SOUTHFIELD, Mich., Nov. 9, 2010 /PRNewswire-FirstCall/ --
TechTeam Global, Inc. (Nasdaq: TEAM), a worldwide provider
of information technology outsourcing and business process
outsourcing services, today reported a net loss of $8.4 million, or $(0.78) per diluted share and a net loss from
continuing operations of $9.2
million, or $(0.86) per
diluted share, for the three months ended
September 30, 2010. For the three months ended
September 30, 2009, net income was
$0.9 million, or $0.08 per diluted share and net income from
continuing operations was $1.1 million or $0.11 per diluted share. The three months ended
September 30, 2010 included a
non-cash impairment charge of $9.4
million and $1.3 million of
expense for professional fees related primarily to the sale of
TechTeam Government Solutions, Inc. Excluding special items, the
Company would have achieved net income from continuing operations
of $934,000, or $0.09 per share in the third quarter 2010.
Please see "Reconciliation of Third Quarter and Year-to-Date Net
Income (Loss) from Continuing Operations to Earnings from
Continuing Operations Excluding Special Items" in the Financial
Data section of this press release.
After the end of the third quarter 2010, the Company completed
the previously announced sale of TechTeam Government Solutions to
Jacobs Engineering Group Inc. (NYSE: JEC) for $43.0 million in cash. For more information
regarding this matter, please see the Form 8-K filed on
October 5, 2010 regarding this
transaction. In addition, on November 1,
2010, the Company entered into a definitive agreement
pursuant to which an affiliate of Stefanini International Holdings
Ltd. (d/b/a Stefanini IT Solutions), a privately held global
provider of onshore and nearshore IT consulting, integration and
development, and outsourcing services, will file a tender offer
with the intention of acquiring and merging with TechTeam Global.
For more information regarding this matter, please see the Form 8-K
filed on November 2, 2010 regarding
this transaction.
Third Quarter 2010 Financial Data Section follows:
- TechTeam Global, Inc. reported a net loss from continuing
operations of $9.2 million, or
$(0.86) per diluted share, for the
three months ended September 30, 2010, compared to net
income from continuing operations of $1.1
million, or $0.11 per diluted
share, for the three months ended September
30, 2009. The net loss from continuing operations for the
three months ended September 30, 2010
included a non-cash impairment charge of $9.4 million and $1.3
million of expense for professional fees. Excluding special
items, the Company would have achieved net income from continuing
operations of $934,000, or
$0.09 per share.
- At the end of the quarter, the Company was not in compliance
with the debt covenants under its Credit Agreement due to the
goodwill impairment recorded in the third quarter of 2010. On
October 5, 2010, the Company
completed the sale of its Government Solutions business and used
$16.4 million of the proceeds to pay
off the Credit Agreement in full.
- Revenue for the Company's Commercial business was $31.7 million in the third quarter of 2010, an
increase of 3.5% over the third quarter of 2009. Total revenue was
$46.2 million in the third quarter
2010, a decrease of 8.3% versus the third quarter of 2009. The
total revenue decrease was primarily the result of the previously
announced wind-down of certain customer contracts in the Government
Solutions business unit. These reductions were partially offset by
the addition of new customers and expansion with existing customers
in the Company's Commercial business in both the Americas and
Europe. Revenue for the third
quarter of 2010 was unfavorably impacted by approximately
$1.2 million due to exchange
rates as compared to the third quarter of 2009. On a sequential
basis, third quarter 2010 revenue increased $1.2 million from second quarter 2010 revenue of
$45.0 million.
- Gross margin in the Commercial business increased to 22.3% in
the third quarter of 2010, up from 21.6% in the third quarter of
2009. Gross margin was 22.4% for the Company in the third quarter
2010, down from 23.4% in the third quarter 2009. This decrease was
primarily due to the loss of higher margin government business. On
a sequential basis, gross margin of 22.4% reported by the Company
in the third quarter 2010 was down from 23.8% reported in the
second quarter 2010.
- Selling, general and administrative (SG&A) expense was
$10.7 million in the third quarter of
2010, an increase from $9.8 million
in the third quarter of 2009. The increase was primarily due to an
increase in professional fees of approximately $1.3 million, primarily related to the sale of
TechTeam Government Solutions. The increase was partially offset by
a reduction of expense from restructuring actions taken in 2009 and
2010 and a reduction in amortization expense related to the write
off of certain intangible assets in the fourth quarter of
2009.
- Third quarter 2010 results include an impairment charge of
$9.4 million related to the write
down of goodwill in the Company's Government Solutions reporting
unit.
- On August 31, 2010, the Company
completed the sale of its TechTeam SQM subsidiary (a staffing
business in Sweden). Beginning in
the third quarter of 2010, SQM has been accounted for as a
discontinued operation. The results of operations for SQM have been
removed from the results of continuing operations for all periods
presented. The Company recognized a net gain of $1,033,000 on the sale of SQM, which is included
with the $181,000 net loss from SQM
for the third quarter 2010, resulting in income from discontinued
operations for the quarter of $852,000.
- Cash provided by operations for the nine months ended
September 30, 2010 was $4.2 million. The Company maintained a
$2.6 million net cash position (total
cash minus total bank debt) at the end of the third quarter 2010.
On October 5, 2010, the Company sold
its Government Solutions business and used a portion of the
proceeds to pay off its debt under its existing credit
facility.
Third quarter highlights include the following:
- In July 2010, TechTeam Global,
Inc. was positioned by Gartner, Inc. in the Visionaries Quadrant of
the Magic Quadrant for Help Desk Outsourcing, Europe report. Note: Magic Quadrant for
Help Desk Outsourcing, Europe was authored by
Gianluca Tramacere, Claudio Da
Rold and Frank Ridder and was
published on July 27, 2010.
- In September 2010, TechTeam
became an authorized reseller of the Google Apps™ Premier Edition
suite of communication and collaboration tools.
- As announced in September 2010,
TechTeam will provide service desk, desk-side and remote desktop
support, infrastructure management, identity and access management,
and service management for Ford Motor Company facilities in
Mexico, Brazil, Argentina, Colombia, Venezuela and Chile.
Gary J. Cotshott, president and
chief executive officer of TechTeam Global, said, "We believe that
combining our business with Stefanini IT Solutions will allow us to
deliver a set of services having greater breadth and depth across
an expanded geographic footprint to our customers and prospects
around the world. We are looking forward to the completion of a
successful tender offer and merger."
About TechTeam Global, Inc.
TechTeam Global, Inc. is a leading provider of IT outsourcing
and business process outsourcing services to large and medium
businesses. The company's primary services include service desk,
technical support, desk-side support, security administration,
infrastructure management and related professional services.
TechTeam also provides a number of specialized, value-added
services in specific vertical markets. Founded in 1979, TechTeam
has approximately 2,200 employees across the world, providing IT
support in 32 languages. TechTeam's common stock is traded on the
NASDAQ Global Market under the symbol "TEAM." For more information,
call 800-522-4451 or visit www.techteam.com.
About the Magic Quadrant
The Magic Quadrant is copyrighted 2010 by Gartner, Inc. and
is reused with permission. The Magic Quadrant is a
graphical representation of a marketplace at and for a
specific time period. It depicts Gartner's analysis of how
certain vendors measure against criteria for that
marketplace, as defined by Gartner. Gartner does not endorse
any vendor, product or service depicted in the Magic Quadrant,
and does not advise technology users to select only those
vendors placed in the "Leaders" quadrant. The Magic Quadrant is
intended solely as a research tool, and is not meant to be a
specific guide to action. Gartner disclaims all warranties,
express or implied, with respect to this research, including any
warranties of merchantability or fitness for a particular
purpose.
Note to Investors
The tender offer to purchase shares of TechTeam Global, Inc.
(the "Company") common stock referenced in this press release has
not yet commenced, and this press release is neither an offer to
purchase, nor a solicitation of an offer to sell, any securities.
The tender offer to purchase shares of TechTeam Global common stock
will be made only pursuant to a Tender Offer Statement on Schedule
TO containing an offer to purchase, forms of letters of transmittal
and other documents relating to the tender offer (the "Tender Offer
Statement"), which Platinum Merger Sub, Inc., a wholly-owned
subsidiary of Stefanini International Holdings Ltd, will file with
the SEC and mail to TechTeam Global stockholders. At the time the
tender offer is commenced, TechTeam Global will file a
Solicitation/Recommendation Statement with respect to the tender
offer (the "Recommendation Statement"). Security holders of
TechTeam Global are advised to read the Tender Offer Statement and
Recommendation Statement when they become available, because they
will contain important information about the tender offer.
Investors and security holders of TechTeam Global also are advised
that they may obtain free copies of the Tender Offer Statement and
other documents filed by Platinum Merger Sub, Inc. with the SEC
(when these documents become available) and the Recommendation
Statement and other documents filed by Stefanini International
Holdings Ltd (when these documents become available) on the SEC's
website at http://www.sec.gov. In addition, free copies of the
Tender Offer Statement and related materials may be downloaded
(when these documents become available) from TechTeam Global's
website at: http://www.techteam.com/investors/sec-filings; and free
copies of the Recommendation Statement and related materials may be
obtained (when these documents become available) from TechTeam
Global by written request to: TechTeam Global, Inc., Attn: Investor
Relations, 27335 West 11 Mile Road, Southfield, Michigan 48033.
Safe Harbor Statement
The statements contained in this press release that are not
purely historical, including statements regarding the Company's
expectations, hopes, beliefs, intentions, or strategies regarding
the future, are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Actual
results may differ materially from those expected because of
various known and unknown risks and uncertainties, including, but
not limited to, the ongoing U.S. recession, the existing global
credit and financial crisis and other changes in general economic
and industry conditions, the award or loss of significant client
assignments, timing of contracts, recruiting and new business
solicitation efforts, currency fluctuations, other factors
affecting the financial health of our clients, uncertainties as to
the timing of the tender offer and the merger; uncertainties as to
how many of the Company's stockholders will tender their stock in
the tender offer; the risk that competing offers will be made; the
possibility that various closing conditions for the transaction may
not be satisfied or waived, including that a governmental entity
may prohibit, delay or refuse to grant approval for the
consummation of the transaction; the effects of disruption from the
transaction making it more difficult to maintain relationships with
employees, licensees, other business partners or governmental
entities; other business effects, including the effects of
industry, economic or political conditions outside of the Company's
control; transaction costs; actual or contingent liabilities; and
other risks and uncertainties discussed in documents filed with the
SEC by the Company, including the solicitation/recommendation
statement to be filed by the Company. These and other risks are
described in the Company's most recent annual report on Form 10-K
and subsequent reports filed with or furnished to the U.S.
Securities and Exchange Commission. The forward-looking statements
included in this press release are based on information available
to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements.
Financial
Data
TechTeam
Global, Inc.
Condensed
Consolidated Statements of Operations (unaudited)
(In
thousands, except per share data)
|
|
|
|
|
|
Third
Quarter Ended September 30,
|
|
Nine Months
Ended September 30,
|
|
|
|
2010
|
|
2009
|
|
%
Change
|
|
2010
|
|
2009
|
|
%
Change
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT Outsourcing
Services
|
|
$ 26,197
|
|
$ 25,407
|
|
3.1%
|
|
$ 75,918
|
|
$ 78,258
|
|
(3.0)%
|
|
IT Consulting and Systems
Integration
|
|
3,066
|
|
2,557
|
|
19.9%
|
|
8,538
|
|
9,319
|
|
(8.4)%
|
|
Other Services
|
|
2,419
|
|
2,637
|
|
(8.3)%
|
|
7,632
|
|
8,273
|
|
(7.7)%
|
|
Total Commercial
|
|
31,682
|
|
30,601
|
|
3.5%
|
|
92,088
|
|
95,850
|
|
(3.9)%
|
|
Government Technology
Services
|
|
14,470
|
|
19,713
|
|
(26.6)%
|
|
44,714
|
|
60,557
|
|
(26.2)%
|
|
Total Revenue
|
|
46,152
|
|
50,314
|
|
(8.3)%
|
|
136,802
|
|
156,407
|
|
(12.5)%
|
|
Cost of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT Outsourcing
Services
|
|
20,394
|
|
20,167
|
|
1.1%
|
|
58,602
|
|
61,145
|
|
(4.2)%
|
|
IT Consulting and Systems
Integration
|
|
2,406
|
|
1,922
|
|
25.2%
|
|
6,850
|
|
7,237
|
|
(5.3)%
|
|
Other Services
|
|
1,808
|
|
1,911
|
|
(5.4)%
|
|
5,819
|
|
6,101
|
|
(4.6)%
|
|
Total Commercial
|
|
24,608
|
|
24,000
|
|
2.5%
|
|
71,271
|
|
74,483
|
|
(4.3)%
|
|
Government Technology
Services
|
|
11,221
|
|
14,525
|
|
(22.7)%
|
|
34,707
|
|
43,841
|
|
(20.8)%
|
|
Total Cost of
Revenue
|
|
35,829
|
|
38,525
|
|
(7.0)%
|
|
105,978
|
|
118,324
|
|
(10.4)%
|
|
Gross Profit
|
|
10,323
|
|
11,789
|
|
(12.4)%
|
|
30,824
|
|
38,083
|
|
(19.1)%
|
|
Selling, general and
administrative
expense
|
|
10,726
|
|
9,807
|
|
9.4%
|
|
31,741
|
|
30,823
|
|
3.0%
|
|
Impairment charge
|
|
9,404
|
|
—
|
|
|
|
9,404
|
|
—
|
|
|
|
Restructuring charge
(credit)
|
|
(75)
|
|
(57)
|
|
|
|
2,687
|
|
(756)
|
|
|
|
Operating Income
(Loss)
|
|
(9,732)
|
|
2,039
|
|
|
|
(13,008)
|
|
8,016
|
|
|
|
Net interest expense
|
|
(165)
|
|
(310)
|
|
|
|
(555)
|
|
(897)
|
|
|
|
Foreign currency transaction
loss
|
|
(347)
|
|
(70)
|
|
|
|
(3)
|
|
(720)
|
|
|
|
Income (Loss) from continuing
operations before Income Taxes
|
|
(10,244)
|
|
1,659
|
|
|
|
(13,566)
|
|
6,399
|
|
|
|
Income tax provision
(benefit)
|
|
(1,004)
|
|
526
|
|
|
|
(1,578)
|
|
2,313
|
|
|
|
Income (Loss) from continuing
operations
|
|
(9,240)
|
|
1,133
|
|
|
|
(11,988)
|
|
4,086
|
|
|
|
Income (Loss) from discontinued
operations, net of tax
|
|
852
|
|
(271)
|
|
|
|
1,085
|
|
(284)
|
|
|
|
Net Income (Loss)
|
|
$ (8,388)
|
|
$
862
|
|
|
|
$(10,903)
|
|
$ 3,802
|
|
|
|
Diluted Earnings (Loss) per
Common Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from continuing
operations
|
|
$
(0.86)
|
|
$
0.11
|
|
|
|
$
(1.12)
|
|
$
0.38
|
|
|
|
Income (Loss) from discontinued
operation
|
|
0.08
|
|
(0.03)
|
|
|
|
0.10
|
|
(0.03)
|
|
|
|
Total Diluted Earnings (Loss)
per Common Share
|
|
$
(0.78)
|
|
$
0.08
|
|
|
|
$
(1.02)
|
|
$
0.36
|
|
|
|
Diluted weighted average common
shares and common share equivalents
|
|
10,755
|
|
10,754
|
|
|
|
10,710
|
|
10,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheet (unaudited)
(In
thousands)
|
|
|
|
|
|
September
30,
2010
|
|
December
31,
2009
|
|
Current Assets
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ 18,984
|
|
$ 14,964
|
|
Accounts receivable,
net
|
|
37,914
|
|
42,925
|
|
Prepaid expenses and other
current assets
|
|
7,498
|
|
3,654
|
|
Net current assets of
discontinued operations
|
|
—
|
|
2,506
|
|
Total current assets
|
|
64,396
|
|
64,049
|
|
Property, Equipment and
Software, Net
|
|
5,511
|
|
6,161
|
|
Goodwill and Other Intangible
Assets, Net
|
|
36,399
|
|
47,270
|
|
Deferred Income
Taxes
|
|
4,209
|
|
3,940
|
|
Other Assets
|
|
1,019
|
|
1,010
|
|
Net long term assets of
discontinued operations
|
|
—
|
|
90
|
|
Total Assets
|
|
$ 111,534
|
|
$ 122,520
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Current portion of long-term
debt
|
|
$ 16,414
|
|
$ 4,074
|
|
Accounts payable
|
|
5,197
|
|
4,972
|
|
Accrued payroll and related
taxes
|
|
8,845
|
|
7,181
|
|
Accrued expenses and other
current liabilities
|
|
5,907
|
|
9,017
|
|
Net current liabilities of
discontinued operations
|
|
—
|
|
1,851
|
|
Total current
liabilities
|
|
36,363
|
|
27,095
|
|
Long-Term
Liabilities
|
|
|
|
|
|
Long-term debt, less current
portion
|
|
—
|
|
11,051
|
|
Other long-term
liabilities
|
|
1,245
|
|
745
|
|
Total long-term
liabilities
|
|
1,245
|
|
11,796
|
|
Shareholders'
Equity
|
|
|
|
|
|
Preferred stock
|
|
—
|
|
—
|
|
Common stock
|
|
112
|
|
111
|
|
Additional paid-in
capital
|
|
81,213
|
|
79,762
|
|
Retained earnings
|
|
(8,177)
|
|
2,726
|
|
Accumulated other comprehensive
income
|
|
778
|
|
1,030
|
|
Total shareholders'
equity
|
|
73,926
|
|
83,629
|
|
Total Liabilities and
Shareholders' Equity
|
|
$ 111,534
|
|
$ 122,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited)
(In
thousands)
|
|
|
|
|
|
Nine Months
Ended September 30,
|
|
|
|
2010
|
|
2009
|
|
Operating
Activities
|
|
|
|
|
|
Net income (loss)
|
|
$ (10,903)
|
|
$ 3,802
|
|
Adjustments to reconcile net
income to net cash
provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
|
4,098
|
|
4,696
|
|
Impairment charge
|
|
9,404
|
|
—
|
|
Gain on sale disposition of
business
|
|
(1,033)
|
|
—
|
|
Other adjustments
|
|
1,652
|
|
7,810
|
|
(Income) loss from discontinued
operations
|
|
(50)
|
|
661
|
|
Net operating cash flow from
discontinued operations
|
|
987
|
|
40
|
|
Net cash provided by operating
activities
|
|
4,155
|
|
17,009
|
|
Investing
Activities
|
|
|
|
|
|
Disposition of business, net of
cash disposed
|
|
935
|
|
—
|
|
Purchase of property, equipment
and software
|
|
(1,472)
|
|
(1,209)
|
|
Cash paid for acquisitions, net
of cash acquired
|
|
(425)
|
|
(375)
|
|
Net cash used in investing
activities
|
|
(962)
|
|
(1,584)
|
|
Financing
Activities
|
|
|
|
|
|
Issuance of debt, net of cash
disposed
|
|
1,288
|
|
—
|
|
Other
|
|
(204)
|
|
(27)
|
|
Payments on long-term
debt
|
|
—
|
|
(16,042)
|
|
Net cash provided used in
financing activities
|
|
1,084
|
|
(16,069)
|
|
Effect of exchange rate changes
on cash and cash equivalents
|
|
(257)
|
|
1,077
|
|
Increase (decrease) in cash and
cash equivalents
|
|
4,020
|
|
433
|
|
Cash and cash equivalents at
beginning of period
|
|
14,964
|
|
16,072
|
|
Cash and cash equivalents at end
of period
|
|
$ 18,984
|
|
$ 16,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Third Quarter and Year-to-Date Net Income
(Loss) from Continuing Operations to Earnings from Continuing
Operations Excluding Special Items
This press release includes a discussion of "Net Income (Loss)
from Continuing Operations to Earnings from Continuing Operations
Excluding Special Items" which is a non-GAAP financial measure. The
Company defines Net Income (Loss) from Continuing Operations to
Earnings from Continuing Operations Excluding Special Items as net
income (loss) from continuing operations excluding impairment
charges, restructuring, legal and professional fees primarily
related to the sale of TechTeam Government Solutions and increases
(decreases) of bad debt expense largely related to bankruptcy
filing of its customers.
The Company believes this non-GAAP financial measure provides
important supplemental information to management and investors.
This non-GAAP financial measure reflects an additional way of
viewing aspects of the Company's operations that, when viewed with
the GAAP results and the accompanying reconciliation to the most
directly comparable GAAP financial measure, provide a more complete
understanding of factors and trends affecting the Company's
business and results of operations.
Net Income (Loss) from Continuing Operations to Earnings from
Continuing Operations Excluding Special Items, which is a non-GAAP
financial measure, should not be considered an alternative to, or
more meaningful than, net (loss) income prepared on a GAAP basis.
Management strongly encourages investors to review the Company's
consolidated financial statements in their entirety and to not rely
on any single financial measure. Because non-GAAP financial
measures are not standardized, it may not be possible to compare
this financial measure with other companies' non-GAAP financial
measures having the same or similar names. In addition, the Company
expects to continue to incur expenses similar to the non-GAAP
adjustments described above, and exclusion of these items from the
Company's non-GAAP measure should not be construed as an inference
that these costs are unusual, infrequent or non-recurring.
The Company provided the following table which reconciles GAAP
net income (loss) from continuing operations, as reported, to
Earnings from Continuing Operations Excluding Special Items:
|
|
(In thousands, except per
share data)
|
|
Quarter
Ended
September
30,
|
|
Nine Months
Ended
September
30,
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
Net income (loss) from
continuing operations
|
|
$ (9,240)
|
|
$ 1,133
|
|
$ (11,988)
|
|
$ 4,086
|
|
|
Special items—
|
|
|
|
|
|
|
|
|
|
|
Impairment charges, net of
tax
|
|
9,404
|
|
-
|
|
9,404
|
|
-
|
|
|
Legal and professional fees, net
of tax
|
|
827
|
|
153
|
|
2,438
|
|
283
|
|
|
Restructuring charge (credit),
net of tax
|
|
(57)
|
|
(57)
|
|
2,079
|
|
(756)
|
|
|
Increase (decrease) bad debt
expense, net of tax
|
|
-
|
|
13
|
|
(65)
|
|
479
|
|
|
Earnings from continuing
operations excluding special items
|
|
$ 934
|
|
$ 1,242
|
|
$ 1,868
|
|
$ 4,092
|
|
|
Diluted weighted average common
shares and common share equivalents
|
|
10,755
|
|
10,754
|
|
10,710
|
|
10,664
|
|
|
Diluted earnings from continuing
operations per common share excluding special items
|
|
$ 0.09
|
|
$ 0.12
|
|
$ 0.17
|
|
$ 0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE TechTeam Global, Inc.