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What changed in TEAM INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TEAM INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+224 added−365 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-14)

Top changes in TEAM INC's 2023 10-K

224 paragraphs added · 365 removed · 171 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

48 edited+9 added−69 removed22 unchanged
Biggest changeWe market our services to companies in a diverse array of heavy industries which include: • Energy (refining, power, renewables, nuclear and liquefied natural gas); • Manufacturing and Process (chemical, petrochemical, pulp and paper industries, automotive and mining); • Midstream and Others (valves, terminals and storage, pipeline and offshore oil and gas); • Public Infrastructure (amusement parks, bridges, ports, construction and building, roads, dams and railways); and • Aerospace and Defense.
Biggest changeWe 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); • Public Infrastructure (construction and building, roads, dams, amusement parks, bridges, ports, and railways); and • Aerospace and Defense. 2 Table of Content 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.
In the event of the resignation, death or removal (for cause or otherwise) of the Investor Director from the Board, APSC, acting on behalf of the Investors, will have the right, but not the obligation, to designate a successor 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 Board Rights Agreement.
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.
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 our potential liabilities under the Superfund Act or similar environmental statutes.
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.
IHT provides conventional and advanced non-destructive testing (“NDT”) 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 (on-stream), during facility turnarounds or during new construction or expansion activities.
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 (on-stream), during facility turnarounds or during new construction or expansion activities.
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.
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.
Our talent management and professional development 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.
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.
The right to nominate the Investor Director is subject to certain qualification requirements and the discretion of our Corporate Governance and Nominating Committee under limited circumstances.
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.
We work closely with our clients across the world to assist them in meeting their environmental sustainability goals. We sponsor and support numerous charitable organizations and our employees donate their time to serving the needs of their communities.
We work closely with our clients 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.
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 community, workplace and the environment.
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.
(“APSC”), pursuant to which APSC, acting as investor representative on behalf of itself and its affiliates that beneficially own our common stock (such affiliates, together with APSC, the “Investors”), may, subject to common stock ownership thresholds and other terms provided in the 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 “Investor Director”).
(“APSC”), pursuant to which APSC, acting as investor representative on behalf of itself and its affiliates that beneficially own our common stock (such affiliates, together with APSC, the “APSC Investors”), 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”).
While many contracts cover specific plants or locations, we also enter into multiple-site regional or national contracts which cover multiple plants or locations. 6 Table of Content In general, competition stems from a large number of other outside service contractors. More than 100 different competitors are currently active in our markets.
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.
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. Our highest priority is the safety of our employees, clients, community and other contractors.
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. Our highest value is the health and safety of our employees, clients, community and other contractors.
We believe we have a competitive advantage over most service contractors due to the quality, training and experience of our technicians, our North America and increasingly 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.
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.
Under its charter, the ESG Council, which is a management committee formed to assist our Chief Legal Officer & 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.
Under its charter, the ESG Council, which is a management committee formed to assist our Executive Vice President, Administration, Chief Legal Officer & 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.
No single client accounted for 10% or more of consolidated revenues during the years ended December 31, 2022 and 2021, respectively. Generally, clients 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 client agreements.
No single client accounted for 10% or more of consolidated revenues during the years ended December 31, 2023 and 2022, respectively. 3 Table of Content Generally, clients 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 client agreements.
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, the Chemical Safety Board, the Department of Transportation and the Federal Aviation Administration.
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.
This program has received much praise and support from our employees, their families and our clients. We recognize the importance of providing training to continually support career growth and development.
This program has received much praise and support from our employees, their families and our clients. 5 Table of Content We recognize the importance of providing training to continually support career growth and development.
Our governance documents are available in print to any stockholder 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.
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. 7 Table of Content
These statements are deeply ingrained in our culture, guiding employee behavior and company decisions and actions. • Safety First/Quality Always – In everything we do; • Integrity – Uncompromising standards of integrity and ethical conduct; 7 Table of Content • Service Leadership – Leading service quality, professionalism and responsiveness; • Innovation – Supports continuous growth and improvement; • Pride and Respect – For our clients, for each other and for all of our stakeholders; and • Teamwork – Global teamwork and collaboration.
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 clients, for each other and for all of our stakeholders; and • Teamwork – Global teamwork and collaboration.
ITEM 1. BUSINESS General Development of Business Introduction. Unless otherwise indicated, the terms “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 New York Stock Exchange (“NYSE”) under the symbol “TISI”.
ITEM 1. BUSINESS General Development of Business Introduction. Unless otherwise indicated, the terms “Team,” “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”.
The Investors are not permitted to designate, in the aggregate, more than one non-voting board observer and more than one Investor Director under the Board Rights Agreement, the Term Loan Credit Agreement and the Commitment 9 Table of Content Letter, provided that the Board Rights Agreement does not otherwise limit or impair any rights under the Commitment Letter and the Term Loan Credit Agreement.
The APSC Investors are not permitted to designate, in the aggregate, more than one non-voting board observer and more than one APSC Investor Director under the APSC Board Rights Agreement, the Term Loan Credit Agreement and the Commitment Letter, provided that the APSC Board Rights Agreement does not otherwise limit or impair any rights under the Commitment Letter and the Term Loan Credit Agreement.
The Investors’ rights under the Board Rights Agreement are a continuation of existing rights under the Term Loan Credit Agreement and that certain commitment letter (the “Commitment Letter”), dated as of November 9, 2021, by and among us, Corre Partners Management, LLC and APSC in the event obligations under the Term Loan Credit Agreement cease to be outstanding.
The APSC Investors’ rights under the APSC Board Rights Agreement are a continuation of existing rights under that certain term loan credit agreement dated December 18, 2020 (the “Term Loan Credit Agreement”) and that certain commitment letter (the “Commitment Letter”), dated as of November 9, 2021, by and among us, Corre Partners Management, LLC (“Corre”) and APSC in the event obligations under the Term Loan Credit Agreement cease to be outstanding.
Our Executive Vice President, Administration, Chief Legal Officer & Secretary, who reports directly to our CEO, has general oversight responsibility with respect to matters of sustainability and social responsibility and is the co-executive sponsor of our ESG Council, along with our Chief Digital & Information Officer of the Company.
Our Executive Vice President, Administration, Chief Legal Officer & 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.
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 talented, high-performing employees.
We invest in our talent by providing our employees with targeted training, mentoring and career 4 Table of Content development opportunities, all of which enable us to hire and retain skilled, high-performing employees.
We are committed to conducting our business in a manner that protects the environment and the health and safety of our employees, our clients, our suppliers and contractors and the general public, including supporting career growth opportunities for our diverse team of employees and actively contributing to the local communities in which we operate.
We are committed to conducting our business in a manner that protects the environment and the health and safety of our employees, our clients, 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.
These regulations are administered by various foreign, federal, state and local health and safety and environmental agencies and authorities, including OSHA of the U.S. Department of Labor and the EPA. Failure to comply with these laws and regulations may involve civil and criminal liability.
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.
Employee engagement Periodically, our employees participate in our engagement survey which provides us with valuable insight as we seek to improve our overall employee engagement and satisfaction. Acting upon employee feedback generated from the engagement 8 Table of Content survey, we review our regional health benefits, communication strategy and training efforts on an ongoing basis.
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 that these service locations are situated to facilitate timely responses to client needs with on-call expertise, which is an important feature of selling and providing our services.
Marketing, Clients 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 client needs with on-call expertise, which is an important feature of selling and providing our services.
They represent what we stand for, the values our employees embody, and what our services and products contribute to the market.
They represent what we stand for, the values our employees embody, what our clients can expect in the delivery of our services and what our services and products contribute to the market.
We believe the significant response rate to our survey is 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.
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.
Many of our services, including our inspection, emissions monitoring and leak repair services, are crucial in assisting our clients to identify, assess and reduce their carbon emissions and fluid leaks. We provide inspection, maintenance and repair services and support our clients’ energy transition efforts into lower carbon and renewable energy sources, such as liquefied natural gas, hydropower and wind.
Many of our services, including our inspection, emissions monitoring and leak repair services, are crucial in assisting our clients to identify, assess and reduce their carbon and greenhouse gas emissions. We provide inspection, condition assessment, maintenance and repair services and support our clients’ diversification efforts into sources of renewable energy.
Since the widespread public health crises, epidemics and pandemics , we’ve proactively introduced more flexibility in our work environment by offering eligible employees the ability to work remotely or on-site, flexible working schedules. We expect to continue offering such flexibility to eligible employees moving forward.
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.
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 clients.
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 clients.
Our specialty maintenance, turnaround and outage services are designed to minimize client downtime and are primarily delivered while assets are off-line and often through the use of cross-certified technicians, whose multi-craft capabilities deliver the production needed 2 Table of Content to achieve tight time schedules.
Our specialty maintenance, turnaround and outage services are designed to minimize client downtime and are primarily delivered while assets are off-line and 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.
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.
We hosted global town hall meetings throughout the year and introduced the monthly CEO Connection newsletter. 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.
Mechanical Services Segment: MS provides onstream services engineered to keep client 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 client downtime. These core MS services described below are delivered in on-call, project-managed, and full-time nested capacities. Leak Repair Services.
Mechanical Services Segment: MS provides onstream services engineered to keep client 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 client downtime.
Corporate Leadership General & Administrative Global Workforce 1 Female 8% 58% 12% Male 92% 42% 88% _________________ 1 Global workforce includes technicians. We have developed diversity focused strategies through collaboration with the career centers at the universities where we recruit.
Corporate Leadership General & Administrative Global Workforce 1 Female 13% 56% 11% Male 87% 44% 89% _________________ 1 Global workforce includes technicians. We have developed diversity focused strategies through internal initiatives and collaboration with the career centers at the universities where we recruit.
These rules remind our work force about hand placement, proper guarding, and when to get assistance. In 2022 we achieved the second-best safety performance in the Company’s history. 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 rules are specific to those high hazard tasks where the opportunity for hand injury is most prevalent. These rules remind our work force about hand placement, proper guarding, and when to get assistance. 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.
IHT also provides advanced digital imaging including remote digital video imaging. MS provides solutions designed to serve clients’ unique needs during both the operational (onstream) and off-line states of their assets.
In addition, IHT provides comprehensive non-destructive testing services and metallurgical and chemical processing services to the aerospace industry, 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 clients’ unique needs during both the operational (onstream) and off-line states of their assets.
The 12 Life Saving Rules are clear and simple rules designed to address those activities that put our employees at the greatest risk. The rules include both encouraged behaviors as well as discouraged behaviors. All our employees receive online training on the rules and must acknowledge that they have read them.
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 are clear and simple rules designed to address those activities that put our employees at the greatest risk. The rules include both encouraged behaviors as well as discouraged behaviors.
We recruit diverse candidate populations through collaborations with the Society of Women Engineers (“SWE”), Society of Hispanic Engineering’s (“SHPE”) and National Society of Black Engineers (“NSBE”) programs, as well as recruiting at Historically Black Colleges and Universities. Health, safety and training In 2019, we introduced our “12 Life Saving Rules” across our organization to further enhance our safety focused culture.
We recruit diverse candidate populations through targeted outreach efforts and collaborations with the Society of Women Engineers (“SWE”), Society of Hispanic Engineering’s (“SHPE”) and National Society of Black Engineers (“NSBE”) programs, as well as recruiting at Historically Black Colleges and Universities.
Human Capital As of December 31, 2022, we had approximately 5,200 employees, with approximately 3,900 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.
Human Capital Due to the seasonal nature of our business, our employee headcount varies during the year. During 2023, we averaged approximately 5,400 employees, with approximately 4,050 employed in the United States and 1,350 internationally. Human capital management, combined with our core values and talent management initiatives, is a key driver of our employee retention program.
These contributions help to support the work of nonprofit organizations of all sizes, working in areas such as health support services and well-being. Our Corporate Governance and Nominating Committee has responsibility for maintaining oversight over the development of appropriate environmental, social and corporate governance principles, policies and practices for Team, including our public reporting on corporate responsibility and sustainability.
Our Corporate Governance and Nominating Committee has responsibility for maintaining oversight over the development of appropriate environmental, social and corporate governance principles, policies and practices for Team, including our public reporting on corporate responsibility and sustainability. Our Company management is responsible for the day-to-day operation of ESG matters.
The Corporate Governance and Nominating Committee receives regular reports from our Executive Vice President, Administration, and Chief Legal Officer & Secretary regarding the considerations and actions taken by the Company with respect to ESG. Existing Board Rights On November 1, 2022, we entered into the Board Rights Agreement (the “Board Rights Agreement”) with Atlantic Park Strategic Capital Fund, L.P.
The Corporate Governance and Nominating Committee receives regular reports from our Executive Vice 6 Table of Content President, Administration, Chief Legal Officer & Secretary and ESG Council regarding the considerations and actions taken by us with respect to ESG.
The rules are posted internally, communicated throughout our organization through our safety bulletins, and are printed in multiple languages. In 2022 we enhanced our 12 Life Saving Rules by establishing our 5 Hand Safety Rules. These rules are specific to those high hazard tasks where the opportunity for hand injury is most prevalent.
All our employees receive online training on the rules and must acknowledge that they have read them. The rules are posted internally, communicated throughout our organization through our safety bulletins, and are printed in multiple languages. In 2022 we enhanced our 12 Life Saving Rules by establishing our 5 Hand Safety Rules.
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.
Also, many states where we operate regulate health, safety and environmental activities, such as California OSHA and 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.
Prior to the sale of our Quest Integrity segment (“Quest Integrity”) as discussed below, we conducted operations in three segments: Inspection and Heat Treating (“IHT”), Mechanical Services (“MS”) and Quest Integrity. We currently conduct operations in two segments.
We conduct operations in two segments: Inspection and Heat Treating (“IHT”) and Mechanical Services (“MS”).
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. A description of these core IHT services is as follows: Non-Destructive Evaluation and Testing Services .
Heat treating services are generally associated with turnaround, project and new construction activities.
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On November 1, 2022, we completed the sale of all of the issued and outstanding equity interests of our wholly-owned subsidiary, TQ Acquisition Inc., a Texas corporation (“TQ Acquisition”), to Baker Hughes Holdings LLC (“Baker Hughes”) for an aggregate purchase price of approximately $279.0 million, after certain post-closing adjustments (the “Quest Integrity Transaction”), pursuant to that certain Equity Purchase Agreement by and between us and Baker Hughes, dated as of August 14, 2022 (the “Sale Agreement”).
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These 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.
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TQ Acquisition and its subsidiaries constituted Quest Integrity, which provided integrity and reliability management solutions for the process, pipeline and power sectors. The criteria for reporting Quest Integrity as a discontinued operation have been met and, as such, all periods presented in this Form 10-K have been recast to present Quest Integrity as a discontinued operation.
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These 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.
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Unless otherwise specified, the financial information and discussion in this Form 10-K are based on our continuing operations (IHT and MS segments) and exclude any results of our discontinued operations (Quest Integrity). Refer to Note 2 - Discontinued Operations for additional details.
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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.
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These critical services include on-site field machining; bolted-joint integrity; vapor barrier plug testing; and valve management solutions. Prior to its sale, Quest Integrity provided integrity and reliability management solutions for the process, pipeline and power sectors.
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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 2023, we continued our focus on regular communications with our employees.
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These solutions encompass two broadly-defined disciplines: (1) highly specialized in-line inspection services for historically unpiggable process piping and pipelines using proprietary in-line inspection tools and analytical software; and (2) advanced engineering and condition assessment services through a multi-disciplined engineering team and related lab support. As referenced previously, Quest Integrity is now reported as discontinued operations.
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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.
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Machined parts, industrial piping and structures can be complex systems that experience extreme loads and fatigue during their lifetime. Our Non-Destructive Evaluation and Testing (“NDE/NDT”) services enable the inspection of these components without permanently altering the equipment.
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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.
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It is a highly valuable technique that is often used to validate the integrity of materials, detect instabilities, discover performance outside of tolerances, identify failed components, or highlight an inadequate control system. Inspection services frequently require industry recognized training and certification. We employ training and certification programs, which are designed to meet or exceed industry standards.
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Corre Board Rights 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 the Board Rights Agreement (the “Corre Board Rights Agreement”), pursuant to which Corre, acting on behalf of itself and its affiliates that beneficially own our common stock (such affiliates, together with Corre, the “Corre Investors”), 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”).
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As assets continue to age and remain in service often beyond the original design life, and compliance regulations advance in parallel, inspection and assessment techniques are playing a critical role in safely monitoring fitness-for-service and where practical, extending the useful life of this aging infrastructure. Radiographic Testing .
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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.
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Radiographic Testing (“RT”) is used to detect discontinuities in ferrous and nonferrous castings, welds or forgings using X-ray or gamma ray radiation. RT reveals both external and internal defects, internal assembly details and changes in thickness. Our licensed technicians utilize conventional, computed and real-time radiography testing techniques depending upon the complexity and needs of our clients. Ultrasonic Testing.
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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.
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Ultrasonic Testing (“UT”) uses high frequency ultrasonic waves to detect surface breaking and internal imperfections, measure material thickness and determine acceptance or rejection of a test object based on a reference code or standard. We offer ten different types of UT methods, including traditional scans as well as automated and high speed ultrasonic Electro Magnet Acoustic Transducer testing.
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Each method is utilized to meet a specific material or process application requirement. Magnetic Particle Inspection . Magnetic Particle Inspection is an NDT process for detecting surface and slight subsurface discontinuities in ferroelectric materials such as iron, nickel, cobalt, and some of their alloys. The process puts a magnetic field into the test object.
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When the part is magnetized, flaws perpendicular to the magnetic field direction cause flux leakage. If a lapse or a crack is present, the magnetic particles will be attracted to the flawed area, providing our technician with what is called an indication. Our technician will then evaluate the indication to assess the location, size, shape and extent of these imperfections.
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Liquid Penetrant Inspection . Liquid Penetrant Inspection is one of the most widely used NDE/NDT methods. Its popularity can be attributed to two main factors: its relative ease of use and its flexibility. Liquid Penetrant Inspection can be used to inspect almost any material. We utilize Liquid Penetrant Inspection to detect surface discontinuities in both ferromagnetic and non-ferromagnetic materials.
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In castings and forgings, there may be cracks or leaks in new products or fatigue cracks in in-service components. 3 Table of Content Positive Material Identification . Positive Material Identification (“PMI”) quickly and accurately identifies the composition of more than 100 different metallurgical alloys onsite.
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We can perform PMI on virtually any size or shape of pipe, plate, weld, welding materials, machined parts or castings. Electromagnetic Testing . Electromagnetic Testing applies to a family of test methods that use magnetism and electricity to detect or measure cracks, flaws, corrosion or heat damage in conductive materials.
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Magnetic properties and geometric analysis are used to determine the best technique to identify defects. Our electromagnetic services enable our technicians to evaluate small cracks, pits, dents and general thinning in tubing with small diameters, large steel surfaces such as storage tank floors, and everything in between. Alternating Current Field Measurement .
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Originally developed for inspection of fatigue cracking, our Alternating Current Field Measurement (“ACFM”) is an advanced technique for detecting surface cracks and pinpointing the location, length and depth of the defect. Our ACFM works through paint and coatings and in a wide range of temperatures. Results are automatically recorded and accepted by certification authorities. Eddy Current Testing .
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Eddy Current Testing (“ECT”) is ideal for nonferrous materials such as heat exchanger tubes, condensers, boilers, tubing and aircraft surfaces. Our ECT uses electromagnetic induction to detect flaws in conductive materials, displaying the presence of very small cracks, pits, dents and general thinning. Long-Range Guided Ultrasonics .
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Guided wave inspection is a method of ultrasonic testing that enables the detection and location of pipe defects above and below ground without disruption of service. This technique only requires a small area of excavation to perform the testing where applicable.
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Guided ultrasonics sends a bilateral signal over hundreds of feet allowing long ranges of piping to be inspected at one time. Phased Array Ultrasonic Testing. Phased Array Ultrasonics Testing (“PAUT”) provides enhanced detection, characterization and sizing capability of flaws in manufactured materials like welds. PAUT applies computer-controlled excitation to individual elements in a multi-element probe.
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By varying the timing of the excitation, the sound beam can be swept through a range of angles to a specific area of interest. Terminals and Storage Inspection and Management Programs.
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Our above ground storage tank (“AST”) inspection and management team, Team Tank Consultants (“TTC”), specializes in performing inspections, condition assessment and selected repair services across the United States (“U.S.”) for AST and related infrastructure.
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Backed by our in-house engineering, documentation and certification services – including American Petroleum Institute 653, 510 & 570 evaluations – TTC’s on-site inspections, repair and maintenance services help keep clients’ tanks fully operational and compliant with stringent industry standards. Rope Access.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe OECD continues to publish guidance pursuant to BEPS and other projects which, if adopted by member countries, may affect our tax positions in many of the countries in which we do business. 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.
Biggest changeOur 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.
Developments in an audit, litigation, or the 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.
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.
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 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.
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.
The services we provide could incur quality of execution issues that may be caused by our workforce personnel and/or components we purchase from other manufacturers or suppliers. If the quality of our services does not meet our clients’ expectations or satisfaction, then our sales and operating earnings, and, ultimately, our reputation, could be negatively impacted.
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 clients’ expectations or satisfaction, then our sales and operating earnings, and, ultimately, our reputation, could be negatively impacted.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited . On February 2, 2022, the Company entered into a Section 382 Rights Agreement (the “Section 382 Rights Agreement”) with Computershare Trust Company, N.A., as rights agent, to facilitate our ability to preserve our net operating losses and certain other tax attributes.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited . On February 2, 2022, we entered into a Section 382 Rights Agreement (the “Section 382 Rights Agreement”) with Computershare Trust Company, N.A., as rights agent, to facilitate our ability to preserve our net operating losses and certain other tax attributes.
The adoption of new or more stringent legislation or regulatory programs limiting greenhouse gas emissions from clients, particularly those in refining and petrochemical industries, for whom we provide repair and maintenance services, or reducing the demand for those clients’ products, could in turn affect demand for our products and services.
The adoption of new or more stringent legislation or regulatory programs limiting greenhouse gas emissions from clients, particularly those in refining and petrochemical industries, for whom we provide inspection, repair and maintenance services, or reducing the demand for those clients’ products, could in turn affect demand for our products and services.
From time to time, we seek growth through strategic acquisitions while also evaluating our portfolio for potential divestitures in the specialty maintenance and specialty industrial services, including inspection, engineering assessment and mechanical services to complement, diversify or rationalize our existing business.
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.
Our ability to compete successfully in new client markets depends on our ability to continue to deliver innovative, relevant and useful services to our clients in a timely manner. As a result, we have invested, and expect to continue to invest, resources in developing products and services to new clients.
Our ability to compete successfully in new client markets depends on our ability to continue to deliver innovative, relevant and useful services to our clients 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 clients.
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.
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.
A delisting of our common stock 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.
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.
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 depends heavily on our ability to make accurate estimates.
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.
The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control. Risks Related to Information Systems Our business and operations would suffer in the event of computer system failures, cyber-attacks or deficiencies in our cyber-security or those of third-party providers .
The concentration of ownership may also have the effect of delaying, preventing or deterring a change of control. 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 .
Such disruptions, should they occur, could materially impact our results of operations, financial position 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.
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.
However, in order 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.
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.
If we do not adapt to or comply with investor or other stakeholder expectations and standards on ESG matters as 14 Table of Content 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 suffer reputational damage.
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 suffer reputational damage.
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 GHG emissions may cause disruptions in, or an increase in the costs associated with, the manufacturing and distribution of our products.
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.
While we continue to expand our market presence in the areas of aerospace and defense, 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 reduction in demand for our services.
While we continue our efforts to expand our market presence in the areas of aerospace and defense, 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.
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 client businesses or governmental regulations, could have a material impact on our results of 10 Table of Content operations, financial position or cash flows.
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 client businesses or governmental regulations, could have a material impact on our results of operations, financial position or cash flows.
Finally, most 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.
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.
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, client 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 profit margins.
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, client 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.
No assurances can be made that we will continue to maintain our pricing model and our profit margins or increase our market share. Our ongoing investments in new client markets involve significant risks, could disrupt our current operations and may not produce the long-term benefits that we expect.
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 client markets involve significant risks, could disrupt our current operations and may not produce the long-term benefits that we expect.
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.
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 are involved and are likely to continue to be involved in legal proceedings, 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 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 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.
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.
Such investments may not prioritize short-term financial results and may involve significant risks and uncertainties, including encountering new competitors. We may fail to generate sufficient revenue, operating margin or other value to justify our investments in such new client markets, thereby harming our ability to generate revenue. Ukraine Conflict .
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 client markets, thereby harming our ability to generate revenue.
As a result, this stockholder may be able to exert influence over our affairs and policies. This concentrated ownership could limit the ability of the remaining stockholders to influence corporate matters, and the interests of the large stockholders may not coincide with our interests or the interests of the remaining stockholders.
As a result, this shareholder may be able to exert influence over our affairs and policies. 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.
The loss of these individuals, or failure to attract new employees, could adversely affect our ability to perform our obligations on our clients’ projects or maintenance and consequently could negatively impact the demand for our products and services.
The failure to retain these individuals, or failure to attract new employees, could adversely affect our ability to perform our obligations on our clients’ projects or maintenance and consequently could negatively impact our ability to meet the demand for our products and services.
Our contracts typically require us to indemnify our clients for injury, damage or loss arising out of our presence at our clients’ location, regardless of fault, or the performance of our services and provide for warranties for materials and workmanship. We may also be required to name the client as an additional insured under our insurance policies.
Our contracts typically require us to name a client as an additional insured under our insurance policies and indemnify our clients for injury, damage or loss arising out of our presence at our clients’ location, regardless of fault, or the performance of our services and provide for warranties for materials and workmanship.
Current and future inflationary volatility driven by, among other things, supply chain disruptions and governmental stimulus or fiscal policies as well as the ongoing military conflict between Russia and Ukraine could further impact our ability to make accurate estimates, which could have an adverse impact on our business, cash flows and profitability.
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 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.
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.
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.
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.
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.
The Company’s ability to use its net operating losses and other tax attributes would be substantially limited if it experiences an “ownership change,” as such term is defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).
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”).
The NYSE has several listing requirements set forth in the NYSE Listed Company Manual. For example, Section 802.01C of the NYSE Listed Company Manual requires that our common stock trade at a minimum average closing price of $1.00 per share over a consecutive 30 trading day period.
For example, Section 802.01C of the NYSE Listed Company Manual requires that our common stock trade at a minimum average closing price of $1.00 per share over a consecutive 30 trading day period.
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.
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 Table of Content ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Full disclosure of our debt appears under Item 7 – Liquidity, Capital Resources and Going Concern, Note 1 – Summary of Significant Accounting Policies and Practice, and Note 12 – Debt .
Disclosure of our debt appears under Item 7 – Liquidity and Capital Resources, Note 1 – Summary of Significant Accounting Policies and Practice, and Note 11 – Debt .
Poor safety performance may limit or eliminate potential revenue streams, including from many of our largest clients, and may materially increase our operating costs, including increasing our required insurance deductibles, self-insured retention and insurance premium costs.
Poor safety performance may limit or eliminate potential revenue streams, including from many of our largest clients, 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.
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 maintain a $6 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.
Notwithstanding the foregoing, even if the Section 382 Rights Agreement deters an ownership change, it is possible that we will not generate taxable income in time to use such net operating losses before their expiration, or at all.
Notwithstanding the foregoing, even if the Section 382 Rights Agreement deters an ownership change, 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.
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.
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.
Although we have regained compliance with Section 802.01C of the NYSE Listed Company Manual within the cure period, there is no assurance that we will remain in compliance with Section 802.01C of the NYSE Listed Company Manual or other NYSE continued listing standards in the future.
There is no assurance that we will remain in compliance with Section 802.01B and Section 802.01C of the NYSE Listed Company Manual or other NYSE continued listing standards in the future.
While we may create and publish voluntary disclosures regarding ESG matters from time to time, 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.
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.
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.
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.
Certain clients have employees represented by unions and could be subject to temporary work stoppage which could impact our activity level. We sell our services in highly competitive markets, which places pressure on our profit margins and limits our ability to maintain or increase the market share of our services.
Certain industries and clients 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.
Such climate events have the potential to adversely affect our operations or those of our clients or suppliers, which in turn could have a negative effect on us, including by adversely impacting our results of operations, financial condition and cash flows.
Such climate events have the potential to adversely affect our operations or those of our clients 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.
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.
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.
Foreign Corrupt Practices Act and the United Kingdom Bribery Act, there can be no assurance that all of our 13 Table of Content 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 our policies and procedures.
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.
The current Presidential administration has also emphasized its intention to actively pursue its policy goals of addressing global climate change through significant economy-wide reductions in greenhouse gases and hastening the transition from carbon-based energy sources.
The current Presidential administration is actively pursuing its policy goals of addressing global climate change through significant economy-wide reductions in greenhouse gases and transitioning from carbon-based energy sources.
A number of our clients 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.
We may experience inflationary pressures in our operating costs and cost overruns on our projects. A small portion of our clients 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.
We may not be able to meet the NYSE’s continued listing requirements and rules, and 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 and may lead to potential events of default on existing debt instruments.
We may not be able to meet the NYSE’s continued listing requirements and rules, and 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. The NYSE has several listing requirements set forth in the NYSE Listed Company Manual.
Our international business operations may include projects in countries where corruption is prevalent. Although we have implemented continue to and enforce policies and procedures designed to ensure compliance with the U.S.
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.
Any of these factors, individually or in combination, could materially and adversely affect our future results of operations, financial position, cash flows and/or stock price and could also affect whether any forward-looking statements in this Annual Report on Form 10-K ultimately prove to be accurate. 20 Table of Content ITEM 1B. UNRESOLVED STAFF COMMENTS None.
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.
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 product demand and client relationships. 19 Table of Content Risks Related to Legal Liability Our insurance coverage will not fully indemnify us against certain claims or losses.
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 client relationships.
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. Our business depends upon the maintenance of our proprietary technologies and information.
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.
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.
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.
If critical information systems fail or are otherwise unavailable, our business operations could be adversely affected. 17 Table of Content 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.
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.
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.
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 the SEC’s proposed rule on climate change disclosure, increased fuel efficiency standards, carbon taxes or cap and trade systems, restrictive permitting and incentives for renewable energy.
Our largest stockholder beneficially owned approximately 37.6% of the total voting power held by stockholders of our outstanding common stock as of March 10, 2023 (including PIPE Shares, as defined below, and shares issuable upon exercise of certain Warrants, as defined below, held by our largest stockholder in each case).
Our largest shareholder beneficially owned approximately 39.8% of the total voting power held by shareholders of our outstanding common stock as of March 5, 2024 (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).
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. As a result of past acquisitions, intangible assets comprise a significant portion of our total assets.
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.
Our initiatives may negatively affect our ability to retain and attract qualified personnel, who may experience uncertainty about their future roles with us. We may experience inflationary pressures in our operating costs and cost overruns on our projects.
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 .
Disruption of the credit markets could also adversely affect our clients’ ability to finance ongoing maintenance and new capital projects, resulting in contract cancellations or suspensions, capital project delays, repurposing of infrastructure, and infrastructure closures. An extended or deep recession may result in plant closures or other contractions in our client base.
Disruptions or volatility in these markets could also adversely affect our clients’ 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.
Further, regulatory requirements related to ESG continue to evolve and may increase our costs of compliance.
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.
The loss or unavailability of any of our executive officers or other key employees could have a material adverse effect on our business operations.
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.
Additionally, the company's attack surface was reduced by blocking remote logins from known high risk countries and physical logins by non-company devices at major company locations. Interruptions in the proper functioning of our information systems could disrupt operations and cause increases in costs and/or decreases in revenues.
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.
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 2022 ABL Credit Facility and Term Loan bear interest at variable market rates. If market interest rates increase, our interest expense and cash flows could be adversely impacted.
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 .
Removed
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.
Added
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 client’s current and future spending levels.
Removed
Risks Related to Market Conditions Widespread public health crises, epidemics and pandemics , and the related threat of recession and other economic repercussions have had, and may continue to have, a significant impact on our business, and depending on its continued effects on the oil and gas industry, could have a material adverse effect on our business, liquidity, consolidated results of operations, and consolidated financial condition.
Added
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 clients’ products.
Removed
Our clients in the oil and gas industry have historically accounted for a substantial portion of our revenues.
Added
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.
Removed
W idespread public health crises, epidemics and pandemics , threat of recession and related economic repercussions created significant volatility, uncertainty and turmoil in the oil and gas industry during 2022 and 2021 and continue to disrupt the normal operations of many businesses, including the temporary closure or scale-back of business operations and/or the imposition of either quarantine or remote work or meeting requirements for employees, either by government order or on a voluntary basis.
Added
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 against those goals.
Removed
While the effects of the COVID-19 outbreak recently appear to be lessening significantly, widespread public health crises, epidemics and pandemics spreading throughout the U.S. and globally could result in significant disruptions. The global economy, our markets and our clients’ businesses have been, and may continue to be, materially and adversely affected by widespread public health crises, epidemics and pandemics .
Added
If our ESG-related data, processes or reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, our reputation could be adversely affected.
Removed
The threat of recession on the economic environment may affect client demand for our services. The threat of recession on our economic environment and political uncertainty may reduce the availability of liquidity and credit and, in many cases, reduce demand for our clients’ products.
Added
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.
Removed
These factors may also adversely affect our ability to collect payment for work we have previously performed. Furthermore, our ability to expand our business could be limited if, in the future, we are unable to increase our credit capacity under favorable terms or at all.
Added
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 would go into effect in 2024.
Removed
The Company does not have employees or operations in Russia or Ukraine. Sanctions and other trade controls imposed by the United States and other governments in response to Russia’s military operations in Ukraine could impact our supply chain and our clients’ businesses in future periods.
Added
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAdditional 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.
Biggest changeWe 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.
ITEM 2. PROPERTIES We provide our services globally through more than 150 locations and 20 countries throughout the world. 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 ISO-9001 certified manufacturing facility for clamps, enclosures, and sealants.
ITEM 2. PROPERTIES We provide our services globally through more than 140 locations in 15 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 and leased office space for our Quest Integrity segment headquarters in Kent, Washington, until its sale on November 1, 2022.
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.
Removed
We own a facility in Pasadena, Texas; a facility in Vlissingen, Netherlands and three facilities in the United Kingdom in Kendal, Carlisle and Scunthorpe.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS Information regarding our legal proceedings can be found in Note 17 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. 21 Table of Content PART II
Biggest changeITEM 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. 10 Table of Content PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 35 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 88 ITEM 9A. CONTROLS AND PROCEDURES 89 Management’s Annual Report on Internal Control Over Financial Reporting 89 ITEM 9B. OTHER INFORMATION 89 PART III 90
Biggest changeFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 23 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 67 ITEM 9A. CONTROLS AND PROCEDURES 68 Management’s Annual Report on Internal Control Over Financial Reporting 68 ITEM 9B. OTHER INFORMATION 68 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 69 PART III 70
ITEM 4. MINE SAFETY DISCLOSURES 21 PART II 22 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 22 ITEM 6. SELECTED FINANCIAL DATA 23 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 24 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 34 ITEM 8.
ITEM 4. MINE SAFETY DISCLOSURES 10 PART II 11 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED S TOCK HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 11 ITEM 6. SELECTED FINANCIAL DATA 12 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends No cash dividends were declared or paid during the years ended December 31, 2022 or 2021. We are limited in our ability to pay cash dividends without the consent of our lenders. Accordingly, we have no present intention to pay cash dividends in the foreseeable future.
Biggest changeDividends No cash dividends were declared or paid during the years ended December 31, 2023 or 2022. 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. 22 Table of Content
Additionally, any future dividend payments will continue to depend on our financial condition, market conditions and other matters deemed relevant by the Board. 11 Table of Content
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 447 holders of record of our common stock as of March 10, 2023, excluding beneficial owners of stock held in street name.
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 323 holders of record of our common stock as of March 5, 2024, excluding beneficial owners of stock held in street name.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

50 edited+32 added−61 removed20 unchanged
Biggest changeAND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued) (unaudited, in thousands) Three Months Ended December 31, Twelve Months Ended December 31, 2022 2021 2022 2021 IHT Operating income $ 4,055 $ 2,173 $ 17,093 $ 12,997 Severance charges, net 1 94 86 286 661 Adjusted EBIT 4,149 2,259 17,379 13,658 Depreciation and amortization 3,019 3,071 12,391 12,959 Adjusted EBITDA $ 7,168 $ 5,330 $ 29,770 $ 26,617 MS Operating income (loss) $ 5,778 $ 3,071 $ 20,930 (47,728) Severance charges, net 1 596 30 685 524 Goodwill impairment loss — — — 55,837 Adjusted EBIT 6,374 3,101 21,615 8,633 Depreciation and amortization 4,799 5,068 19,021 20,500 Adjusted EBITDA $ 11,173 $ 8,169 $ 40,636 $ 29,133 Corporate and shared support services Net loss $ (66,765) $ (43,143) $ (188,110) $ (150,114) Provision for income taxes (876) 353 3,306 8,773 Loss (gain) on equipment sale 69 375 (4,200) 375 Interest expense, net 21,344 17,315 85,052 46,079 Loss on debt extinguishment 3 30,083 — 30,083 — Foreign currency loss (gain) 1,263 990 (2,692) 3,299 Pension expense (credit) 4 (178) (102) (749) (622) Loss on warrants — 59 — 59 Professional fees and other 5 3,339 5,775 13,915 8,882 Legal costs 6 (700) 398 2,571 7,243 Severance charges, net 1 243 103 2,990 1,564 Natural disaster insurance recovery 2 (324) — (1,196) — Adjusted EBIT (12,502) (17,877) (59,030) (74,462) Depreciation and amortization 1,185 1,362 5,041 5,443 Non-cash share-based compensation costs (323) 1,437 247 7,013 Adjusted EBITDA $ (11,640) $ (15,078) $ (53,742) $ (62,006) _________________ 1 2022 severance charges represent costs associated with executive departures and ongoing cost reduction efforts across multiple segments. 2021 severance charges represent costs associated with the Operating Group Reorganization and other continuing restructuring measures. 2 Amount represents the insurance recovery for hurricane damage incurred in prior year. 3 Represents loss on partial payoff of the APSC Term Loan consisting $12.4 million of cash fees and premium and the noncash write off of the unamortized balance of deferred issuance cost and warrant and debt discounts in the amount of $17.7 million. 4 Represents pension credit 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.
Biggest changeAND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued) (unaudited, in thousands) Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 IHT Operating income $ 6,537 $ 4,055 $ 24,220 $ 17,093 Professional fees and other 113 — 941 — Severance charges, net 1 92 94 492 286 Adjusted EBIT 6,742 4,149 25,653 17,379 Depreciation and amortization 3,012 3,019 12,402 12,391 Adjusted EBITDA $ 9,754 $ 7,168 $ 38,055 $ 29,770 MS Operating income (loss) $ 5,364 $ 5,778 $ 27,759 $ 20,930 Professional fees and other 80 — 147 — Severance charges, net 1 197 596 792 685 Adjusted EBIT 5,641 6,374 28,698 21,615 Depreciation and amortization 4,642 4,799 18,755 19,021 Adjusted EBITDA $ 10,283 $ 11,173 $ 47,453 $ 40,636 Corporate and shared support services Net loss $ (35,025) $ (66,765) $ (127,701) $ (188,110) Provision (benefit) for income taxes 558 (876) 4,578 3,306 Loss (gain) on equipment sale (5) 69 (291) (4,200) Interest expense, net 11,682 21,344 55,181 85,052 Loss on debt extinguishment 2 — 30,083 1,585 30,083 Foreign currency loss (gain) 1,510 1,263 734 (2,692) Pension credit 3 (159) (178) (640) (749) Write-off of other assets 4 666 — 1,295 — Professional fees and other 5 3,108 3,339 8,033 13,915 Legal costs (credit) and other 6 4,785 (700) 5,635 2,571 Severance charges, net 1 98 243 280 2,990 Natural disaster insurance recovery 7 — (324) — (1,196) Adjusted EBIT (12,782) (12,502) (51,311) (59,030) Depreciation and amortization 1,737 1,185 6,715 5,041 Non-cash share-based compensation costs 731 (323) 1,590 247 Adjusted EBITDA $ (10,314) $ (11,640) $ (43,006) $ (53,742) _________________ 1 For 2023, represents customary severance costs associated with staff reductions across multiple departments.
For the year ended December 31, 2022, net cash used in financing activities was $192.0 million, consisting primarily of $224.9 million payoff on the APSC term loan, $62.0 million of net payments under the 2020 ABL Credit Facility and $13.7 million of term loan debt issuance costs, partially offset by net borrowings on our 2022 ABL Credit Facility of $64.9 million and borrowings of $35.0 million under the Corre Delayed Draw Term Loan.
For the year ended December 31, 2022, net cash used in financing activities was $192.0 million, consisting primarily of the $224.9 million payoff on the APSC term loan, $62.0 million of net payments under the 2020 ABL Credit Facility and $13.7 million of term loan debt issuance costs, partially offset by net borrowings on our 2022 ABL Credit Facility of $64.9 million and borrowings of $35.0 million under the Corre Delayed Draw Term Loan.
In particular, adjusted net income (loss), adjusted net income (loss) per diluted 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.
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.
Cash flows attributable to our investing activities . For the year ended December 31, 2022, net cash provided by investing activities was $243.4 million, consisting primarily of net proceeds from sale of Quest Integrity of $260.8 million and net proceeds from asset disposals of $7.2 million, partially offset by $24.7 million of capital expenditures.
For the year ended December 31, 2022, net cash provided by investing activities was $243.4 million, consisting primarily of net proceeds from the sale of Quest Integrity of $260.8 million and net proceeds from asset disposals of $7.2 million, partially offset by $24.7 million of capital expenditures. Cash flows attributable to our financing activities.
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 diluted share, earnings before interest and taxes (“EBIT”); adjusted EBIT (defined below); adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) and free cash flow to supplement financial information presented on a GAAP basis.
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.
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. Goodwill.
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.
Our segment adjusted EBIT and segment adjusted EBITDA is also used as a basis for the Chief Operating Decision Maker 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.
Our segment adjusted EBIT and segment adjusted EBITDA are 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.
Political economic repercussions could have a broad range of effects on our liquidity sources and will depend on future developments and cannot be predicted at this time.
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.
Free cash flow is defined as net cash provided by (used in) operating activities minus capital expenditures. Management believes these non-GAAP financial measures are useful to both management and investors in their analysis of our financial position and results of operations.
Free cash flow is defined as net cash provided by (used in) operating activities minus capital expenditures. 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.
The pension plan was frozen in 1994 and no new participants have been added since that date.
The pension plan was frozen in 1994 and no new participants have been added since that date. TEAM, INC.
Effect of exchange rate changes on cash . For the year ended December 31, 2022, the effect of foreign exchange rate changes on cash was a negative impact of $0.7 million.
Effect of exchange rate changes on cash . For the year ended December 31, 2023, the effect of foreign exchange rate changes on cash was a positive impact of $0.3 million. For the year ended December 31, 2022, the effect of foreign exchange rate changes on cash was a negative impact of $0.7 million.
The impact of our cost reduction efforts have been partially offset by continued cost inflation in several areas across all segments, such as raw materials, transportation, and labor costs. 26 Table of Content Operating loss for the current year includes net expenses totaling $20.4 million that we do not believe are indicative of our core operating activities, while the same period in the prior year included $74.7 million of such items.
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 costs. 14 Table of Content Operating loss for the current year includes net expenses totaling $16.3 million that we do not believe are indicative of our core operating activities, while the same period in the prior year included $20.4 million of such items.
The provision for income tax was $3.3 million on the pre-tax loss from continuing operations of $146.8 million in the current year compared to the provision for income tax of $8.8 million on pre-tax loss from continuing operations of $176.1 million in the prior year.
The provision for income tax was $4.6 million on the pre-tax loss from continuing operations of $71.1 million in the current year compared to the provision for income tax of $3.3 million on pre-tax loss from continuing operations of $146.8 million in the prior year.
Foreign currency transaction gains in the current year period reflect the effects of fluctuations in the U.S. dollar relative to the foreign currencies to which we have exposure. Taxes.
Foreign currency transaction losses in the current year period reflect the effects of negative fluctuations in the value of the U.S. dollar relative to the foreign currencies to which we have exposure. Taxes.
“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. Reverse Stock Split .
“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.
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: 28 Table of Content TEAM, INC.
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: 16 Table of Content TEAM, INC.
Segment adjusted EBIT is equal to segment operating income (loss) excluding costs associated with the Operating Group Reorganization, non-routine legal costs and settlements, non-routine professional fees, restructuring charges, certain severance charges, goodwill impairment charges and certain other items as determined by management. Segment adjusted EBITDA further excludes from segment adjusted EBIT depreciation, amortization, and non-cash share-based compensation costs.
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 us. Segment adjusted EBITDA further excludes from segment adjusted EBIT depreciation, amortization, and non-cash share-based compensation costs.
Our cash and cash equivalents as of December 31, 2022 totaled $58.1 million. $16.3 million of the $58.1 million of cash and cash equivalents was in foreign accounts, primarily in Europe, Canada and Australia, including $1.4 million of cash located in countries where currency restrictions exist.
Our cash and cash equivalents as of December 31, 2022 totaled $58.1 million of which $16.3 million was in foreign accounts, primarily in Europe, Canada and Australia, including $1.4 million of cash located in countries where currency restrictions exist. Cash flows attributable to our operating activities.
The lingering effects of COVID-19, the threat of recession and related economic repercussions could have a significant adverse effect on our financial position and business condition, as well as our clients and suppliers.
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 clients and suppliers.
Our ability to maintain compliance with the financial covenants contained in the 2022 ABL Credit Facility, Term Loan Credit Agreement, and Subordinated Term Loan Credit Agreement is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.
As of December 31, 2023 we are in compliance with our debt covenants. Our ability to maintain compliance with the financial covenants contained in the 2022 ABL Credit Agreement and A&R Term Loan Credit Agreement is dependent upon our future operating performance and future financial condition, both of which are subject to various risks and uncertainties.
In addition to our current sources of funding our business, the effects of such events may impact our liquidity or 31 Table of Content our need to revise our allocation or sources of capital, implement further cost reduction measures and/or change 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.
For the three and twelve months ended December 31, 2021, includes $0.2 30 Table of Content million and $1.9 million, respectively, of costs associated with the Operating Group Reorganization (exclusive of restructuring costs). $3.9 million associated with debt financing and $2.8 million of corporate support costs. 6 Primarily relates to accrued legal matters, adjustments to legal reserves and other legal fees related to debt restructuring and other non-routine matters.
The three and twelve months ended December 31, 2022, includes $1.8 million and $10.2 million, respectively, related to costs associated with debt financing, and $1.5 million and $3.7 million of corporate support and other costs. 6 Primarily relates to accrued legal matters, adjustments to legal reserves and other legal fees related to debt restructuring and other non-routine matters.
We had net income of $70.1 million, adjusting for the gain on sale of Quest Integrity of $203.4 million and a decrease in working capital of $30.2 million, partially offset by the effect of depreciation and amortization of $37.6 million, loss on debt extinguishment of $17.7 million, amortization of debt issuance costs and debt discount of $35.5 million and paid in kind interest of $18.2 million resulted in negative operating cash flow.
We had net income of $70.1 million, further adjusted for the gain on sale of our Quest Integrity segment (“Quest Integrity”) of $203.4 million and a decrease in net working capital of $30.2 million, partially offset by the effect of depreciation and amortization of $37.6 million, loss on debt extinguishment of $17.7 million, amortization of non-cash debt issuance costs and debt discount of $35.5 million and paid- in-kind interest of $18.2 million. 20 Table of Content Cash flows attributable to our investing activities .
For the year ended December 31, 2021, net cash used in operating activities was $35.5 million.
For the year ended December 31, 2023, net cash used in operating activities was $11.0 million.
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, and affect our future need or ability to borrow under our 2022 ABL Credit Facility.
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 2022 ABL Credit Facility and our A&R Term Loan Credit Agreement.
We deploy conventional to highly specialized inspection, condition assessment, maintenance and repair services that result in greater safety, reliability and operational efficiency for our clients’ most critical assets. Prior to the sale of our Quest Integrity segment (“Quest Integrity”) as discussed below, we conducted operations in three segments: Inspection and Heat Treating (“IHT”), Mechanical Services (“MS”) and Quest Integrity.
We deploy conventional to highly specialized inspection, condition assessment, maintenance and repair services that result in greater safety, reliability and operational efficiency for our clients’ most critical assets. We conduct operations in two segments: Inspection and Heat Treating (“IHT”) and Mechanical Services (“MS”).
As of December 31, 2022, we had approximately $52.4 million of borrowing capacity consisting of $42.4 million available under the 2022 ABL Credit Facility and $10.0 million available under the Corre Delayed Draw Term Loan. Our principal uses of cash are for working capital needs and operations.
As of December 31, 2023, we had approximately $31.3 million of available borrowing capacity under our various credit facilities, consisting of $21.3 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.
We also recorded goodwill impairment of $8.8 million on our discontinued operations during the year ended December 31, 2021. 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.
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.
Corporate operating loss decreased by $14.3 million due to lower professional fees and legal fees in the current year compared to prior year and lower overall costs due to the Company’s cost reduction efforts.
Corporate operating loss decreased by $12.6 million year over year, mainly due to lower personnel and professional costs in the current year as compared to prior year and lower overall costs due to our ongoing cost reduction efforts.
AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited, in thousands except per share data) Three Months Ended December 31, Twelve Months Ended December 31, 2022 2021 2022 2021 Adjusted Net Income (Loss): Net loss $ (56,932) $ (37,899) $ (150,087) $ (184,845) Professional fees and other 1 3,339 5,775 13,915 8,882 Legal costs (credit) 2 (700) 398 2,571 7,243 Severance charges, net 3 933 219 3,961 2,749 Natural disaster insurance recovery 4 (324) — (1,196) — Loss on debt extinguishment 7 30,083 — 30,083 — Loss on warrants — 59 — 59 Goodwill impairment charge — — — 55,837 Tax impact of adjustments and other net tax items 5 (48) (18) (79) (386) Adjusted net loss $ (23,649) $ (31,466) $ (100,832) $ (110,461) Adjusted net loss per common share: Basic and diluted $ (5.46) $ (10.12) $ (24.08) $ (35.66) Consolidated Adjusted EBIT and Adjusted EBITDA: Net loss $ (56,932) $ (37,899) $ (150,087) $ (184,845) Provision for income taxes (876) 353 3,306 8,773 Interest expense, net 21,344 17,315 85,052 46,079 Foreign currency loss (gain) 1,263 990 (2,692) 3,299 Pension credit 6 (178) (102) (749) (622) Loss (gain) on equipment sale 69 375 (4,200) 375 Loss on debt extinguishment 7 30,083 — 30,083 — Loss on warrants — 59 — 59 Professional fees and other 1 3,339 5,775 13,915 8,882 Legal costs (credit) 2 (700) 398 2,571 7,243 Severance charges, net 3 933 219 3,961 2,749 Natural disaster insurance recovery 4 (324) — (1,196) — Goodwill impairment charge — — — 55,837 Consolidated Adjusted EBIT (1,979) (12,517) (20,036) (52,171) Depreciation and amortization Amount included in operating expenses 3,757 4,391 15,600 18,342 Amount included in SG&A expenses 5,246 5,110 20,853 20,560 Total depreciation and amortization 9,003 9,501 36,453 38,902 Non-cash share-based compensation costs (323) 1,437 247 7,013 Consolidated Adjusted EBITDA $ 6,701 $ (1,579) $ 16,664 $ (6,256) Free Cash Flow: Cash used in operating activities $ (1,152) $ (2,866) $ (51,725) $ (41,674) Capital expenditures (3,245) (4,094) (20,544) (14,105) Free Cash Flow $ (4,397) $ (6,960) $ (72,269) $ (55,779) ____________________________________ 1 The three and twelve months ended December 31, 2022 , includes $1.8 million and $10.2 million, respectively, related to costs associated with debt financing, $1.0 million of corporate support costs for the year ended December 31, 2022 and other project costs.
AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited, in thousands except per share data) Three Months Ended December 31, Twelve Months Ended December 31, 2023 2022 2023 2022 Adjusted Net Income (Loss): Net loss from continuing operations $ (23,124) $ (56,932) $ (75,722) $ (150,087) Professional fees and other 1 3,301 3,339 9,121 13,915 Legal costs (credit) and other 2 4,785 (700) 5,635 2,571 Severance charges, net 3 387 933 1,564 3,961 Natural disaster insurance recovery 4 — (324) — (1,196) Loss on debt extinguishment 5 — 30,083 1,585 30,083 Write-off of other assets 6 666 — 1,295 — Tax impact of adjustments and other net tax items 7 (37) (48) (159) (79) Adjusted net loss $ (14,022) $ (23,649) $ (56,681) $ (100,832) Adjusted net loss per common share: Basic $ (3.18) $ (5.46) $ (12.97) $ (24.08) Consolidated Adjusted EBIT and Adjusted EBITDA: Net loss from continuing operations $ (23,124) $ (56,932) $ (75,722) $ (150,087) Provision (benefit) for income taxes 558 (876) 4,578 3,306 Interest expense, net 11,682 21,344 55,181 85,052 Foreign currency loss (gain) 1,510 1,263 734 (2,692) Pension credit 8 (159) (178) (640) (749) Loss (gain) on equipment sale (5) 69 (291) (4,200) Loss on debt extinguishment 5 — 30,083 1,585 30,083 Professional fees and other 1 3,301 3,339 9,121 13,915 Legal costs (credit) and other 2 4,785 (700) 5,635 2,571 Severance charges, net 3 387 933 1,564 3,961 Natural disaster insurance recovery 4 — (324) — (1,196) Write-off of other assets 6 666 — 1,295 — Consolidated Adjusted EBIT (399) (1,979) 3,040 (20,036) Depreciation and amortization Amount included in operating expenses 3,529 3,757 14,555 15,600 Amount included in SG&A expenses 5,862 5,246 23,317 20,853 Total depreciation and amortization 9,391 9,003 37,872 36,453 Non-cash share-based compensation costs 731 (323) 1,590 247 Consolidated Adjusted EBITDA $ 9,723 $ 6,701 $ 42,502 $ 16,664 Free Cash Flow: Cash provided by (used in) operating activities $ 11,083 $ (1,152) $ (10,986) $ (51,725) Capital expenditures (2,997) (3,245) (10,430) (20,544) Free Cash Flow $ 8,086 $ (4,397) $ (21,416) $ (72,269) ____________________________________ 1 The three and twelve months ended December 31, 2023, includes $2.2 million and $6.7 million, respectively, related to costs associated with debt financing, and $1.1 million and $2.4 million, respectively, for lease extinguishment charges, support and other costs.
We define adjusted net income (loss), adjusted net income (loss) per diluted share and adjusted EBIT to exclude the following items: costs associated with the Operating Group Reorganization (as defined in Note 19 to the consolidated financial statements), non-routine legal costs and settlements, non-routine professional fees, restructuring charges, certain severance charges, goodwill impairment charges and certain other items that we believe are not indicative of core operating activities.
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, loss on debt extinguishment, certain severance charges, non-routine 15 Table of Content write off of assets and certain other items that we believe are not indicative of core operating activities.
Loss on debt extinguishment for the year ended December 31, 2022 represented a $30.1 million loss due to partial payoff of the Term Loan which consisted of $12.4 million of cash fees and early payment 27 Table of Content premium and $17.7 million of noncash write off of the unamortized balance of the related deferred insurance cost, and debt and warrant discounts.
The prior year loss on debt extinguishment was due to the $225.0 million paydown of the APSC Term Loan in November 2022 and consisted of $12.4 million of cash fees and early payment premium and $17.7 million of noncash expense related to the write off of the related unamortized balance of deferred issuance costs and debt and warrant discounts.
We evaluated our liquidity within one year after the date of issuance of the accompanying audited consolidated financial statements to determine if there is substantial doubt about the Company’s ability to continue as a going concern.
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.
The twelve months ended December 31, 2021, includes $1.9 million Operating Group Reorganization costs (exclusive of restructuring costs), $3.9 million debt financing costs and $2.8 million of corporate support costs. 2 Primarily relates to accrued legal matters and other legal fees related to debt restructuring and other non-routine maters.. 3 2022 severance charges represent costs associated with executive departures and our ongoing cost reduction efforts across multiple segments. 2021 severance charges represent costs associated with the Operating Group Reorganization and other continuing restructuring measures.
The three and twelve months ended December 31, 2022, includes $1.8 million and $10.2 million, respectively, related to costs associated with debt financing, and $1.5 million and $3.7 million of corporate support and other costs. 2 Primarily relates to accrued legal matters, adjustments to legal reserves and other legal fees related to debt restructuring and other non-routine matters.
As of March 13, 2023, we had consolidated cash and cash equivalents of $31.3 million, excluding $6.7 million restricted mainly as collateral for outstanding letters of credit and our purchasing card programs, and approximately $35.7 million of undrawn availability under our various credit facilities, resulting in total liquidity of $67.0 million.
As of March 5, 2024, we had consolidated cash and cash equivalents of $24.0 million, excluding $4.9 million restricted mainly as collateral for outstanding letters of credit, and approximately $12.1 million of undrawn availability under our various credit facilities, resulting in total liquidity of $36.1 million. Refer to Note 11 - Debt for information on our debt instruments.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table sets forth the components of revenue and operating income (loss) from our operations for the twelve months ended December 31, 2022 and 2021 (in thousands): Twelve Months Ended December 31, Increase (Decrease) 2022 2021 $ % Revenues by business segment: IHT $ 422,562 $ 415,371 $ 7,191 1.7 % MS 417,646 378,826 38,820 10.2 % Total revenues $ 840,208 $ 794,197 $ 46,011 5.8 % Operating income (loss): IHT 17,093 12,997 4,096 31.5 % MS 1 20,930 (47,728) 68,658 NM 2 Corporate and shared support services (77,825) (92,151) 14,326 15.5 % Total operating loss $ (39,802) $ (126,882) $ 87,080 68.6 % Interest expense, net 85,052 46,079 38,973 84.6 % Loss on debt extinguishment 30,083 — 30,083 NM 2 Loss on warrants — 59 (59) NM 2 Other expense (income), net (8,156) 3,052 (11,208) NM 2 Loss before income taxes $ (146,781) $ (176,072) $ 29,291 16.6 % Provision for income taxes 3,306 8,773 (5,467) (62.3) % Net loss $ (150,087) $ (184,845) $ 34,758 18.8 % _________________ 1 Includes goodwill impairment charge of $55.8 million for the twelve months ended December 31, 2021. 2 NM - Not meaningful.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table sets forth the components of revenue and operating income (loss) from our operations for the twelve months ended December 31, 2023 and 2022 (in thousands): Twelve Months Ended December 31, Increase (Decrease) 2023 2022 $ % Revenues by business segment: IHT $ 429,559 $ 422,562 $ 6,997 1.7 % MS 433,056 417,646 15,410 3.7 % Total revenues $ 862,615 $ 840,208 $ 22,407 2.7 % Operating income (loss): IHT 24,220 17,093 7,127 41.7 % MS 27,759 20,930 6,829 32.6 % Corporate and shared support services (65,255) (77,825) 12,570 16.2 % Total operating loss $ (13,276) $ (39,802) $ 26,526 66.6 % Interest expense, net 55,181 85,052 (29,871) (35.1) % Loss on debt extinguishment 1,585 30,083 (28,498) (94.7) % Other expense (income), net 1,102 (8,156) 9,258 (113.5) % Loss before income taxes $ (71,144) $ (146,781) $ 75,637 51.5 % Provision for income taxes 4,578 3,306 1,272 38.5 % Net loss from continuing operations $ (75,722) $ (150,087) $ 74,365 49.5 % Revenues.
For the year ended December 31, 2021, net cash provided by financing activities was $91.9 million, consisting primarily of $10.5 million of term loan debt issuance costs, and $0.2 million in withholding tax payments related to share-based compensation, offset by net borrowings on our 2020 ABL Facility of $53.0 million and borrowings of $50.0 million under the Subordinated Term Loan Facility.
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, and $9.1 million of term loan debt issuance costs, partially offset by $47.2 million of borrowings under the Corre 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.
Additionally, $23.8 million of the $65.3 million ($14.2 million of the $55.2 million related to continuing operations) of cash and cash equivalents was in foreign accounts, primarily in Europe, Canada and Australia, including $4.0 million ($2.4 million related to continuing operations) of cash located in countries where currency restrictions exist. Cash flows attributable to our operating activities.
Cash and cash equivalents . 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.
Revenues. Total revenues increased $46.0 million or 5.8% from the same period in the prior year. Total revenue was negatively impacted by $15.0 million in unfavorable foreign exchange rates during 2022. IHT revenues increased by $7.2 million or 1.7% and MS revenue increased by $38.8 million or 10.2%.
Total revenues increased $22.4 million or 2.7% from the prior year. Total revenue was negatively impacted by $2.3 million of unfavorable foreign exchange rate movements during 2023.
Financing for our operations consists primarily of our 2022 ABL Credit Facility, Term Loan, Subordinated Term Loan (as defined herein) and cash flows attributable to our operations.
Subsequent to the June 2023 Refinancing, financing for our operations consists primarily of our 2022 ABL Credit Agreement, which includes our 2022 ABL Credit Facility and the ME/RE Loans; the A&R Term Loan Credit Agreement, which includes the Uptiered Loan and the Incremental Term Loan; and cash flows from our operations.
Accruals for future benefits ceased in connection with a plan curtailment in 2013. 7 Represents loss on partial payoff of the APSC Term Loan consisting $12.4 million of cash fees and premium and the noncash write off of the unamortized balance of deferred issuance cost and warrant and debt discounts in the amount of $17.7 million. TEAM, INC.
The 2022 loss consists of $12.4 million of cash fees and premium, and $17.7 million of noncash expense related to the write off of the related unamortized balance of deferred issuance cost and warrant and debt discounts. 3 Represents pension credit 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.
See Note 12 - Debt to the consolidated financial statements for additional details related to these amendments. 25 Table of Content Results of Operations The following is a comparison of our results of operations for the twelve months ended December 31, 2022 and December 31, 2021.
See Item 1A “Risk Factors” in this Annual Report on Form 10-K for additional information. 13 Table of Content Results of Operations The following is a comparison of our results of operations for the twelve months ended December 31, 2023 and December 31, 2022.
We do not believe, based on the Company’s forecast, that current working capital, cash flow from operations, expected availability under our existing credit agreements and capital expenditure financing is sufficient to fund the operations, maintain compliance with our debt covenants (as amended), and satisfy the Company’s obligations, specifically with respect to the Notes described below, as they come due within one year after the date of issuance of these consolidated financial statements.
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.
Additionally, for the twelve months ended December 31, 2021, $3.9 million was related to costs associated with debt financing and $2.8 million of corporate support costs. 2 Primarily relates to accrued legal matters, adjustments to legal reserves and other legal fees related to debt restructuring and other non-routine matters. 3 2022 severance charges represent costs associated with executive departures and our ongoing cost reduction efforts across multiple segments. 2021 severance charges represent costs associated with the Operating Group Reorganization and other continuing restructuring measures. 29 Table of Content 4 Amount represent the insurance recovery received during the year for hurricane damage incurred in prior year. 5 Represents the tax effect of the adjustments.
For 2022, severance charges represent costs associated with executive departures and our ongoing cost reduction efforts across multiple segments . 17 Table of Content 4 Represents the insurance recovery received during the year for hurricane damage incurred in 2021. 5 Represents loss on payoff of remaining APSC Term Loan in June 2023 and loss on payoff of $225.0 million of the APSC Term Loan in November 2022.
Other expense (income), net . Other expense, net increased $11.2 million, from the same period in the prior year, primarily due to foreign currency transaction gains and gains on disposal of fixed assets in the current year compared to the prior year.
The decrease was primarily driven by a $4.6 million gain on disposal of assets and impairment in prior year as compared to current year, and $3.4 million foreign currency transaction gain in the prior year.
The negative impact in the current year is primarily attributable to unfavorable fluctuations in U.S. dollar exchange rates with the Canadian dollar, the Euro, the British pound, the Australian dollar and Mexican peso. For the year ended December 31, 2021, the effect of foreign exchange rate changes on cash was a negative impact of $1.6 million.
The negative impact in 2022 is primarily attributable to unfavorable fluctuations in U.S. dollar exchange rates with the Canadian dollar, the euro, the British pound, the Australian dollar and Mexican peso. 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.
Accruals for future benefits ceased in connection with a plan curtailment in 2013. 5 For the three and twelve months ended December 31, 2022 , includes $1.8 million and $10.2 million, respectively, related to costs associated with debt financing, $1.0 million of corporate support costs for the year ended December 31, 2022 and other project costs.
The pension plan was frozen in 1994 and no new participants have been added since that date. 4 Includes $0.7 million for the loss on settlement of a note receivable and, for the full year 2023, an additional $0.6 million for the write-off of software related costs. 18 Table of Content 5 The three and twelve months ended December 31, 2023, includes $2.2 million and $6.7 million, respectively, related to costs associated with debt financing, and $1.1 million and $2.4 million, respectively, for lease extinguishment charges, support and other costs.
The negative impact in 2021 is primarily attributable to unfavorable fluctuations in U.S. dollar exchange rates with the Canadian dollar, the euro, the British pound, the Australian dollar and Mexican peso. 33 Table of Content Critical Accounting Policies The process of preparing financial statements in accordance with GAAP requires our management to make estimates and judgments.
See Note 11 - Debt for additional details on our off-balance sheet arrangements. 21 Table of Content Critical Accounting Policies The process of preparing financial statements in accordance with GAAP requires us to make estimates and judgments.
The effective tax rate was a provision of 2.3% for the year ended December 31, 2022 and 5.0% for the year ended December 31, 2021. The higher effective rate in 2021 is primarily attributable to the goodwill impairment loss taken during the year, a portion of which is not deductible for tax purposes and an increase in the valuation allowance.
The effective tax rate was a provision of 6.4% and 2.3% for years ended December 31, 2023 and 2022, respectively.
MS revenues increased primarily due to higher activity in our U.S. and Latin American operations related to leak repair, hot tapping services, and the U.S. valve business, partially offset by decreases in international revenue due to non-repeating project work in the United Kingdom in 2021. Operating income (loss) .
MS revenues increased by $15.4 million or 3.7%, over prior year, driven by a $16.7 million increase across our international regions other than Canada due to higher activity related to leak repair, machining and bolting services, and hot tapping services primarily in the United Kingdom and Europe.
Removed
On November 2, 2022, the Company’s shareholders approved a proposal to authorize the Board to implement a reverse stock split of the outstanding shares of the Company’s common stock at a ratio of one-for-ten (the “Reverse Stock Split”). The Board approved the Reverse Stock Split on December 9, 2022, which became effective on December 21, 2022.
Added
During 2023, we entered into an amendment and restatement of that certain subordinated term loan credit agreement dated as of November 9, 2021 (as amended and restated, the “A&R Term Loan Credit Agreement”) among us, as borrower, the guarantors party thereto, the lenders from time to time party thereto and Cantor Fitzgerald Security, as agent; we entered into ABL Amendment No. 3; we paid off the remaining balance on the APSC Term Loan (defined below) and our 5.00% Convertible Senior Notes due 2023 (the “Notes”); and entered into an amendment of the Substitute Insurance Reimbursement Facility Agreement.
Removed
At the effective time, every ten issued and outstanding shares of common stock were converted into one share of common stock. The common stock began trading on a reverse split-adjusted basis on the NYSE at the opening of trading on December 22, 2022.
Added
See Note 11 - Debt to the consolidated financial statements for additional details related to these transactions. Market Conditions Update . Fluctuations in oil and gas prices continued during 2023 with an overall decline in prices as compared to 2022. Oil and gas price volatility may impact the current and future spending on our services by our clients.
Removed
The Reverse Stock Split also effected a proportionate reduction in the Company’s authorized shares of common stock from 120,000,000 shares to 12,000,000 shares, and reduced the number of shares of common stock outstanding from 43,429,089 shares to 4,342,909 shares.
Added
Although oil and gas prices are expected to be relatively stable in 2024 given the current balance between oil and gas supply and demand, the future impacts to our business from potentially higher interest rates, persistent global and domestic inflation, geopolitical unrest especially in the Middle East, and volatility in global supply chains cannot be predicted.
Removed
All issued and outstanding common stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented.
Added
IHT revenues increased by $7.0 million or 1.7%, driven by a $10.3 million increase in the U.S., primarily due to higher callout and turnaround activities in various districts due to higher demand for our non-destructive testing services, a $5.1 million increase in Europe due to higher turnaround activity primarily in the Netherlands, and a $1.5 million increase in our aerospace business as our new facility in Cincinnati experienced increased client interest.
Removed
In addition, a proportionate adjustment was made to the per share exercise price and the number of shares issuable upon the exercise and/or vesting of all outstanding stock options, restricted stock units and warrants to purchase shares of common stock.
Added
These increases were partially offset by a $9.9 million decrease in Canada due to reduced scope in certain client turnaround projects.
Removed
A proportionate adjustment was also made to the number of shares reserved for issuance pursuant to the Company’s equity incentive compensation plans to reflect the Reverse Stock Split. Any fraction of a share of common stock that was created as a result of the Reverse Stock Split was rounded up to the next whole share.
Added
MS revenue in the U.S. increased by $1.1 million, these increases were offset by decreases in valve sales and non-repeating turnaround work in Canada of $1.4 million, and $1.0 million, respectively. Operating income (loss) .
Removed
The common stock par value and additional paid-in-capital line items contained in the financial statements were adjusted to account for the Reverse Stock Split for all periods presented. 24 Table of Content Market Conditions Update .
Added
Overall operating loss decreased by $26.5 million to a loss of $13.3 million in 2023 as compared to a loss of $39.8 million in the prior year. IHT’s operating income increased by $7.1 million, primarily driven by higher activity as described above.
Removed
During the fourth quarter of 2022, the lingering impact of COVID-19 had less effect on our workforce and operations, as well as the operations of our clients, suppliers and contractors.
Added
MS operating income increased by $6.8 million year over year to $27.8 million for 2023, mainly due to increased activity levels from U.S. and international operations; partially offset by a decrease in operating income from our valve business.
Removed
However, the global economy, including the financial and credit markets, has recently experienced significant volatility and disruptions, including increases in inflation rates, rising interest rates, disruption to global supply chains, declines in economic growth, volatility in foreign currency exchange rates, and uncertainty about economic stability.
Added
The detail of operating income (loss) excluding non-core expenses is below (unaudited) (in thousands): Twelve Months Ended December 31, Increase (Decrease) 2023 2022 $ % Operating loss $ (13,276) $ (39,802) $ 26,526 66.6 % Professional fees and other 9,121 13,915 (4,794) (34.5) % Legal costs 5,635 2,571 3,064 119.2 % Severance charges, net 1,564 3,961 (2,397) (60.5) % Total non-core expenses 16,320 20,447 (4,127) (20.2) % Total operating income (loss), excluding non-core expenses $ 3,044 $ (19,355) $ 22,399 115.7 % Excluding the impact of these identified non-core expenses in both periods, operating loss decreased by $22.4 million from a loss of $19.4 million to income of $3.0 million.
Removed
The severity and duration of the impact of these conditions on our business cannot be predicted. See Item 1A of our Annual Report on Form 10-K “Risk Factors” for additional information. Under the CARES Act we qualified to defer the employer portion of social security taxes incurred through the end of calendar year 2020.
Added
See our non-GAAP reconciliation for additional details of our non-core expenses. Interest expense, net . Interest expense for 2023 was $55.2 million, a decrease of $29.9 million compared to the prior year.
Removed
We deferred total employer payroll taxes of $14.1 million and paid $7.0 million of the deferred payroll taxes in January 2022, transferred $0.5 million of such obligation as part of the Quest Integrity sale transaction to the buyer in November 2022, and paid the remaining amount of $6.6 million, outstanding as of December 31, 2022, in January 2023.
Added
The decrease was primarily attributable to lower interest expense and amortization of debt issuance costs on our APSC Term Loan in 2023 due to the pay down of $225.0 million of the balance in November 2022, full payoff of the remaining balance in June 2023, payoff of the Notes in August 2023, as well as decrease in accelerated amortization due to the “Maturity Reserve Trigger Date” provision that was previously applicable.
Removed
Additionally, other governments in jurisdictions where we operate passed legislation to provide employers with relief programs, which included wage subsidy grants, deferral of certain payroll related expenses and tax payments and other benefits. As these other governments review compliance with their relief programs, we may be required to return a portion of these funds.
Added
These effects were partially offset by a year over year increase in cash interest on the 2022 ABL Credit Facility due to higher balances outstanding related to the June 2023 Refinancing and an increase in the Secured Overnight Financing Rate (“SOFR”) rate, and the increase in amounts outstanding and paid-in-kind (noncash) (“PIK”) interest on the Uptiered Loan / Subordinated Term Loan and the Incremental Term Loan.
Removed
We elected to treat qualified government subsidies from Canada and other governments as offsets to the related expenses. As a result, we recognized $0.6 million and $0.1 million as a reduction to operating expenses and selling, general and administrative expenses, respectively, during the twelve months ended December 31, 2022.
Added
Cash interest paid for the years ended December 31, 2023 and 2022 amounted to $19.5 million and $29.2 million, respectively. Loss on debt extinguishment . Loss on debt extinguishment for the year ended December 31, 2023 was $1.6 million compared to $30.1 million in the prior year.
Removed
We recognized $6.2 million and $1.5 million as a reduction to operating expenses and selling, general and administrative expenses, respectively, during the twelve months ended December 31, 2021. We also deferred certain payroll related expenses and tax payments under other foreign government programs.
Added
Loss on debt extinguishment during 2023 was due to the payoff of the remaining balance of the APSC Term Loan in June 2023 and consisted mainly of an early payment premium.
Removed
We had $2.1 million and $3.2 million as of December 31, 2022 and 2021, respectively, related to these foreign deferrals. Goodwill Impairment . With the sale of Quest Integrity, as discussed above, as of December 31, 2022 and December 31, 2021, there was no goodwill on the Company’s balance sheets related to continuing operations.
Added
Other expense (income), net . Other expense (income), net decreased by $9.3 million, from income of $8.2 million in the prior year to expense of $1.1 million for 2023.

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