performance-based vesting criteria is no longer considered probable, previously recognized compensation cost would be reversed.
Reclassifications. Certain amounts in prior periods have been reclassified to conform to the current year presentation. Such reclassifications did not have any effect on our financial condition or results of operations as previously reported.
Newly Adopted Accounting Standards
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires enhanced disclosures regarding significant segment expenses and other segment items. The guidance requires public entities to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for all fiscal years beginning after December 15, 2023 and for interim periods beginning after December 15, 2024, and is applied retrospectively to all periods presented. We adopted ASU 2023-07 during the year ended December 31, 2024. The adoption of ASU 2023-07 did not have a material impact on our Consolidated Financial Statements.
Accounting Standards Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires entities to provide additional information in the rate reconciliation and additional disclosures about income taxes paid. This guidance requires public entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. ASU 2023-09 is effective for all annual periods beginning after December 31, 2024, and is applied prospectively, while retrospective application is permitted. We are currently evaluating the effect this guidance will have on our tax disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires the disaggregation of certain expenses in the notes of the financials, to provide enhanced transparency into the expense captions presented on the face of the income statement. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027 and may be applied either prospectively or retrospectively. The Company is currently evaluating the impact that ASU 2024-03 will have on its related disclosures, including the adoption date and transition method.
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2. REVENUE
Disaggregation of revenue. Essentially all of our revenues are associated with contracts with customers. A disaggregation of our revenue from contracts with customers by geographic region, by reportable operating segment and by service type is presented below:
Geographic area (in thousands):
| Twelve Months Ended December 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| United States | Canada | Other Countries | Total | |||||||||||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||||||||||||
| IHT | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| MS | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Twelve Months Ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||
| United States | Canada | Other Countries | Total | |||||||||||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||||||||||||||
| IHT | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| MS | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Revenue by operating segment and service type (in thousands):
| Twelve Months Ended December 31, 2024 | |||||||||||||||||||||||||||||
| Non-Destructive Evaluation and Testing Services | Repair and Maintenance Services | Heat Treating | Other | Total | |||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||
| IHT | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| MS | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Twelve Months Ended December 31, 2023 | |||||||||||||||||||||||||||||
| Non-Destructive Evaluation and Testing Services | Repair and Maintenance Services | Heat Treating | Other | Total | |||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||
| IHT | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| MS | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
For additional information on our reportable operating segments and geographic information, refer to Note 17 - Segment and Geographic Disclosures.
Remaining performance obligations. As permitted by ASC 606, Revenue from Contracts with Customers, we have elected not to disclose information about remaining performance obligations where (i) the performance obligation is part of a contract that has an original expected duration of one year or less or (ii) when we recognize revenue from the satisfaction of the performance obligation in accordance with the right-to-invoice practical expedient, which permits us to recognize revenue in the amount to which we have a right to invoice the customer if that amount corresponds directly with the value to the customer of our performance completed to date. As most of our contracts with customers are short-term in nature and billed on a time and material basis, there were no material amounts of remaining performance obligations as of December 31, 2024 and 2023.
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3. ACCOUNTS RECEIVABLE
A summary of accounts receivable as of December 31, 2024 and 2023 is as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Trade accounts receivable | $ | $ | |||||||||
| Unbilled revenues | |||||||||||
| Allowance for credit losses | ( | ( | |||||||||
| Accounts receivable, net | $ | $ | |||||||||
The following table shows a rollforward of the allowance for credit losses (in thousands):
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Balance at beginning of period | $ | $ | |||||||||
| Provision for expected credit losses | |||||||||||
| Recoveries collected | ( | ( | |||||||||
| Write-offs | ( | ( | |||||||||
| Foreign exchange effects | ( | ||||||||||
| Balance at end of period | $ | $ | |||||||||
4. INVENTORY
A summary of inventory as of December 31, 2024 and 2023 is as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Raw materials | $ | $ | |||||||||
Work-in-progress | |||||||||||
| Finished goods | |||||||||||
| Inventory | $ | ||||||||||
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
A summary of prepaid expenses and other current assets as of December 31, 2024 and 2023 is as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Insurance receivables | $ | $ | |||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
Prepaid expenses and other current assets | $ | $ | |||||||||
The insurance receivable relates to receivables from our third-party insurance providers for a legal claim that is recorded in other accrued liabilities, refer to Note 9 - Other Accrued Liabilities. Insurance receivables will be collected from our third-party insurance providers for litigation matters that have been settled, or are pending settlement, and where the deductibles have been satisfied. The prepaid expenses primarily relate to prepaid insurance and other expenses that have been paid in advance of the coverage period.
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6. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment as of December 31, 2024 and 2023 is as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Land | $ | $ | |||||||||
| Buildings and leasehold improvements | |||||||||||
| Machinery and equipment | |||||||||||
| Furniture and fixtures | |||||||||||
| Capitalized ERP system development costs | |||||||||||
| Computers and computer software | |||||||||||
| Automobiles | |||||||||||
| Construction in progress | |||||||||||
| Total | $ | $ | |||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||
| Property, plant, and equipment, net | $ | $ | |||||||||
7. INTANGIBLE ASSETS
A summary of intangible assets as of December 31, 2024 and 2023 is as follows (in thousands):
| December 31, 2024 | |||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
| Customer relationships | $ | $ | ( | $ | |||||||||||||
| Trade names | ( | ||||||||||||||||
| Technology | ( | ||||||||||||||||
| Licenses | ( | ||||||||||||||||
| Intangible assets | $ | $ | ( | $ | |||||||||||||
| December 31, 2023 | |||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
| Customer relationships | $ | $ | ( | $ | |||||||||||||
| Trade names | ( | ||||||||||||||||
| Technology | ( | ||||||||||||||||
| Licenses | ( | ||||||||||||||||
| Intangible assets | $ | $ | ( | $ | |||||||||||||
Amortization expense on intangible assets for the years ended December 31, 2024 and 2023 was $12.4 million and $12.7 million, respectively, and is included in “Selling, general and administrative expenses” on our Consolidated Statements of
41
Operations. Amortization expense for intangible assets is forecasted to be approximately $12.4 million, $12.0 million, $11.3 million, $6.4 million, and $5.4 million in 2025, 2026, 2027, 2028 and 2029, respectively.
The weighted-average amortization period for intangible assets subject to amortization was 13.8 13.9 years for customer relationships, 13.8 years for trade name and 10.0 years for technology.
8. OTHER ASSETS
A summary of other assets as of December 31, 2024 and 2023 is as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Long term software implementation costs | $ | $ | |||||||||
| Long term deposit | |||||||||||
| Escrow fund | |||||||||||
| Deferred financing charges | |||||||||||
| Non-current income tax receivable | |||||||||||
| Other non-current assets | |||||||||||
| Other assets | $ | $ | |||||||||
As of December 31, 2024, the Company had $19.0 million of gross capitalized cloud-based software implementation costs and $8.9 million of related accumulated amortization, for a net balance of $10.1 million, consisting of $0.9 million recorded within Prepaid expenses and other current assets, and $9.2 million recorded within Other assets (included in the table above) on the Company’s consolidated balance sheets.
As of December 31, 2023, the Company had $13.7 million of gross capitalized cloud-based software implementation costs and $6.6 million of related accumulated amortization, for a net balance of $7.1 million, consisting of $1.7 million recorded within Prepaid expenses and other current assets, and $5.4 million recorded within Other assets (included in the table above) on the Company’s consolidated balance sheets.
For the years ended December 31, 2024 and 2023, the Company amortized $2.3 million and $2.9 million, respectively, of cloud-based software implementation costs.
9. OTHER ACCRUED LIABILITIES
A summary of other accrued liabilities as of December 31, 2024 and 2023 is as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Legal and professional accruals | $ | $ | |||||||||
| Payroll and other compensation expenses | |||||||||||
| Property, sales and other non-income related taxes | |||||||||||
| Accrued interest | |||||||||||
| Insurance accruals | |||||||||||
| Volume discounts | |||||||||||
| Other accruals | |||||||||||
| Other accrued liabilities | $ | $ | |||||||||
42
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10. INCOME TAXES
For the year ended December 31, 2024, our income tax provision resulted in an effective tax rate of 9.4 %. For the year ended December 31, 2023, our income tax provision resulted in an effective tax rate of 6.4 %. Our income tax provision for the year ended December 31, 2024 and 2023 was $3.3 million and $4.6 million, respectively, and includes federal, state and foreign taxes.
The components of our tax provision and benefit were as follows (in thousands):
| Current | Deferred | Total | |||||||||||||||
| Twelve months ended December 31, 2024: | |||||||||||||||||
| U.S. Federal | $ | $ | ( | $ | |||||||||||||
| State & local | |||||||||||||||||
| Foreign jurisdictions | ( | ||||||||||||||||
| Tax provision | $ | $ | ( | $ | |||||||||||||
| Twelve months ended December 31, 2023: | |||||||||||||||||
| U.S. Federal | $ | ( | $ | $ | |||||||||||||
| State & local | |||||||||||||||||
| Foreign jurisdictions | |||||||||||||||||
| Tax provision | $ | $ | $ | ||||||||||||||
The components of loss before income taxes for the years ended December 31, 2024 and 2023 were as follows (in thousands):
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Domestic | $ | ( | $ | ( | |||||||
| Foreign | |||||||||||
Loss before income taxes | $ | ( | $ | ( | |||||||
The income tax provision in 2024 and 2023, respectively, differed from the amounts computed by applying the U.S. federal income tax rate of 21
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Loss before income taxes | $ | ( | $ | ( | |||||||
Computed income tax benefit at statutory rate | ( | ( | |||||||||
| State income taxes, net of federal benefit | ( | ||||||||||
| Foreign tax rate differential | |||||||||||
| Non-cash compensation | |||||||||||
| Deferred taxes on investment in foreign subsidiaries | ( | ||||||||||
| Non-deductible expenses | |||||||||||
| Foreign withholding | |||||||||||
| Prior year tax adjustments | ( | ||||||||||
| Valuation allowance | |||||||||||
| Other | |||||||||||
Total expense for income tax | $ | $ | |||||||||
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| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accrued compensation and benefits | $ | $ | |||||||||
| Receivables | |||||||||||
| Inventory | |||||||||||
| Share based compensation | |||||||||||
| Other accrued liabilities | |||||||||||
| Tax credit carry forward | |||||||||||
| Interest expense limitation | |||||||||||
| Goodwill and intangible costs | |||||||||||
Debt related cost | |||||||||||
| Net operating loss carry forwards | |||||||||||
| Other | |||||||||||
| Deferred tax assets | |||||||||||
| Less: Valuation allowance | ( | ( | |||||||||
| Deferred tax assets, net | $ | $ | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant and equipment | ( | ( | |||||||||
| Unremitted earnings of foreign subsidiaries | ( | ( | |||||||||
| Other | ( | ( | |||||||||
| Deferred tax liabilities | ( | ( | |||||||||
Net deferred tax liability | $ | ( | $ | ( | |||||||
As of December 31, 2024, a valuation allowance of $102.2 million was recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized, primarily attributable to the domestic operations. A significant factor of negative evidence evaluated for the domestic jurisdiction was the cumulative pre-tax loss incurred over the three-year period ended December 31, 2024.
As of December 31, 2024, we had net operating loss carryforwards for U.S. federal income tax purposes of $134.0 million, all of which have an indefinite carryforward period. These carryforwards are available, subject to certain limitations such as mentioned above, to offset future taxable income. Further, we have state net operating loss carryforwards of $230.0 million with $177.5 million expiring on various dates through 2043 and $52.5 million with an indefinite carryforward period.
As of December 31, 2024, we had interest expense carryforward for U.S. income tax purposes of $227.5 million. The entire $227.5 million has an indefinite carryforward period. These carryforwards are available, subject to certain limitations, to offset future taxable income.
As of December 31, 2024, we had $2.7 million of tax credits that will expire on various dates through 2037 if not utilized.
As of December 31, 2024, we had foreign net operating loss carryforwards totaling $18.8 million. Of this amount, $0.2 million will expire on various dates through 2033 and $18.6 million has an unlimited carryforward period.
As of December 31, 2024, none of our undistributed earnings of foreign operations were considered to be permanently reinvested overseas. As of December 31, 2024, the deferred tax liability related to undistributed earnings of foreign subsidiaries was $2.8 million.
We file income tax returns in the U.S. federal and state jurisdictions as well as various foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years prior to 2016. We are currently under audit in one of the states in which we do substantial business. As of December 31, 2024, we recorded a $0.9 million tax liability in our uncertain positions related to this audit due to retroactive changes included in final regulations issued by the state. Certain Dutch entities were also under audit. We do not anticipate any material adjustments related to these examinations.
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Periodic examinations of our tax filings occur by the taxing authorities for the jurisdictions in which we conduct business. These examinations review the significant positions taken on our returns, including the timing and amount of income and deductions reported, as well as the allocation of income among multiple taxing jurisdictions. We do not expect any material adjustments to result from positions taken on our income tax returns.
As of December 31, 2024, $2.2 million of unrecognized tax benefits would affect our effective tax rate. We estimate the uncertain tax benefits that may be recognized within the next twelve months will not be material. Our policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense.
The following table summarizes a reconciliation of gross unrecognized tax benefits, excluding penalties and interest, for the year ended December 31, 2024 and 2023 (in thousands):
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Unrecognized tax benefits - January 1 | $ | $ | |||||||||
| Additions based on tax positions related to prior years | |||||||||||
Reductions based on tax positions related to prior years | ( | ||||||||||
| Reductions resulting from a lapse of the applicable statute of limitations | ( | ( | |||||||||
| Unrecognized tax benefits - December 31 | $ | $ | |||||||||
We have recorded the unrecognized tax benefits in other long-term liabilities in the consolidated balance sheets. As of December 31, 2024 and 2023, the total amount of accrued interest and penalties related to unrecognized tax benefits was $0.9 million and $0.8 million, respectively. There was approximately $0.1 million and $0.2 million of interest or penalties related to unrecognized tax benefits that were recorded in income tax expense for the years ended December 31, 2024, and 2023, respectively.
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11. DEBT
As of December 31, 2024 and 2023, our total long-term debt and finance lease obligations are summarized as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
2022 ABL Credit Facility1 | $ | $ | |||||||||
ME/RE Loans1 | |||||||||||
Uptiered Loan1 | |||||||||||
Incremental Term Loan1 | |||||||||||
Equipment Financing Loan | |||||||||||
| Total | |||||||||||
Finance lease obligations2 | |||||||||||
| Total debt and finance lease obligations | |||||||||||
| Current portion of long-term debt and finance lease obligations | ( | ( | |||||||||
| Total long-term debt and finance lease obligations, less current portion | $ | $ | |||||||||
_________________
1 Comprised of principal amount outstanding, less unamortized debt issuance costs. See below for additional information.
2 For information on our finance lease obligations see Note 12 - Leases.
The following table summarizes scheduled maturities of our debt for the years succeeding December 31, 2024 (in thousands):
| December 31 | |||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
Total1 | $ | ||||
1 The total excludes unamortized debt issuance cost of $8.4 million.
On March 12, 2025, we entered into certain debt refinancing transactions with our existing and new lenders, which resulted in:
•full payoff of the outstanding balance under Delayed Draw Term Loan,
•full payoff of the outstanding balance under the ME/RE Loans,
•full payoff of the outstanding balance under the Incremental Term Loan, and
•partial payoff of the outstanding balance under the Uptiered Loan.
Refer to Note 19 - Subsequent Events for additional details about the transactions.
2022 ABL Credit Facility
On February 11, 2022, we entered into a credit agreement, with the lender parties thereto, and Eclipse Business Capital, LLC, a Delaware limited liability company, as agent (the “ABL Agent”) (such agreement, as amended by Amendment No.1 dated as of May 6, 2022, Amendment No.2 dated as of November 1, 2022, Amendment No.3 dated as of June 16, 2023 (“ABL Amendment No. 3”), Amendment No.4 dated as of March 6, 2024 and Amendment No.5 dated as of September 30, 2024 (“ABL Amendment No.5”), the “2022 ABL Credit Agreement”).
Available funding commitments to us under the 2022 ABL Credit Agreement, subject to certain conditions, include a revolving credit line in an amount of up to $130.0 million to be provided by certain affiliates of the ABL Agent, with a $35.0 million sublimit for swingline borrowings, and a $26.0 million sublimit for issuances of letters of credit (the “Revolving Credit Loans”). We have fully drawn on the delayed draw term loan of $35.0 million (the “Delayed Draw Term Loan”) provided by Corre Partners Management, LLC (“Corre”) and certain of its affiliates, and on the ME/RE Loans (collectively, the Revolving Credit Loans, the Delayed Draw Term Loan and the ME/RE Loans, and the“2022 ABL Credit Facility”).
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Our obligations under the 2022 ABL Credit Agreement are guaranteed by certain of our direct and indirect subsidiaries referenced below as the “ABL Guarantors” and, together with the Company, the “ABL Loan Parties.” Our obligations under the 2022 ABL Credit Facility are secured on a first priority basis by, among other things, accounts receivable, deposit accounts, securities accounts and inventory of the ABL Loan Parties (collectively, the “ABL Priority Collateral”) and are secured on a lower priority basis by substantially all of the other assets of the ABL Loan Parties, subject to the terms of the Intercreditor Agreement (as defined below). Availability under the revolving credit line is based on a percentage of the value of qualifying accounts receivable and inventory, reduced by certain reserves.
On September 30, 2024, the Company entered into ABL Amendment No.5 to the 2022 ABL Credit Agreement to, among other things:
(i) extend the scheduled maturity date from August 11, 2025 to September 30, 2027;
(ii) amend the applicable margin for Delayed Draw Term Loans from a flat rate of 10.00 % for SOFR Loans (as defined in the 2022 ABL Credit Agreement) and 9.00 % for Base Rate Loans (as defined in the 2022 ABL Credit Agreement) to a rate based on EBITDA ranging from 8.50 % to 10.00 % for SOFR Loans and 7.50 % to 9.00 % for Base Rate Loans;
(iii) amend the applicable margin for Revolving Credit Loans from a rate based on EBITDA ranging from 4.15 % to 4.65 % for SOFR Loans and 3.15 % to 3.65 % for Base Rate Loans to a rate based on both EBITDA and Average Historical Excess Availability (as defined in the 2022 ABL Credit Agreement) ranging from 3.50 % to 4.25 % for SOFR Loans and 2.50 % to 3.25 % for Base Rate Loans;
(iv) amend the applicable margin for ME/RE Loans from a flat rate of 5.75 % for SOFR Loans to a flat rate of 5.00 % for SOFR Loans;
(v) amend the definitions of “Borrowing Base” and “Consolidated Fixed Charge Coverage Ratio” as well as related definitions to expand availability under the Revolving Credit Facility (as defined in the 2022 ABL Credit Agreement);
(vi) add a springing financial covenant requiring Excess Availability (as defined in the 2022 ABL Credit Agreement) to be above $7,500,000 only if the Consolidated Fixed Charge Coverage Ratio falls below 0.85 x for twelve-month periods ending on or prior to December 31, 2024 and 1.00 x for twelve-month periods ending after December 31, 2024; and
(vii) amend the applicable prepayment premium for Delayed Draw Term Loans and ME/RE Loans from a rate ranging from 0 % to 1 % to a rate ranging from 0 % to 2 % based on the date of prepayment.
ABL Amendment No.5 was accounted for in accordance with ASC 470-60, Troubled Debt Restructuring, and no gain or loss was recognized. Amendment fees of $0.9 million related to the Revolving Credit Loans are deferred and amortized to interest expense over the term of the 2022 ABL Credit Agreement.
The terms of the 2022 ABL Credit Facility are described in the table below (dollar amounts are presented in thousands):
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| Revolving Credit Loans | Delayed Draw Term Loan | ||||||||||
Scheduled maturity date1 | 9/30/2027 | 9/30/2027 | |||||||||
Stated interest rate | SOFR + applicable margin (base + applicable margin) | SOFR + applicable margin (base + applicable margin) | |||||||||
| Actual interest rate: | |||||||||||
| 12/31/2024 | |||||||||||
| 12/31/2023 | |||||||||||
| Interest payments | monthly | monthly | |||||||||
| Cash paid for interest | |||||||||||
| 12/31/2024 | $ | $ | |||||||||
| 12/31/2023 | $ | $ | |||||||||
Balances at 12/31/2024 | |||||||||||
Principal balance | $ | $ | |||||||||
Unamortized balance of debt issuance cost | NA2 | $( | |||||||||
Net carrying balance | $ | $ | |||||||||
Balances at 12/31/2023 | |||||||||||
Principal balance | $ | $ | |||||||||
Unamortized balance of debt issuance cost | NA2 | $ | |||||||||
Net carrying balance | $ | $ | |||||||||
| Unamortized balance of deferred financing cost | |||||||||||
| 12/31/2024 | $ | NA2 | |||||||||
| 12/31/2023 | $ | NA2 | |||||||||
| Available amount at 12/31/2024 | $ | $ | |||||||||
1 Amended maturity date is the earlier of (i) the Scheduled Maturity Date and (ii) the Springing Maturity Date (91 days prior to Scheduled Maturity Date of the A&R Term Loan Credit Agreement (defined below), or October 1, 2026).
2 Not applicable
The “applicable margin” in the table above is defined as a rate of 3.15 %, 3.40 % or 3.65 % for Base Rate Loans with a 2.00 % base rate floor and a rate of 4.15 %, 4.40 % or 4.65 % for Adjusted Term SOFR Loans with a 1.00 % SOFR floor, in each case depending on the amount of EBITDA (as defined in ABL Amendment No.3 to the 2022 ABL Credit Agreement) as of the most recent measurement period as reported in a monthly compliance certificate. Base rate is used when SOFR is not available. The fee for undrawn revolving amounts is 0.50 %.
We may make voluntary prepayments of the loans under the 2022 ABL Credit Facility from time to time, subject, in the case of the Delayed Draw Term Loan, to certain conditions. Mandatory prepayments are also required in certain circumstances, including with respect to the Delayed Draw Term Loan, if the ratio of aggregate value of the collateral under the 2022 ABL Credit Facility to the sum of the Delayed Draw Term Loan plus revolving facility usage outstanding is less than 130 %. In addition, mandatory prepayments are required for the Delayed Draw Term Loan, equal to 100 % of all net cash proceeds attributable to certain European collateral realized in connection with the disposition of the assets.
Amounts repaid under the Revolving Credit Loans may be re-borrowed, subject to compliance with the borrowing base and the other conditions set forth in the 2022 ABL Credit Agreement. Amounts repaid under the Delayed Draw Term Loan cannot be re-borrowed. Certain permanent repayments of the 2022 ABL Credit Facility loans are subject to the payment of a premium ranging from 0 % to 2 % depending on the date of prepayment as specified in the 2022 ABL Credit Agreement. The 2022 ABL Credit Agreement contains customary conditions to borrowings and covenants, including covenants that restrict our ability to sell assets, make changes to the nature of our business, engage in mergers or acquisitions, incur, assume or permit to exist additional indebtedness and guarantees, create or permit to exist liens, pay dividends, issue equity instruments, make distributions or redeem or repurchase capital stock or make other investments, engage in transactions with affiliates and make payments in respect of certain debt. The 2022 ABL Credit Agreement following the execution of Amendment No.3 also requires that we will not exceed $15.0 million in unfinanced capital expenditures in any CapEx Test Period (as defined therein); provided we shall be permitted to make up to $25.0 million in unfinanced capital expenditures in any CapEx Test Period (as
49
defined therein) if we maintain a total leverage ratio of less than or equal to 2.00 to 1.00 on a pro forma basis immediately after giving effect to each such unfinanced capital expenditure in excess of the capital expenditure limit. In addition, the 2022 ABL Credit Agreement includes customary events of default, the occurrence of which may require that we pay an additional 2.0 % interest on the outstanding loans under the 2022 ABL Credit Facility and that the debt becomes payable immediately. As of December 31, 2024, we are in compliance with the covenants.
Direct and incremental costs associated with the issuance of the 2022 ABL Credit Facility were approximately $8.4 million and were capitalized as deferred financing costs. These costs were fully amortized as of June 16, 2023 due to the Maturity Reserve Trigger Date provision that was previously applicable. We incurred additional financing cost of $0.4 million related to the ABL Amendment No.3 and $0.9 million related to the ABL Amendment No.5. These costs were capitalized and are amortized on a straight-line basis over the amended term of the 2022 ABL Credit Facility.
As of December 31, 2024, we had $77.9 million outstanding under the Revolving Credit Loans and $35.0 million outstanding under the Delayed Draw Term Loans. There were $9.5 million in outstanding letters of credit secured by these instruments, which are off-balance sheet.
ME/RE Loans
The ABL Amendment No.3, in addition to making certain other changes to the 2022 ABL Credit Facility, provided us with $27.4 million of term loans (the “ME/RE Loans”). Our obligations in respect of the ME/RE Loans are guaranteed by the ABL Guarantors. The ME/RE Loans under the 2022 ABL Credit Agreement are secured on a first priority basis by, among other things, certain real estate and machinery and equipment (the “Specified ME/RE Collateral”) and are secured on a lower priority basis by substantially all of the other assets of the ABL Loan Parties. The ME/RE Loans were drawn in full on June 16, 2023 and were used to pay off the remaining amounts owed under the existing APSC Term Loan, discussed below.
On September 30, 2024, the Company entered into ABL Amendment No.5. ABL Amendment No.5 amended the 2022 ABL Credit Agreement to, among other things, provide for the following changes to the ME/RE Loans:
(i) extended the scheduled maturity date from August 11, 2025 to September 30, 2027;
(ii) amended the applicable margin for ME/RE Loans from a flat rate of 5.75 % for SOFR Loans (as defined in the 2022
ABL Credit Agreement) to a flat rate of 5.00 % for SOFR Loans; and
(iii) amend the applicable prepayment premium for ME/RE Loans from a rate ranging from 0 % to 1 % to a rate ranging from 0 % to 2 % based on the date of prepayment.
The terms of ME/RE Loans are described in the table below (dollar amounts are presented in thousands):
50
Scheduled maturity date1 | 9/30/2027 | |||||||
Stated interest rate | SOFR + | |||||||
| Principal payments | $ | |||||||
Effective interest rate2 | ||||||||
| 12/31/2024 | ||||||||
| 12/31/2023 | ||||||||
Actual cash interest rate | ||||||||
| 12/31/2024 | ||||||||
| 12/31/2023 | ||||||||
| Interest payments | monthly | |||||||
| Cash paid for interest | ||||||||
| 12/31/2024 | $ | |||||||
| 12/31/2023 | $ | |||||||
| Balances at 12/31/2024 | ||||||||
| Principal balance | $ | |||||||
| Unamortized balance of debt issuance cost | $( | |||||||
| Net carrying balance | $ | |||||||
Balances at 12/31/2023 | ||||||||
| Principal balance | $ | |||||||
| Unamortized balance of debt issuance cost | $( | |||||||
| Net carrying balance | $ | |||||||
| Available amount at 12/31/2024 | $ | |||||||
_________________
1 Amended maturity date is the earlier of (i) the Scheduled Maturity Date and (ii) the Springing Maturity Date (91 days prior to Scheduled Maturity Date of the A&R Term Loan Credit Agreement, or October 1, 2026).
2 The effective interest rate as of December 31, 2024, consisted of a 9.67 % variable interest rate paid in cash and an additional 3.30 % due to non-cash amortization of the related debt issuance costs. The effective interest rate as of December 31, 2023, consisted of a 11.21 % variable interest rate paid in cash and an additional 6.19 % due to amortization of the related debt issuance costs.
We may make voluntary prepayments of the ME/RE Loans from time to time. Mandatory prepayments are required in certain instances when sales of assets are completed that are related to the Specified ME/RE Collateral (as defined in the 2022 ABL Credit Agreement), subject to certain prepayment premiums (subject to certain exceptions), plus accrued and unpaid interest. The remaining unpaid principal balance of the ME/RE loans at maturity will be $18.2 million. The ME/RE Loans are governed by the 2022 ABL Credit Agreement and the same restrictive covenants described above under 2022 ABL Credit Facility apply.
Direct and incremental costs associated with the issuance of the ME/RE Loans in connection with ABL Amendment No. 3 were approximately $2.2 million and were deferred and presented as a direct deduction from the carrying amount of the related debt and are amortized over the term of the ME/RE Loans.
APSC Term Loan
On June 16, 2023, we used the proceeds from the ME/RE Loans and borrowings under the 2022 ABL Credit Facility to repay the total outstanding APSC Term Loan (as defined below) balance of $35.5 million plus the applicable prepayment premium, resulting in a loss on debt extinguishment of $1.6 million and the termination of this facility.
In the previous years, we entered into that certain Term Loan Credit Agreement, dated December 18, 2020, (as amended, the “APSC Term Loan Credit Agreement”) with APSC as agent, pursuant to which we borrowed $250.0 million (the “APSC Term Loan”).
51
Amended and Restated Term Loan Credit Agreement - Uptiered Loan and Incremental Term Loan
On November 9, 2021, we entered into a credit agreement (as amended by Amendment No.1 dated as of November 30, 2021, Amendment No.2 dated as of December 6, 2021, Amendment No.3 dated as of December 7, 2021, Amendment No.4 dated as of December 8, 2021, Amendment No.5 dated as of February 11, 2022, Amendment No.6 dated as of May 6, 2022, Amendment No.7 dated as of June 28, 2022, Amendment No.8 dated as of October 4, 2022, Amendment No.9 dated as of November 1, 2022, Amendment No.10 dated as of November 4, 2022, Amendment No.11 dated as of November 21, 2022 and Amendment No.12 dated as of March 29, 2023, the “Subordinated Term Loan Credit Agreement”) with Cantor Fitzgerald Securities, as agent, and the lenders party thereto providing for an unsecured approximately $123.1 million delayed draw subordinated term loan facility. Pursuant to the Subordinated Term Loan Credit Agreement, we borrowed $22.5 million on November 9, 2021, and an additional $27.5 million on December 8, 2021. On October 4, 2022, an additional approximately $57.0 million was added to the outstanding principal amount under the Subordinated Term Loan Credit Agreement in exchange for an equivalent amount of the Company’s senior unsecured 5.00 % Convertible Senior Notes due 2023 (the “Notes”) held by Corre.
On June 16, 2023, we entered into an amendment and restatement of that certain subordinated term loan credit agreement dated as of November 9, 2021 (such agreement, as amended and restated, and as further amended by Amendment No.1 dated March 6, 2024, and Amendment No. 2 dated September 30, 2024, the “A&R Term Loan Credit Agreement”) among the Company, as borrower, the guarantors party thereto, the lenders from time-to-time party thereto and Cantor Fitzgerald Securities, as agent (the “A&R Term Loan Agent”). Additional funding commitments under the A&R Term Loan Credit Agreement, subject to certain conditions, included a $57.5 million senior secured first lien term loan (the “Incremental Term Loan”) provided by Corre and certain of its affiliates, consisting of a $37.5 million term loan tranche and a $20.0 million delayed draw tranche. Amounts outstanding under the existing subordinated term loan credit agreement (the “Uptiered Loan”) became senior secured obligations of the Company and the A&R Term Loan Guarantors (as defined below) and are secured on a pari passu basis with the Incremental Term Loan, on the terms described below.
On July 31, 2023, $42.5 million, made up of $37.5 million of the term loan tranche and $5.0 million of the delayed draw tranche, of the $57.5 million Incremental Term Loan under the A&R Term Loan Credit Agreement was drawn down and the proceeds thereof were used to repay all of the remaining outstanding Notes that matured on August 1, 2023. We borrowed an additional $5.0 million on October 6, 2023. The remaining availability of the delayed draw tranche of $10.0 million will be used, subject to certain maximum liquidity conditions, for working capital purposes.
On September 30, 2024 we entered into Amendment No.2 (“ Term Loan Amendment No.2”) to the A&R Term Loan Credit Agreement. Term Loan Amendment No.2 amended the A&R Term Loan Credit Agreement to, among other things, make conforming changes to the A&R Term Loan Credit Agreement, consistent with the changes being made to the 2022 ABL Credit Agreement by ABL Amendment No.5.
The Company’s obligations under the A&R Term Loan Credit Agreement are guaranteed by certain direct and indirect material subsidiaries of the Company (the “A&R Term Loan Guarantors” and, together with the Company, the “A&R Term Loan Parties”). The obligations of the A&R Term Loan Parties are secured on a second or lower priority basis by the ABL Priority Collateral and the Specified ME/RE Collateral, and on a first priority basis by substantially all of the other assets of the A&R Term Loan Parties, subject to the terms of an intercreditor agreement (the “Intercreditor Agreement”) between the A&R Term Loan Agent, the ABL Agent and the A&R Term Loan Parties, that sets forth the priorities in respect of the collateral and certain related agreements with respect thereto.
We may make voluntary prepayments of the loans under the A&R Term Loan Credit Agreement from time to time, and we are required in certain instances related to change of control, asset sales, equity issuances, non-permitted debt issuances and with annual excess cash flow (as defined in the A&R Term Loan Credit Agreement), to make mandatory prepayments of the loans under the A&R Term Loan Credit Agreement, subject to certain prepayment premiums as specified in the A&R Term Loan Credit Agreement (subject to certain exceptions), plus accrued and unpaid interest.
The A&R Term Loan Credit Agreement contains certain customary conditions to borrowings, events of default and affirmative, negative, and financial covenants (including a net leverage ratio and maximum annual capital expenditures covenant, all as described in the A&R Term Loan Credit Agreement). As of December 31, 2024, we were in compliance with the covenants.
Further, the A&R Term Loan Credit Agreement includes certain customary events of default, the occurrence of which may require an additional 2.00 % interest on the outstanding loans and other obligations under the A&R Term Loan Credit Agreement and the debt may become payable immediately.
The terms of Uptiered Loan / Subordinated Term Loan and Incremental Term Loan are described in the table below (dollar amounts are presented in thousands):
52
Uptiered Loan | Incremental Term Loan | ||||||||||
| Maturity date | 12/31/2027 (12/31/2026 if outstanding balance is greater than $ | 12/31/2026 | |||||||||
| Stated interest rate | |||||||||||
| 12/31/2024 | |||||||||||
| 12/31/2023 | |||||||||||
| Principal payments | at maturity | $ | |||||||||
| Effective interest rate | |||||||||||
| 12/31/2024 | |||||||||||
| 12/31/2023 | |||||||||||
| Interest payments | cash quarterly/PIK monthly | quarterly | |||||||||
Cash paid for interest | |||||||||||
| 12/31/2024 | $ | $ | |||||||||
| 12/31/2023 | $ | $ | |||||||||
| PIK interest added to principal | |||||||||||
| 12/31/2024 | $ | $ | |||||||||
| 12/31/2023 | $ | $ | |||||||||
| Balances at 12/31/2024 | |||||||||||
Principal balance4 | $ | $ | |||||||||
| Unamortized balance of debt issuance cost | $( | $( | |||||||||
| Net carrying balance | $ | $ | |||||||||
| Balances at 12/31/2023 | |||||||||||
Principal balance4 | $ | $ | |||||||||
| Unamortized balance of debt issuance cost | $( | $( | |||||||||
| Net carrying balance | $ | $ | |||||||||
| Available amount at 12/31/2024 | $ | $ | |||||||||
___________
1 The effective interest rate on the Uptiered Loan as of December 31, 2024, consisted of a 13.50 % stated interest rate paid in PIK and cash and an additional 1.06 % due to the amortization of the related debt issuance costs. The effective interest rate on the Uptiered Loan as of December 31, 2023 consisted of a 12.00 % stated interest rate paid in PIK and an additional 0.86 % due to the acceleration of the amortization of the related debt issuance costs.
2 The effective interest rate on the Incremental Term Loan as of December 31, 2024 and 2023, consisted of a 12.00 10.96
3 Cash and PIK split is determined based on the Net Leverage Ratio as defined in the A&R Term Loan Credit Agreement.
4 The principal balance of the Uptiered Loan is made up of $22.5 million drawn on November 9, 2021, $27.5 million drawn on December 8, 2021, and $57.0 million added as part of the exchange agreement on October 4, 2022. In addition, the principal balance includes PIK interest of $36.6 million and $22.2 million as of December 31, 2024 and December 31, 2023 respectively, and PIK fees of $0.9 million incurred as of December 31, 2022.
The Uptiered Loan under the A&R Term Loan Credit Agreement bears an original interest at an annual rate of 12.00 %, a split between cash and PIK, with the cash portion ranging from 2.50 % per annum to 12.00 % per annum, and the PIK portion ranging from 9.50 % per annum to 0.00 % per annum, depending on the Company’s Net Leverage Ratio (as defined in the A&R Term Loan Credit Agreement). In addition, if certain conditions related to repayments in respect of the Incremental Term Loan are not met, certain additional quarterly fees (not to exceed 4 such fees) plus a 150 basis point increase to the applicable interest rate will be payable to the lenders under the A&R Term Loan Credit Agreement in cash or common stock of the Company, at the Company’s option. The rate increase became effective at January 31, 2024, and as of December 31, 2024, the interest rate was 13.5 % consisting of 4 % cash interest and 9.5 % PIK interest.
In addition, if certain minimum liquidity thresholds set forth in the A&R Term Loan Credit Agreement are not met for an applicable interest payment date, all interest in respect of the Uptiered Loan payable on such interest payment date will be PIK, irrespective of the Net Leverage Ratio at such time.
53
Direct and incremental costs associated with the issuance of the Incremental Term Loan in connection with the A&R Term Loan Credit Agreement were approximately $10.1 million and were deferred and presented as a direct deduction from the carrying amount of the related debt and are amortized over the term of the Incremental Term Loan.
Warrants
As of December 31, 2024 and December 31, 2023, APSC Holdco II, L.P. held 500,000 500,000 15.00
| Original | After 1 for 10 Reverse Stock Split (Effective date December 22, 2022) | |||||||||||||||||||||||||
| Holder | Date | Number of shares | Exercise price | Expiration date | Number of shares | Exercise price | Expiration date | |||||||||||||||||||
| APSC Holdco II, LP | ||||||||||||||||||||||||||
| Original | 12/18/2020 | $ | 6/14/2028 | |||||||||||||||||||||||
| Amended | 11/9/2021 | $ | 6/14/2028 | |||||||||||||||||||||||
| Amended | 12/8/2021 | $ | 12/8/2028 | |||||||||||||||||||||||
| Total APSC | $ | 12/8/2028 | $ | 12/8/2028 | ||||||||||||||||||||||
| Corre | 12/8/2021 | $ | 12/8/2028 | $ | 12/8/2028 | |||||||||||||||||||||
| Total warrants | ||||||||||||||||||||||||||
The exercise price and the number of shares of our common stock issuable on exercise of the warrants are subject to certain antidilution adjustments, including for stock dividends, stock splits, reclassifications, noncash distributions, cash dividends, certain equity issuances and business combination transactions.
In connection with the transactions contemplated by the 2022 ABL Credit Agreement, on February 11, 2022 we entered into a common stock subscription agreement with the Corre holders, pursuant to which we issued and sold the common stock to the Corre holders. The Company, the Corre holders and APSC Holdco entered into those certain Team, Inc. Waivers of Anti-Dilution Adjustments and Cash Transaction Exercise (collectively, the “Warrant Waivers”) and agreed, among other things, (i) to irrevocably waive certain anti-dilution adjustments set forth in such Warrant in connection with the Proposed Equity Financing (as defined in the Warrant Waivers); (ii) to not exercise such Warrant, in whole or in part, if the Company determines that such exercise will cause an ownership change within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (assuming, among other things, that the ownership change threshold is 47% rather than 50%); and (iii) to only exercise such Warrant in a “cashless” or “net-issue” exercise.
Equipment Financing Loan
On March 6, 2024, we entered into agreements to sell various equipment to an equipment finance lender for $2.9 million and lease the equipment for monthly payments of $181 thousand over eighteen months . The lease agreement provides for a bargain purchase option at the end of the lease term which we intend to exercise. The Company determined that the transaction did not meet the criteria for sale-leaseback in accordance with ASC 842, Leases and accounted for this arrangement as an equipment financing. The assets subject to the transaction remain on our balance sheet and continue to depreciate in accordance with our depreciation policy.
1970 Group Substitute Insurance Reimbursement Facility
On September 16, 2024, we entered into an amended and restated substitute insurance reimbursement facility agreement with 1970 Group Inc. (“1970 Group”) (such agreement, the “Substitute Insurance Reimbursement Facility Agreement”). Under the Substitute Insurance Reimbursement Facility Agreement, the 1970 Group extended credit to us in the form of a substitute reimbursement facility (the “Substitute Reimbursement Facility”) to provide up to approximately $19.0 million of letters of credit on our behalf in support of our workers’ compensation, commercial automotive and general liability insurance policies. As of December 31, 2024, we have $19.0 million of letters of credit outstanding under the Substitute Reimbursement Facility.
Such letters of credit arranged by the 1970 Group permitted the return of certain existing letters of credit for our account that were outstanding for the purpose of supporting the Insurance Policies and that were required to be collateralized, thereby providing us increased liquidity. Under the Substitute Insurance Reimbursement Facility Agreement, we are required to
54
reimburse the 1970 Group for any draws made under the letters of credit within of notice of any such draw. The Substitute Insurance Reimbursement Facility Agreement is effective through the term of the issued letters of credit; it renews annually upon payment of the extension fee, provided there has not been an event of default.
According to the provisions of ASC 470, Debt, the arrangement is a “Substitute Insurance Reimbursement Facility” limited to the amounts drawn under the letters of credit. Therefore, until we use or draw on the Substitute Insurance Reimbursement Facility, the letters of credit are treated as an off-balance sheet credit arrangement. Fees in the amount of $2.3 million and $2.9 million, respectively, were paid by us during the years ended December 31, 2024 and 2023 and were deferred and amortized over the term of the arrangement. As of December 31, 2024 and 2023, the unamortized balance of $1.6 million and $1.8 million was included in other current assets.
Liquidity
As of December 31, 2024, we had $31.5 million of unrestricted cash and cash equivalents and $4.0 million of restricted cash, including $2.8 million of restricted cash held as collateral for letters of credit and commercial card programs. International cash balances included in total cash as of December 31, 2024 were $5.1 million, and approximately $1.1 million of such cash is restricted. As of December 31, 2024, we had approximately $45.9 million of availability under our various credit facilities, consisting of $35.9 million available under the Revolving Credit Loans and $10.0 million available under the Incremental Delayed Draw Term Loan under the A&R Term Loan Credit Agreement. We had $30.6 million in letters of credit and $1.5 million in surety bonds outstanding.
Our cash and cash equivalents as of December 31, 2023 totaled $30.4 million of unrestricted cash and cash equivalents and $5.0 million of restricted cash, including $3.4 million of restricted cash held as collateral for letters of credit and commercial card programs. Additionally, $12.0 million of the $30.4 million of cash and cash equivalents was in foreign accounts, primarily in Canada, the U.K. and Europe including $0.6 million of cash located in countries where currency or regulatory restrictions existed.
12. LEASES
We determine if an arrangement is a lease at inception. Operating leases are included in “Operating lease right-of-use (‘ROU’) assets”, “current portion of operating lease obligations” and “operating lease obligations” on our consolidated balance sheets. Finance leases are included in “property, plant and equipment, net”, “current portion of long-term debt and finance lease obligations” and “long-term debt and finance lease obligations” on our consolidated balance sheets.
Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments and short-term lease payments (leases with initial terms less than twelve months) are expensed as incurred.
We have lease agreements with lease and non-lease components for certain equipment, office, and vehicle leases. We have elected the practical expedient to not separate lease and non-lease components and account for both as a single lease component.
We have operating and finance leases primarily for equipment, real estate, and vehicles. Some of our leases include options to extend the leases for up to 10 years, and some may include options to terminate the leases within 14 months.
The components of lease expense are as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating lease costs | $ | $ | |||||||||
| Variable lease costs | |||||||||||
| Finance lease costs: | |||||||||||
| Amortization of right-of-use assets | |||||||||||
| Interest on lease liabilities | |||||||||||
| Total lease cost | $ | $ | |||||||||
55
Other information related to leases is as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Supplemental cash flow information: | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
| Operating cash flows from finance leases | |||||||||||
| Financing cash flows from finance leases | |||||||||||
| Right-of-use assets obtained in exchange for lease obligations | |||||||||||
| Operating leases | $ | $ | |||||||||
| Finance leases | $ | $ | |||||||||
Amounts recognized in the consolidated balance sheet are as follows (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating Leases: | |||||||||||
| Operating lease right-of-use assets | $ | $ | |||||||||
| Current portion of operating lease obligations | |||||||||||
| Operating lease obligations (non-current) | |||||||||||
| Finance Leases: | |||||||||||
| Property, plant and equipment, net | $ | $ | |||||||||
| Weighted average remaining lease term | |||||||||||
| Operating leases | |||||||||||
| Finance leases | |||||||||||
| Weighted average discount rate | |||||||||||
| Operating leases | % | % | |||||||||
| Finance lease | % | % | |||||||||
As of December 31, 2024, we have no material additional operating and finance leases that have not yet commenced.
As of December 31, 2024, future minimum lease payments under non-cancellable (excluding short-term leases) are as follows (in thousands):
| Twelve Months Ended December 31, | Operating Leases | Finance Leases | |||||||||
| 2025 | $ | $ | |||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| Thereafter | |||||||||||
| Total future minimum lease payments | $ | $ | |||||||||
| Less: Interest | |||||||||||
| Present value of lease liabilities | $ | $ | |||||||||
56
Total rent expense resulting from operating leases, including short-term leases, for the years ended December 31, 2024 and 2023 was $36.9 million and $36.4 million, respectively.
13. SHARE-BASED COMPENSATION
In June 2018, the Company adopted the 2018 Team, Inc, Equity Incentive Plan (as amended and restated in May 2021 and May 2024, the “2018 Plan”) pursuant to which our Board of Directors may grant stock options, restricted stock, stock units, stock appreciation rights, common stock or performance awards to officers, directors and key employees.
As of December 31, 2024, the 2018 Plan had 462,348 shares available for issuance. These shares exclude 445,136 performance award shares granted in 2023 which become issuable if 100 % of performance target is achieved, and can be settled in shares, cash or a combination thereof when vested. These performance awards are discussed in further detail below.
Compensation expense related to share-based compensation totaled $2.3 million and $1.6 million for the years ended December 31, 2024 and 2023, respectively. Share-based compensation expense reflects an estimate of expected forfeitures. As of December 31, 2024, $2.5 million of unrecognized compensation expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of 1.5 years. There was no income tax benefit recognized for the years ended December 31, 2024 or 2023.
Restricted Stock Units (RSUs)
Restricted 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 or four years and the expense associated with the units is recognized ratably over the same vesting period. Compensation expense related to RSUs totaled $1.0 million and $1.4 million for the years ended December 31, 2024 and 2023, respectively.
Transactions involving our restricted stock unit grants for the twelve months ended December 31, 2024 are summarized below:
| Twelve Months Ended December 31, 2024 | |||||||||||
| No. of Stock Units | Weighted Average Fair Value at Date of Grant | ||||||||||
| (in thousands) | |||||||||||
| Stock and stock units, beginning of year | $ | ||||||||||
| Changes during the year: | |||||||||||
| Granted | |||||||||||
| Vested and settled | ( | $ | |||||||||
| Cancelled | |||||||||||
| Stock and stock units, end of year | $ | ||||||||||
The intrinsic value of stock units vested during the years ended December 31, 2024 and 2023 was $2.0 million and $0.6 million, respectively.
Performance Stock Units (PSUs)
We granted 445,136 long-term performance stock units during 2023 to certain executives with a non-market condition milestone factor related to our adjusted EBITDA. For these awards, we recognize compensation expense over the vesting term on a straight-line basis based upon the performance target that is probable of being met, subject to adjustment for changes in the expected or actual performance outcome. For performance awards, we recorded an expense of $1.3 million and $0.2 million for the years ended December 31, 2024 and 2023, respectively.
57
Transactions involving our performance awards during the twelve months ended December 31, 2024 are summarized below:
__________________________
| Twelve Months Ended December 31, 2024 | |||||||||||
No. of Stock Units1 | Weighted Average Fair Value at Date of Grant | ||||||||||
| (in thousands) | |||||||||||
| Performance stock units, beginning of year | $ | ||||||||||
| Changes during the period: | |||||||||||
| Granted | |||||||||||
| Cancelled and forfeited | |||||||||||
| Performance stock units, end of year | $ | ||||||||||
1 Performance units with variable payouts are shown at target level of performance.
There were no
58
14. SHAREHOLDERS’ EQUITY
Shareholders’ Equity and Preferred Stock
As of December 31, 2024 there were 4,493,338 12,000,000 0.30
As of December 31, 2024 we had 500,000 none of which had been issued.
Warrants
In connection with the APSC Term Loan Credit Agreement and the Subordinated Term Loan Credit Agreement, we entered into Warrant Agreements and Waivers related to our common stock. The APSC Term Loan Credit Agreement was fully paid off in June of 2023. For additional details, see Note 11 - Debt.
Accumulated Other Comprehensive Income (loss)
A summary of changes in accumulated other comprehensive loss included within shareholders’ equity is as follows (in thousands):
| Twelve Months Ended December 31, 2024 | Twelve Months Ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign Currency Translation Adjustments | Foreign Currency Hedge | Defined benefit pension plans | Tax Provision | Total | Foreign Currency Translation Adjustments | Foreign Currency Hedge | Defined benefit pension plans | Tax Provision | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at beginning of year | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at end of year | $ | ( | $ | $ | ( | $ | $ | ( | $ | ( | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
The following table represents the related tax effects allocated to each component of other comprehensive income (loss) (in thousands):
| Twelve Months Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| Gross Amount | Tax Effect | Net Amount | Gross Amount | Tax Effect | Net Amount | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | $ | ( | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||
| Defined benefit pension plan | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total | $ | ( | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||
59
15. EMPLOYEE BENEFIT PLANS
Defined contribution plan. Under the Team, Inc. Salary Deferral Plan (the “Plan”), contributions are made to the Plan by qualified employees at their election and our matching contributions to the Plan are made at specified rates. Our contribution for the plan year ended December 31, 2024 and 2023 was approximately $6.0 million and $7.2 million, respectively.
Defined benefit plans. In connection with our acquisition of Furmanite, we assumed liabilities associated with the defined benefit pension plan covering certain United Kingdom employees (the “U.K. Plan”).
Benefits for the U.K. Plan are based on the average of the employee’s salary for the last three years of employment. The U.K. Plan has had no new participants added since the plan was frozen in 1994 and accruals for future benefits ceased in connection with a plan curtailment in 2013. Plan assets are primarily invested in unitized pension funds managed by U.K. registered fund managers. The most recent valuation of the U.K. Plan was performed as of December 31, 2024.
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. The discount rate assumption used to determine end of year benefit obligations was 5.5 % as of December 31, 2024. These rates are reviewed annually and adjusted to reflect current conditions. These rates are determined appropriate based on reference to yields. The expected return on plan assets of 5.5 % for 2024 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 are subject to amortization 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.
Net pension cost (credit) included the following components (in thousands):
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Interest cost | $ | $ | |||||||||
| Expected return on plan assets | ( | ( | |||||||||
| Amortization of prior service cost | |||||||||||
Amortization of net actuarial loss | |||||||||||
Net pension credit | $ | ( | $ | ( | |||||||
The weighted-average assumptions used to determine benefit obligations as of December 31, 2024 and 2023 are as follows:
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Discount rate | % | % | |||||||||
Rate of compensation increase1 | Not applicable | Not applicable | |||||||||
| Inflation | % | % | |||||||||
______________
1 Not applicable due to plan curtailment.
60
The weighted-average assumptions used to determine net periodic benefit cost (credit) for the years ended December 31, 2024 and 2023 are as follows:
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Discount rate | % | % | |||||||||
| Expected long-term return on plan assets | % | % | |||||||||
Rate of compensation increase1 | Not applicable | Not applicable | |||||||||
| Inflation | % | % | |||||||||
_______________
1 Not applicable due to plan curtailment.
The plan actuary determines the expected return on plan assets based on a combination of expected yields on equity securities and corporate bonds and considering historical returns.
The expected long-term rate of return on invested assets for 2024 is determined based on the weighted average of expected returns on asset investment categories as follows: 6.1 % overall, 9.9 % for equities and 6.0 % for debt securities.
The following table sets forth the changes in the benefit obligation and plan assets for the years ended December 31, 2024 and 2023 (in thousands):
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Projected benefit obligation: | |||||||||||
| Beginning of year | $ | $ | |||||||||
| Actuarial (gain) loss | ( | ||||||||||
| Benefits paid | ( | ( | |||||||||
| Foreign currency translation adjustment and other | ( | ||||||||||
| End of year | $ | $ | |||||||||
| Fair value of plan assets: | |||||||||||
| Beginning of year | |||||||||||
| Actual gain (loss) on plan assets | ( | ||||||||||
| Employer contributions | |||||||||||
| Benefits paid | ( | ( | |||||||||
| Foreign currency translation adjustment and other | ( | ||||||||||
| End of year | |||||||||||
| Excess of fair value of plan assets over projected obligation at end of year | $ | $ | |||||||||
| Amounts recognized in accumulated other comprehensive loss: | |||||||||||
| Net actuarial loss | $ | ( | $ | ( | |||||||
| Prior service cost | ( | ( | |||||||||
| Total | $ | ( | $ | ( | |||||||
The accumulated benefit obligation for the U.K. Plan was $51.2 million and $59.3 million as of December 31, 2024 and 2023, respectively.
61
As of December 31, 2024, expected future benefit payments are as follows for the years ended December 31, (in thousands):
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030-2034 | |||||
| Total | $ | ||||
The following tables summarize the plan assets of the U.K. Plan measured at fair value on a recurring basis (at least annually) as of December 31, 2024 and 2023 (in thousands):
| December 31, 2024 | ||||||||||||||||||||||||||
| Asset Category | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||||||||||||
| Equity securities: | ||||||||||||||||||||||||||
| Diversified growth fund (a) | ||||||||||||||||||||||||||
| Fixed income securities: | ||||||||||||||||||||||||||
| U.K. government fixed income securities (b) | ||||||||||||||||||||||||||
| U.K. government index-linked securities (c) | ||||||||||||||||||||||||||
| Corporate bonds (d) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||
| Asset Category | Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Observable Inputs (Level 2) (a) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||||||||||||
| Equity securities: | ||||||||||||||||||||||||||
| Diversified growth fund (a) | ||||||||||||||||||||||||||
| Fixed income securities: | ||||||||||||||||||||||||||
| U.K. government fixed income securities (b) | ||||||||||||||||||||||||||
| U.K. government index-linked securities (c) | ||||||||||||||||||||||||||
| Corporate bonds (d) | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
a.This category includes investments in a diversified portfolio of equity, alternatives and cash markets that aims to achieve capital growth returns.
b.This category includes investments in funds with the objective to provide a leveraged return to U.K. government fixed income securities (bonds) that have maturity periods ranging from 2030 to 2060.
c.This category includes investments in funds with the objective to provide a leveraged return to various U.K. government indexed-linked securities (gilts), with maturity periods ranging from 2027 to 2062. The funds invest in U.K. government bonds and derivatives.
d.This category includes investments in a diversified pool of debt and debt like assets to generate capital and income returns. Investment objectives for the U.K. Plan, as of December 31, 2024, are to:
•optimize the long-term return on plan assets at an acceptable level of risk;
•maintain a broad diversification across asset classes; and
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•maintain careful control of the risk level within each asset class.
The trustees of the U.K. Plan have established a long-term investment strategy comprising global investment weightings targeted at 10.0 % for equity securities/diversified growth funds and 90.0 % for debt securities. Diversified growth funds are actively managed absolute return funds that hold a combination of debt and equity securities. Selection of the targeted asset allocation was based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes. Actual allocations to each asset class vary from target allocations due to periodic investment strategy changes, market value fluctuations and the timing of benefit payments and contributions.
The following table sets forth the weighted-average asset allocation and target asset allocations as of December 31, 2024 and 2023 by asset category:
| Asset Allocations | Target Asset Allocations | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Equity securities and diversified growth funds1 | % | % | % | % | |||||||||||||||||||
Debt securities2 | % | % | % | % | |||||||||||||||||||
Cash | % | % | % | % | |||||||||||||||||||
| Total | % | % | % | % | |||||||||||||||||||
______________________________
1Diversified growth funds refer to actively managed absolute return funds that hold a combination of equity and debt securities.
2Includes investments in funds with the objective to provide leveraged returns to U.K. government fixed income securities, U.K. government indexed-linked securities, global bonds, and corporate bonds.
The following table summarizes the changes in the fair value measurements of Level 3 investments for the pension plans (in thousands):
| December 31, 2024 | December 31, 2023 | ||||||||||
| Balance at beginning of year | $ | $ | |||||||||
| Actual return on plan assets | |||||||||||
| Purchases/ sales/ settlements | ( | ( | |||||||||
Transfer out of level 3 | |||||||||||
| Changes due to foreign exchange | |||||||||||
| Balance at end of year | $ | $ | |||||||||
The following is a description of the valuation methodologies used to measure plan assets at fair value.
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16. COMMITMENTS AND CONTINGENCIES
Certain conditions may exist as of the date the financial statements are issued which may result in a loss to the Company, which will only be resolved when one or more future events occur or fail to occur. Team’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, Team’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
We accrue for contingencies where the occurrence of a material loss is probable and can be reasonably estimated, based on our best estimate of the expected liability. We may increase or decrease our legal accruals in the future, on a matter-by-matter basis, to account for developments in such matters. Because such matters are inherently unpredictable and unfavorable developments or outcomes can occur, assessing contingencies is highly subjective and requires judgments about future events. Notwithstanding the uncertainty as to the outcome and while our insurance coverage might not be available or adequate to cover these claims, based upon the information currently available, we do not believe that any uninsured losses that might arise from these lawsuits and proceedings will have a materially adverse effect on our consolidated financial statements.
Kelli Most Litigation - On November 13, 2018, Kelli Most filed a lawsuit against Team Industrial Services, Inc., individually and as a personal representative of the estate of Jesse Henson, in the 268th District Court of Fort Bend County, Texas (the “Most litigation”). The complaint asserted claims against Team for negligence resulting in the wrongful death of Jesse Henson. A jury trial commenced on this matter on May 4, 2021. On June 1, 2021, the jury rendered a verdict against Team for $222.0 million in compensatory damages.
On January 25, 2022, the trial court signed a final judgment in favor of the plaintiff and against Team Industrial Services, Inc. Post-judgment motions challenging the judgment were denied by the trial court on April 22, 2022. We appealed the trial court’s judgment to the Texas First Court of Appeals.
On May 16, 2024, the Texas First Court of Appeals issued a decision which vacated the trial court’s judgment and dismissed the case, holding that the trial court erred in refusing to dismiss the case on forum non conveniens grounds. The plaintiff filed a motion with the Texas First Court of Appeals for rehearing and a motion for en banc reconsideration, which was denied by the Court of Appeals on October 3, 2024. The plaintiff had 45 days to seek review with the Texas Supreme Court but failed to do so. On March 5, 2025, the plaintiff re-filed a lawsuit against the Company in the U.S. District Court, Kansas District in Kansas City. We currently have accrued a liability of $39.0 million as of December 31, 2024 in other accrued liabilities, and have recorded a related receivable from our third-party insurance providers in other current assets in the same amount. Such amounts are treated as non-cash operating activities. The Most litigation is covered by our general liability and excess insurance policies which are occurrence based and subject to an aggregate $3.0 million self-insured retention and deductible. All retentions and deductibles have been met, and accordingly, we believe pending the final settlement, all further claims will be fully funded by our insurance policies. We will continue to evaluate the possible outcomes of this case in light of future developments and their potential impact on factors relevant to our assessment of any possible loss.
Notice of repayment of pandemic related government subsidies - In response to the widespread COVID-19 health pandemics, certain of our entities based in foreign jurisdictions received governmental funding assistance to compensate for a portion of employee wages between March 2020 and March 2022. Following ongoing compliance reviews of these funding assistance programs, we received notices stating noncompliance with the requirements of these funding assistance programs. Accordingly, based on the assessments completed by the government appointed administrative authority, we previously had accrued $5.5 million as of December 31, 2023, to be repaid over an extended period related to this noncompliance. However, during the quarter ended December 31, 2024, we successfully appealed $3.8 million of the assessment, which resulted in the reduction of the accrued liability from $5.5 million to $1.7 million as of December 31, 2024.
Accordingly, for all matters discussed within this Note 16 - Commitments and Contingencies, we have accrued in the aggregate approximately $40.7 million as of December 31, 2024, of which approximately $1.7 million is not covered by our various insurance policies.
In addition to legal matters discussed above, we are subject to various lawsuits, claims and proceedings encountered in the normal conduct of business (“Other Proceedings”). We believe that based on our current knowledge and after consultation
64
with legal counsel that the Other Proceedings, individually or in the aggregate, will not have a material effect on our consolidated financial statements.
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17. SEGMENT AND GEOGRAPHIC DISCLOSURES
We conduct operations in two segments: IHT and MS. Management’s determination of our reporting segments was made on the basis of our strategic priorities within each segment and the differences in the services we offer. The reportable segments results are reviewed regularly by the chief operating decision maker (“CODM”), who is our Chief Executive Officer, in deciding how to allocate resources and assess performance. Our CODM evaluates the segments’ operating performance based on adjusted EBITDA defined as net income (loss) before income taxes, interest expense, depreciation and amortization, and other non-recurring and non-operational items. Our CODM uses adjusted EBITDA as a measure to make resource allocation decisions for each segment for the budgeting process and reviews budget-to-actual variances to access performance and allocate capital.
Segment data for our two operating segments are as follows (in thousands):
Twelve Months Ended December 31, 2024 | ||||||||||||||
| IHT | MS | Total | ||||||||||||
| Revenues | $ | $ | $ | |||||||||||
Adjusted operating expenses1 | ||||||||||||||
Adjusted selling, general and administrative expenses2 | ||||||||||||||
Adjusted EBITDA | $ | $ | $ | |||||||||||
Twelve Months Ended December 31, 2023 | ||||||||||||||
| IHT | MS | Total | ||||||||||||
| Revenues | $ | $ | $ | |||||||||||
Adjusted operating expenses1 | ||||||||||||||
Adjusted selling, general and administrative expenses2 | ||||||||||||||
Adjusted EBITDA | $ | $ | $ | |||||||||||
______________
1 Represent operating expenses excluding indirect depreciation and amortization, and severance cost.
2 Represent segment selling, general and administrative expenses excluding depreciation and amortization, noncash share based compensation, professional, legal and other non-recurring costs.
Reconciliation of segment adjusted EBITDA to consolidated loss before income taxes:
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| IHT | $ | $ | |||||||||
| MS | |||||||||||
Segment adjusted EBITDA | |||||||||||
Segment depreciation and amortization | ( | ( | |||||||||
Segment professional fees, severance and other | ( | ( | |||||||||
| Corporate and shared support cost | ( | ( | |||||||||
Consolidated operating income/(loss) | ( | ||||||||||
| Interest expense | ( | ( | |||||||||
Loss on debt extinguishment | ( | ||||||||||
| Other income/(expense) | ( | ||||||||||
| Loss before income taxes | $ | ( | $ | ( | |||||||
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| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Capital expenditures1: | |||||||||||
| IHT | $ | $ | |||||||||
MS | |||||||||||
| Corporate and shared support services | |||||||||||
Total capital expenditures | $ | $ | |||||||||
______________
1 Excludes finance leases. Totals may vary from amounts presented in the consolidated statements of cash flows due to the timing of cash payments.
| Twelve Months Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Depreciation and amortization1: | |||||||||||
| IHT | $ | $ | |||||||||
| MS | |||||||||||
| Corporate and shared support services | |||||||||||
Total depreciation and amortization | $ | $ | |||||||||
___________
1 Breakdown of depreciation and amortization included in the Consolidated Statements of Operations described below:
| Twelve Months Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Depreciation and amortization: | ||||||||||||||
| Amount included in operating expenses | $ | $ | ||||||||||||
| Amount included in SG&A expenses | ||||||||||||||
| Total depreciation and amortization | $ | $ | ||||||||||||
Separate measures of our assets by operating segment are not produced or utilized by our CODM to evaluate segment performance.
A geographic breakdown of our revenues for the years ended December 31, 2024 and 2023 and our total long-lived assets as of December 31, 2024 and 2023 are as follows (in thousands):
Total Revenues1 | Total Long-lived Assets2 | ||||||||||
| Twelve months ended December 31, 2024 | |||||||||||
| United States | $ | $ | |||||||||
| Canada | |||||||||||
| Other foreign countries | |||||||||||
| Total | $ | $ | |||||||||
| Twelve months ended December 31, 2023 | |||||||||||
| United States | $ | $ | |||||||||
| Canada | |||||||||||
| Other foreign countries | |||||||||||
| Total | $ | $ | |||||||||
______________
1 Revenues attributable to individual countries/geographic areas are based on the country of domicile of the legal entity that performs the work.
2 Excludes financial instruments and deferred tax assets.
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18. RELATED PARTY TRANSACTIONS
In connection with our debt transactions, we engaged in transactions with Corre and APSC to provide and/or repay funding as described in Note 11 - Debt.
19. SUBSEQUENT EVENTS
As of March 19, 2025, the filing date of this Annual Report on Form 10-K, we evaluated the existence of events occurring subsequent to the end of fiscal year 2024 and determined that there were no events or transactions that would have a material impact on our results of operations or financial position except as described below:
Refinancing Transactions
On March 12, 2025, we entered into the following refinancing transactions (collectively, the “Refinancing Transactions”):
First Lien Term Loan Agreement
On March 12, 2025, we, as borrower, along with the guarantors party thereto, the lenders party thereto and HPS Investment Partners, LLC, as Agent, entered into a First Lien Term Loan Credit Agreement (the “First Lien Term Loan Agreement”). Available funding commitments to us include a $225.0 million senior secured first lien term loan (the “First Lien Term Loan”) consisting of a $175.0 million initial term loan tranche (the “Initial First Lien Term Loans”) and a $50.0 million delayed draw term loan tranche (the “First Lien Delayed Draw Term Loans”), which is available to be drawn upon subject to satisfying certain conditions, including pro forma compliance with a First Lien Net Leverage Ratio (as defined in the First Lien Term Loan Agreement) of 3.75 to 1.00 and Liquidity (as defined in the First Lien Term Loan Agreement) of not less than $40.0 million. All outstanding amounts in respect of the First Lien Term Loan under the First Lien Term Loan Agreement mature and become due and payable on March 12, 2030. The proceeds of the Initial First Lien Term Loans under the First Lien Term Loan Agreement were used to redeem and repay certain term loans outstanding under the 2022 ABL Credit Agreement and the A&R Term Loan Agreement. The proceeds of the First Lien Delayed Draw Term Loans will be used to solely repay the obligations under the Second A&R Second Lien Term Loan Agreement (as defined below).
The First Lien Term Loan Agreement contains certain conditions to borrowings, events of default and affirmative, negative and financial covenants, that require that the Company not exceed a maximum First Lien Net Leverage Ratio (as defined in the First Lien Term Loan Agreement), tested as of the end of each fiscal quarter, of 5.50 to 1.00 Further, the First Lien Term Loan Agreement includes certain events of default, the occurrence of which may require that we pay an additional 2.0 % interest on the outstanding loans and other obligations under the First Lien Term Loan Agreement.
Second A&R Second Lien Term Loan Credit Agreement
On March 12, 2025, we as borrower, along with the guarantors party thereto, the lenders party thereto and Cantor Fitzgerald Securities, as Agent, entered into a Second Amended and Restated Second Lien Term Loan Credit Agreement (the “Second A&R Second Lien Term Loan Agreement”), which amended and restated the A&R Term Loan Credit Agreement. Available funding commitments to us under the Second A&R Second Lien Term Loan Agreement, subject to certain conditions, include a $107.4 million second lien term loan, provided by Corre and certain of its affiliates, consisting of a $97.4 million term loan tranche (the “2025 Second Lien Term Loans”) and a $10.0 million delayed draw term loan tranche (the “Second Lien Delayed Draw Term Loans”). All outstanding amounts in respect of the Second A&R Second Lien Term Loan Agreement mature and become due and payable on June 10, 2030. The proceeds of the 2025 Second Lien Term Loans were used on March 12, 2025, along with a portion of the proceeds of the First Lien Term Loan, to pay off the Existing Loans (as defined in the Second A&R Second Lien Term Loan Agreement) (including certain interest paid in kind and accrued fees and expenses thereon) outstanding under the A&R Term Loan Agreement. The proceeds of the Second Lien Delayed Draw Term Loans shall be used by the Company for general working capital and liquidity purposes.
The Second A&R Second Lien Term Loan Agreement contains certain conditions to borrowings, events of default and affirmative, negative and financial covenants, that require that the Company not exceed a maximum First Lien Net Leverage Ratio (as defined in the Second A&R Second Lien Term Loan Agreement), tested as of the end of each fiscal quarter, of 6.00 to 1.00. Further, the Second A&R Second Lien Term Loan Agreement includes certain events of default, the occurrence of which may require that we pay an additional 2.0 % interest on the outstanding loans and other obligations under the Second A&R Second Lien Term Loan Agreement.
2022 ABL Credit Facility
On March 12, 2025, we along with the guarantors party thereto, the lenders party thereto and the ABL Agent, entered into Amendment No.6 (“ABL Amendment No.6”) to the 2022 ABL Credit Agreement. ABL Amendment No.6 amended the 2022 ABL Credit Agreement to, among other things, (i) permit the entry of the Company into the First Lien Term Loan Agreement, the borrowing of the First Lien Term Loans thereunder, (ii) to make conforming changes to the 2022 ABL Credit Agreement,
68
consistent with the terms of the First Lien Term Loan Agreement and the changes being made to the Second A&R Second Lien Term Loan Agreement, and (iii) to reflect the payoff of the term loan tranches previously outstanding under the 2022 ABL Credit Agreement prior to March 12, 2025.
Compliance with NYSE listing standards
On March 14, 2025, the Company received notice from the NYSE that the Company had regained compliance with the NYSE continued listing standards. Specifically, the Company resolved its prior non-compliance with the quantitative listing standards described in Section 802.01B of the NYSE Listed Company Manual.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements concerning accounting and financial disclosures with our independent accountants during any of the periods presented.
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ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures. Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”), are controls and procedures that are designed to ensure that the information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is appropriately accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation included consideration of the various processes carried out under the direction of our disclosure committee in an effort to ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified by the SEC. This evaluation also considered the work completed related to our compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Based on this evaluation, our CEO and CFO have concluded that, as of December 31, 2024, our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate over time.
We have used the framework set forth in the report entitled Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013) to evaluate the effectiveness of our internal control over financial reporting. As a result of this evaluation, Management has concluded that our internal control over financial reporting was effective as of December 31, 2024.
Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2024.
This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
ITEM 9B. OTHER INFORMATION
a) None.
b) During the year ended December 31, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted terminated
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable
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PART III
The information for the following items of Part III has been omitted from this Annual Report on Form 10-K since we will file, not later than 120 days following the close of our fiscal year ended December 31, 2024, our Definitive Proxy Statement. The information required by Part III will be included in that proxy statement and such information is hereby incorporated by reference, with the exception of the information under the headings “Compensation Committee Report” and “Audit Committee Report.”
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code of business conduct and ethics is available on the Corporate Governance section of our website, which is located at www.teaminc.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K filed with the SEC. The inclusion of our website address in this Annual Report on Form 10-K does not include or incorporate by reference the information on our website into this Annual Report.
Insider Trading Policy
We have adopted a written insider trading policy governing the purchase, sale and/or other dispositions of our securities by our directors, officers and employees. A copy of the insider trading policy is filed as an exhibit to this Annual Report on Form 10-K.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| (a) | 1) | Consolidated Financial Statements filed as part of this report are listed in the Financial Table of Contents included in this report and incorporated by reference in this report in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8, “Consolidated Financial Statements and Supplementary Data.” | ||||||
| 2) | All schedules for which provision is made in the applicable accounting regulations of the SEC are listed in this report in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data.” | |||||||
| 3) | See exhibits listed under Part (b) below. | |||||||
| (b) | Exhibits | |||||||
Exhibit Number | Description | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 3.3 | ||||||||
| 3.4 | ||||||||
| 3.5 | ||||||||
| 3.6 | Certificate of Designations of Series A Preferred Stock of Team, Inc., as filed with the Secretary of State of the State of Delaware on February 2, 2022 (filed as Exhibit 3.1 to Team, Inc.’s Current Report on Form 8-K (File No. 001-08604) filed on February 2, 2022, incorporated by reference herein). | |||||||
| 4.1 | ||||||||
| 4.2 | Certificate representing shares of common stock of Company (filed as Exhibit 4(1) to Team, Inc.’s Registration Statement on Form S-1, (File No. 2-68928), incorporated by reference herein). | |||||||
| 4.3 | ||||||||
| 4.4 | ||||||||
| 4.5 | ||||||||
| 4.6 | ||||||||
| 4.7 | ||||||||
| 4.8 | ||||||||
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Exhibit Number | Description | |||||||
| 4.9 | ||||||||
| 10.1 | ||||||||
| 10.2 | ||||||||
| 10.3 | ||||||||
| 10.4 | ||||||||
| 10.5 | ||||||||
| 10.6 | ||||||||
| 10.7 | ||||||||
| 10.8 | ||||||||
| 10.9 | ||||||||
| 10.10 | ||||||||
| 10.11† | ||||||||
10.12† | ||||||||
10.13† | ||||||||
10.14† | ||||||||
10.15† | ||||||||
10.16† | ||||||||
73
74
Exhibit Number | Description | |||||||
| 101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
| † | Management contract or compensation plan or arrangement. | ||||
*Certain schedules and similar attachments have been omitted in reliance on Item 601(a)(5) of Regulation S-K. Team, Inc. will provide, on a supplemental basis, a copy of any omitted schedule or attachment to the SEC or its staff upon request.
Note: Unless otherwise indicated, documents incorporated by reference are located under SEC file number 001-08604.
ITEM 16. FORM 10-K SUMMARY
NONE
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized March 19, 2025.
TEAM, INC. | ||
/S/ KEITH D. TUCKER | ||
| Keith D. Tucker | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated.
/S/ KEITH D. TUCKER | Chief Executive Officer (Principal Executive Officer) | March 19, 2025 | |||||||||
| (Keith D. Tucker) | |||||||||||
/S/ NELSON M. HAIGHT | Chief Financial Officer (Principal Financial Officer) | March 19, 2025 | |||||||||
| (Nelson M. Haight) | |||||||||||
/S/ MATTHEW E. ACOSTA | Vice President and Chief Accounting Officer (Principal Accounting Officer) | March 19, 2025 | |||||||||
| (Matthew E. Acosta) | |||||||||||
/S/ J. MICHAEL ANDERSON | Director | March 19, 2025 | |||||||||
| (J. Michael Anderson) | |||||||||||
/S/ MICHAEL J. CALIEL | Director, Executive Chairman | March 19, 2025 | |||||||||
| (Michael J. Caliel) | |||||||||||
/S/ JEFFERY G. DAVIS | Director | March 19, 2025 | |||||||||
| (Jeffery G. Davis) | |||||||||||
/S/ ANTHONY R. HORTON | Director | March 19, 2025 | |||||||||
| (Anthony R. Horton) | |||||||||||
/S/ EVAN S. LEDERMAN | Director | March 19, 2025 | |||||||||
| (Evan. S. Lederman) | |||||||||||
/S/ TED STENGER | Director | March 19, 2025 | |||||||||
| (Ted Stenger) | |||||||||||
/S/ PAMELA J. MCGINNIS | Director | March 19, 2025 | |||||||||
(Pamela J. McGinnis) | |||||||||||
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Team, Inc.
Insider Trading Policy
(November 2020)
This Insider Trading Policy (the “Policy”) provides guidelines to employees, officers and directors of, and consultants and contractors to Team, Inc. and Team Industrial Services, Inc., including without limitation all of their subsidiary and affiliated companies (the "Company" or “TEAM”), with respect to transactions in TEAM securities. Please read this Policy carefully and make sure you understand it. If you have any questions about this Policy, please contact our Chief Legal Officer.
I.Applicability of Policy.
The Policy is applicable to all members of the Board of Directors (“directors”), officers and employees and consultants and contractors of TEAM. The Policy applies to our employees wherever located, both inside and outside the United States.
This Policy applies to all transactions in TEAM securities, including common stock, options for common stock and any other securities TEAM may issue, such as preferred stock, warrants and convertible debentures, as well as derivative securities relating to TEAM stock, whether or not issued by TEAM, such as exchange-traded options (the “Company Securities”).
Any person who possesses Material Nonpublic Information (as defined below) is considered an “insider” as to that information. Insiders include TEAM’s directors, officers, employees, contractors and those persons in a special relationship with the Company, e.g., its auditors, consultants or attorneys. The definition of insider is transaction specific; that is, an individual is an insider with respect to each material, nonpublic item of which he or she is aware. Any employee can be an insider from time to time, and would at those times be subject to this Policy.
II.Statement of Policy.
If a director, officer or any employee of TEAM or any agent or advisor of TEAM has Material Nonpublic Information (defined below) relating to the Company, it is our policy that neither that person nor any Related Person (as defined below) may buy or sell Company Securities or engage in any other action to take advantage of, or pass on to others, that information. This Policy also applies to Material Nonpublic Information (defined below) relating to any other company with publicly-traded securities, including our customers or suppliers, obtained in the course of employment by or association with TEAM. All of our officers, directors, employees, consultants and contractors should treat Material Nonpublic Information about our business partners with the same care required with respect to information related directly to TEAM.
To avoid even the appearance of impropriety, additional restrictions on trading Company Securities apply to our directors, officers and other employees that have been designated by our
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Chief Legal Officer from time to time (“Restricted Employees”). See Section V of this Policy for a discussion of these additional restrictions.
III.Definitions.
A.Material Information. It is not possible to define all categories of Material Information. However, information should be regarded as ‘Material Information” if there is a reasonable likelihood that it would be considered important to an investor in making an investment decision regarding the purchase or sale of Company Securities or the securities of any other publicly traded companies.
While it may be difficult under this standard to determine whether particular information is “material”, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered “material”. Examples of such Material Information may include:
•Company financial results
•Known but unannounced future earnings or losses
•Changes in our executive or senior management
•Changes in our auditors or notification by our auditors that we may no longer rely on the auditor’s report
•News of a pending or proposed mergers
•News of the disposition or acquisition of significant assets
•Significant developments related to intellectual property
•Significant developments involving customer or supplier relationships
•New service announcements of a significant nature
•Stock splits or changes in dividend policy
•New equity or debt offerings
•Significant litigation exposure due to actual or threatened litigation
•Changes in pricing or discount policies
Either positive or negative information may be considered to Material Information.
B.Nonpublic Information. Nonpublic Information is information that has not been previously disclosed to the general public and is otherwise not available to the general public. We consider information to be available to the public only when it has been released to the public through appropriate channels (e.g., by means of a TEAM press release or a widely disseminated statement from an executive or senior officer) and enough time has elapsed to permit the investment market to absorb and evaluate the information. As a general rule, information should be considered as non-public until two (2) full trading days after public disclosure.
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C.Related Person. A “Related Person” includes, when applicable, your spouse, minor children and anyone else living in your household; partnerships in which you are a general partner; trusts of which you are a trustee; estates of which you are an executor; and other equivalent legal entities that you control. Although a person’s parent or sibling may not be considered a Related Person (unless living in the same household), a parent or sibling may be a “tippee” for securities laws purposes. See Section IV.B. below for a discussion on the prohibition on “tipping.”
IV.Specific Policies Applicable to All TEAM Employees.
A. Trading on Material Nonpublic Information. No director, officer or employee of, or consultant or contractor to, TEAM, and no Related Person, shall engage in any transaction involving a purchase or sale of Company Securities, including any offer to purchase or offer to sell, during any period commencing with the date that he or she possesses Material Nonpublic Information concerning TEAM, and ending at the beginning of the 2nd Trading Day following the date of public disclosure of that information, or at such time as such Nonpublic Information is no longer material. As used in this Policy, the term "Trading Day" shall mean a day on which national stock exchanges and the New York Stock Exchange ("NYSE") are open for trading. A "Trading Day" begins at the time trading begins on such day. This restriction on trading does not apply to transactions made under a trading plan adopted pursuant to Securities and Exchange Commission (the “SEC”) Rule 10b5-1(c) (17 C.F.R. § 240.10b5-1(c)) and approved in writing by our Chief Legal Officer (an "Approved Rule 10b5-1 Trading Plan").
B. Tipping. No director, officer or employee of, or consultant or contractor to, TEAM, and no Related Person shall disclose ("tip") Material Nonpublic Information to any other person (including family members) where such information may be used by such person to his or her profit by trading in the securities of companies to which such information relates, nor shall such insider or Related Person make recommendations or express opinions on the basis of Material Nonpublic Information as to trading in Company Securities. This Policy does not restrict legitimate business communications provided on a “need to know” basis where there is a reasonable basis to expect that the other person will not trade while in possession of the information.
C. Confidentiality of Nonpublic Information. Nonpublic Information relating to the Company is the property of TEAM and the unauthorized disclosure of such information is forbidden. All information learned about TEAM or its business plans is potentially Material Nonpublic Information that should be treated by the recipient as confidential and proprietary to TEAM. Recipients of such information may not disclose Material Nonpublic Information to others, such as family members, other relatives, or business or social acquaintances.
D.Individual Responsibility. Every TEAM director, officer, or employee of, or consultant or contractor to, TEAM has the individual responsibility to comply with
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this Policy and is responsible for determining whether or not they are in possession of Material Nonpublic Information or are otherwise considered an insider subject to this Policy. An insider may, from time to time, have to forego a proposed transaction in Company Securities even if he or she planned to make the transaction before learning of the Material Nonpublic Information and even though the insider believes he or she may suffer an economic loss or forego an anticipated profit by waiting.
E. Disclosure of Material Information. Federal securities laws and regulations govern the timing and nature of our disclosure of Material Information to outsiders or the public. A violation of these laws and regulations could result in substantial liability for insiders, TEAM and its management. For this reason, we permit only specifically designated representatives to discuss TEAM with the news media, securities analysts and investors. In the event any TEAM director, officer or employee receives an inquiry from outside the Company, such as a stock analyst, for information (particularly financial results and/or projections) that may be considered Material Nonpublic Information, the inquiry should be referred to our Chief Legal Officer or Chief Financial Officer, who are responsible for coordinating and overseeing the release of such information to the investing public, analysts and others in compliance with applicable laws and regulations.
F. Unauthorized Disclosure of Material Nonpublic Information. In the event a TEAM director, officer, employee, consultant or contractor, learns of an unauthorized disclosure of Material Nonpublic Information, or has a belief that such an unauthorized disclosure may have been made, such person shall immediately provide full information regarding the disclosure to both our Chief Financial Officer and our Chief Legal Officer, who shall determine the appropriate response to such disclosure in accordance with federal securities laws and regulations.
V. Additional Trading Guidelines and Requirements Applicable to Restricted Employees.
A. Pre-Clearance of Trades.
TEAM has determined that all directors, officers and Restricted Employees must refrain from trading in Company Securities, even during the Trading Window, without first complying with our "pre-clearance" process. In addition, any person in possession of Material Nonpublic Information is required to comply with TEAM’s “pre-clearance” process. Each such person should contact our Chief Legal Officer prior to commencing any trade in Company Securities. This pre-clearance process applies to all transactions in Company Securities, including transactions inside our benefit plans, such as the Company 401(k) plan. Our Chief Legal Officer may consult as necessary with senior management of and/or counsel to the Company before clearing any proposed trade. Although an insider wishing to trade pursuant to an Approved Rule 10b5-1 Trading Plan need not seek pre-clearance from our Chief Legal Officer before each trade takes place, such an insider must obtain the written
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approval of the proposed Rule 10b5-1 Trading Plan from our Chief Legal Officer before it is adopted.
Any transaction that receives approval under the pre-clearance policy must be confirmed within two (2) business days after the approval is obtained, but regardless may not be executed if an Insider acquires Material Nonpublic Information during that time. If a transaction is not confirmed within the two (2) business day period, the transaction must be approved again before it is executed.
If a proposed transaction is not approved under the pre-clearance policy, insiders should refrain from initiating any transaction in Company Securities, and insiders shall not inform anyone of the restriction.
B. Black-Out Period and Trading Windows.
1.Black-Out Period. The period beginning at the close of market on the 15th calendar day prior to the end of each fiscal quarter or fiscal year and ending at the end of the 2nd Trading Day following the date of public disclosure of the financial results for that quarter or fiscal year is a particularly sensitive period of time for transactions in Company Securities from the perspective of compliance with applicable securities laws, because certain employees will, during that period, often possess Material Nonpublic Information about the expected financial results for the financial period. Accordingly, this period of time is referred to as a "black-out" period. All officers, directors and Restricted Employees are prohibited from trading during such period. Our Chief Legal Officer is authorized to review and waive or extend quarterly blackout restrictions for individual transactions in Company Securities. Requests to waive the quarterly blackout to permit individual transactions shall follow the procedures set forth in the Trading Pre-clearance section of this Policy. In addition, from time to time Material Nonpublic Information regarding TEAM may be pending. While such information is pending, TEAM may impose a special "black-out" period during which the same prohibitions and recommendations shall apply. These restrictions on trading do not apply to transactions made under an Approved Rule 10b5-1 Trading Plan.
2.Trading Windows. To ensure compliance with this Policy and applicable federal and state securities laws, unless specifically waived by our Chief Legal Officer, the Company requires that all directors, officers and Restricted Employees refrain from conducting transactions involving the purchase or sale of Company Securities other than during the period (the "Trading Window") commencing at the close of the market on the 2nd Trading Day following the date of public disclosure of the financial results for a particular fiscal quarter or fiscal year and continuing until the close of market on the 15th calendar day prior to the next fiscal quarter or fiscal year. This restriction on trading does not apply to transactions made under an Approved Rule 10b5-1 Trading Plan. The prohibition against trading during the black-out period encompasses the fulfillment of "limit
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orders" by any broker for a Restricted Employee, and the brokers with whom any such limit order is placed must be so instructed at the time it is placed.
From time to time, TEAM may also prohibit directors, offices and Restricted Employees and potentially a larger group of TEAM employees, consultants and contractors from trading in Company Securities because of material developments known to the Company and not yet disclosed to the public. In such event, directors, officers, Restricted Employees and such other employees, consultants and contractors may not engage in any transaction involving the purchase or sale of Company Securities and should not disclose to others the fact of such suspension of trading. This restriction on trading does not apply to transactions made under an Approved Rule 10b5-1 Trading Plan.
From time to time, TEAM may also prohibit directors, offices and Restricted Employees and potentially a larger group of TEAM employees, consultants and contractors from trading in Company Securities because of material developments known to the Company and not yet disclosed to the public. In such event, directors, officers, Restricted Employees and such other employees, consultants and contractors may not engage in any transaction involving the purchase or sale of Company Securities and should not disclose to others the fact of such suspension of trading. This restriction on trading does not apply to transactions made under an Approved Rule 10b5-1 Trading Plan.
It should be noted that even during Trading Windows, any person possessing Material Nonpublic Information concerning TEAM, whether or not subject to the black-out period and Trading Window, should not engage in any transactions in Company Securities until such information has been known publicly for at least two (2) Trading Days, whether or not TEAM has recommended a suspension of trading to that person. This restriction on trading does not apply to transactions made under an Approved Rule 10b5-1 Trading Plan. Trading in Company Securities during the trading window should not be considered a "safe harbor," and all directors, officers, Restricted Employees, employees and other persons affiliated with TEAM should use good judgment at all times.
3. Pension Blackout Periods. Additionally, the Sarbanes-Oxley Act of 2002 requires that we absolutely prohibit all purchases, sales or transfers of Company Securities by directors and executive officers during a pension fund blackout period. A pension fund blackout period exists whenever 50% or more of the plan participants are unable to conduct transactions in their accounts for more than three (3) consecutive days. These pension fund blackout periods typically occur when there is a change in the retirement plan’s trustee, record keeper or investment manager. Notice of any such blackout period will be provided.
VI. Additional Restrictions for Certain Transactions by Directors and Executive Officers.
TEAM considers it improper and inappropriate for directors and executive officers of the Company to engage in short-term, speculative transactions, including derivatives or hedges, in or related to Company Securities or in other transactions in Company Securities that may lead to inadvertent violations of the insider trading laws. Accordingly, the following additional restrictions apply to all directors, executive officers and Related Persons:
1. Short Sales, Public Options and Derivative Securities. TEAM’s directors, executive officers and Related Persons may not trade in puts or calls or engage in short sales with respect to Company Securities. Trading in "puts" and
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"calls" (publicly traded options to sell or buy stock) and engaging in short sales are often perceived as involving insider trading and they may focus the party engaging in such transaction’s attention on TEAM's short-term performance rather than its long-term objectives. Therefore, transactions in puts, calls and other derivative securities with respect to Company Securities on an exchange or in any other organized market are prohibited by this Policy, as are short sales of Company Securities. Note also that in addition to this Policy, Section 16(c) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), prohibits executive officers and directors from engaging in short sales.
2. Hedging. TEAM’s directors, executive officers and Related Persons may not engage in hedging transactions with respect to Company Securities. Hedging transactions, such as zero-cost collars and forward sale contracts, allow a stockholder to lock in the value of his or her stock holdings, often in exchange for all or a portion of any future appreciation in the stock. The stockholder is then no longer exposed to the full risks of stock ownership and may no longer have the same objectives as TEAM's other stockholders. Therefore, such hedging transactions are prohibited under this Policy.
3. Pledging and Margin Accounts. TEAM’s directors, executive officers and Related Persons may not hold Company Securities in a margin account or pledge Company Securities as collateral for any other loan. Because a broker is permitted to sell securities in a margin account if the customer fails to meet a margin call, the securities can be sold at a time when the customer is aware of Material Nonpublic Information about TEAM. Also, a foreclosure sale under any other loan could occur at a time when the borrower has Material Nonpublic Information about TEAM. Therefore, insiders may not hold Company Securities in a margin account or pledge Company Securities as collateral for a loan.
VII. Miscellaneous Provisions Applicable to All Employees.
A. Potential Criminal and Civil Liability and/or Disciplinary Action.
1. Liability for Insider Trading. Pursuant to federal and state securities laws, insiders may be subject personally to criminal and civil fines and penalties as well as imprisonment for engaging in transactions in Company Securities at a time when they have knowledge of Material Nonpublic Information regarding TEAM. There is no exception for small transactions or transactions that may seem necessary or justifiable for independent reasons, such as the need to raise money for an emergency expenditure. Federal and state investigators will scrutinize a questionable trade after the fact with the benefit of hindsight, so it is advisable to err on the side of caution. Even the appearance of an improper transaction must be avoided to preserve our reputation for adhering to a high standard for ethical conduct. Any questions regarding specific information should be directed to our Chief Legal Officer.
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Both the SEC and the NYSE are very effective at detecting and pursuing insider trading cases. The SEC has successfully prosecuted cases against employees and other persons trading through foreign accounts, trading by family members and friends, and trading involving only a small number of shares. Therefore, it is important that insiders understand the breadth of activities that constitute illegal insider trading.
2. Liability for Tipping. Insiders may also be liable for improper transactions by any person (commonly referred to as a "tippee") to whom they have disclosed Material Nonpublic Information regarding TEAM or to whom they have made recommendations or expressed opinions on the basis of such information as to trading in Company Securities. The SEC has imposed large penalties even when the disclosing person did not profit from the trading. The SEC, the stock exchanges and the National Association of Securities Dealers use sophisticated electronic surveillance techniques to uncover insider trading.
3. Possible Disciplinary Actions. Any of our employees of who violate this Policy shall also be subject to disciplinary action by the Company, which may include ineligibility for future participation in our equity incentive plans or termination of their employment.
B. Exceptions to Policy.
1.Company Stock Option Exercises. For purposes of this Policy, TEAM considers that the exercise of stock options for cash under our stock option plans (but not the sale of any shares issued upon such exercise or purchase and not a cashless exercise (accomplished by a sale of a portion of the shares issued upon exercise of an option)) to be exempt from this Policy, since the other party to these transactions is the Company itself and the price does not vary with the market, but is fixed by the terms of the option agreement or plan, as applicable. In addition, for purposes of this Policy, TEAM considers that bona fide gifts of the securities of the Company are exempt from this Policy.
2.Company Benefit Plans. The restrictions in this Policy do not apply to periodic contributions by TEAM or by employees to our employee benefit plans (e.g. 401(k) plans) which are used to purchase Company Securities pursuant to the employees’ advance instructions. However, employees may not alter or change their instructions regarding the purchase or sale of Company Securities in such plans, including the reallocation within the plans of Company Securities, or make discretionary transfers into or out of Company Securities in such plans, while in the possession of Material Nonpublic Information.
C. Post-Termination Transactions.
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This Policy continues to apply to transactions in Company Securities even after TEAM directors, officers or employees, consultants or contractors, have terminated their employment or other service relationship with TEAM as follows: if an individual is aware of Material Nonpublic Information when the employment or service relationship terminates, such individual may not trade in Company Securities until that information has become public or is no longer material. In all other respects, the procedures set forth in this Policy will cease to apply to the individual’s transactions in Company Securities upon the expiration of any closed trading window period applicable to such transactions at the time of the termination of the employment or service relationship.
D. Inquiries
Please direct your questions as to any of the matters discussed in this Policy to our Chief Legal Officer, or his successor:
André C. “Butch” Bouchard
Executive Vice President, Chief Legal Officer & Secretary
Team, Inc.
13131 Dairy Ashford, Suite 600
Sugar Land, Texas 77478
Direct: (281) 388-5561
butch.bouchard@teaminc.com
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Exhibit 21
SUBSIDIARIES OF REGISTRANT
| COMPANY | JURISDICTION / STATE OF INCORPORATION | |||||||
| Team, Inc. | Delaware | |||||||
| TISI Pipelines, Inc. | Delaware | |||||||
| Team Industrial Services, Inc. | Texas | |||||||
| Global Ascent, LLC | California | |||||||
| TCI Services Holdings, LLC | Delaware | |||||||
| TCI Services, LLC | Oklahoma | |||||||
| Tank Consultants, LLC | Oklahoma | |||||||
| Tank Consultants Mechanical Services, LLC | Oklahoma | |||||||
| Team Industrial Services International, Inc. | Delaware | |||||||
| Team Mexico Holdings, LLC | Texas | |||||||
| Team Middle East FZ LLC | United Arab Emirates | |||||||
| TISI Canada Inc. | Canada | |||||||
| TISI VI, LLC | USVI | |||||||
| Team Industrial Services Asia Private Ltd. | Singapore | |||||||
| Team Industrial Services Trinidad, Ltd. | Trinidad, West Indies | |||||||
| T.I.S.I. Trinidad Limited | Trinidad, West Indies | |||||||
| Team Industrial Services Europe B.V. | Netherlands | |||||||
| Team Industrial Services Netherlands B.V. | Netherlands | |||||||
| Teaminc Europe B.V. | Netherlands | |||||||
| Team Industrial Services Belgium BVBA | Belgium | |||||||
| TIS UK Limited Limited | United Kingdom | |||||||
| Team Valve Repair Services B.V. | Netherlands | |||||||
| Team Industrial Services Deutschland GmbH | Germany | |||||||
| Team Industrial Services Malaysia Sdn Bhd | Malaysia | |||||||
| Team Industrial Services (UK) Holding Limited | United Kingdom | |||||||
| Team Valve and Rotating Services Limited | United Kingdom | |||||||
| TISI do Brasil-Servicos Industriais Ltda. | Brazil | |||||||
| DK Valve & Supply, LLC | California | |||||||
| Team Technical School, LLC | Texas | |||||||
| Rocket Acquisition, LLC | Delaware | |||||||
| Team Qualspec, LLC | Delaware | |||||||
| COMPANY | JURISDICTION / STATE OF INCORPORATION | |||||||
| Qualspec LLC | Delaware | |||||||
| Quantapoint, LLC | Delaware | |||||||
| Quality Inspection Services B.V. | Netherlands | |||||||
| Quality Inspection Services BVBA | Belgium | |||||||
| Threshold Inspection & Application Training Europe B.V. | Netherlands | |||||||
| Furmanite, LLC | Delaware | |||||||
| Xanser Services, LLC | Delaware | |||||||
| Furmanite Germany, LLC | Delaware | |||||||
| Furmanite GmbH | Germany | |||||||
| Furmanite Worldwide, LLC | Delaware | |||||||
| Xtria, LLC | Delaware | |||||||
| Kaneb Financial, LLC | Delaware | |||||||
| Aggressive Equipment Company, LLC | Delaware | |||||||
| Xanser Investment, LLC | Delaware | |||||||
| Furmanite Offshore Services, Inc. | Delaware | |||||||
| Self Leveling Machines, LLC | Texas | |||||||
| Furmanite International Finance Limited | United Kingdom | |||||||
| Furmanite America, LLC | Virginia | |||||||
| Advanced Integrity Solutions, Inc. | Texas | |||||||
| Furmanite Louisiana, LLC | Delaware | |||||||
| Furmanite Aruba II, N.V. | Aruba | |||||||
| Furmanite B.V. | Netherlands | |||||||
| Furmanite GSG BVBA | Belgium | |||||||
| Furmanite Limited | United Kingdom | |||||||
| Furmanite 1986 | United Kingdom | |||||||
| Team Industrial Services Inspection Limited | United Kingdom | |||||||
| Team Industrial Services (UK) Limited | United Kingdom | |||||||
| Furmanite West Africa Ltd. | Nigeria | |||||||
| Furmanite Middle East S.P.C. | Bahrain | |||||||
| Furmanite Kazakhstan LLP | Kazakhstan | |||||||
| Team Industrial Services France SAS | France | |||||||
| Furmanite Malaysia LLC | Delaware | |||||||
| Furmanite (Malaysia) Sdn. Bhd. | Malaysia | |||||||
| Furmanite Australia Pty. Ltd. | Australia | |||||||
| Furmanite Holding B.V. | Netherlands | |||||||
| Furmanite NZ Limited | New Zealand | |||||||
| Furmanite Mechanical Technology Services Co., Ltd. | China | |||||||
Specialty Industrial Services Sdn. Bhd. Malaysia
SLMM PTE Ltd. Singapore
Team Valve and Rotating Services Limited United Kingdom
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (Nos. 333-258885, 333-209871, 333-211495, 333-222128, 333-225727, 333-232227, 333-74062 and 333-281395) on Form S-8 and the registration statement (No. 333-263708) on Form S-3 of our report dated March 19, 2025, with respect to the consolidated financial statements of Team, Inc..
Houston, Texas
March 19, 2025
March 19, 2025
Exhibit 31.1
I, Keith D. Tucker, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Team, Inc.; | ||||
| 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. | The registrant’s other certifying officers 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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |||||||
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | ||||
| 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 the registrant’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 the registrant’s internal control over financial reporting. | |||||||
Date: March 19, 2025
/S/ Keith D. Tucker | |||||
Keith D. Tucker Chief Executive Officer (Principal Executive Officer) | |||||
Exhibit 31.2
I, Nelson M. Haight, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Team, Inc.; | ||||
| 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. | The registrant’s other certifying officers 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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |||||||
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | ||||
| 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 the registrant’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 the registrant’s internal control over financial reporting. | |||||||
Date: March 19, 2025
/S/ Nelson M. Haight | |||||
Nelson M. Haight Chief Financial Officer (Principal Financial Officer) | |||||
Exhibit 31.3
I, Matthew E. Acosta, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Team, Inc.; | ||||
| 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. | The registrant’s other certifying officers 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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |||||||
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | ||||
| 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 the registrant’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 the registrant’s internal control over financial reporting. | |||||||
Date: March 19, 2025
/S/ Matthew E. Acosta | |||||
Matthew E. Acosta Vice President, Chief Accounting Officer (Principal Accounting Officer) | |||||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Team, Inc. (the Company) on Form 10-K for the period ended December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Keith D. Tucker, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(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/ Keith D. Tucker | |||||
Keith D. Tucker Chief Executive Officer (Principal Executive Officer) | |||||
| March 19, 2025 | |||||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Team, Inc. (the Company) on Form 10-K for the period ended December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Nelson M. Haight, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(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/ Nelson M. Haight | |||||
Nelson M. Haight Chief Financial Officer (Principal Financial Officer) | |||||
| March 19, 2025 | |||||
Exhibit 32.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Team, Inc. (the Company) on Form 10-K for the period ended December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Matthew E. Acosta, Vice President and Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(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/ Matthew E. Acosta | |||||
Matthew E. Acosta Vice President, Chief Accounting Officer (Principal Accounting Officer) | |||||
| March 19, 2025 | |||||