Welcome to the Team IR Call. (Operator Instructions) I will now turn the call over to Mr. Phil Hawk.

Good morning and happy New Year. It's my pleasure to welcome you to the Team web conference call. Again, my name is Phil Hawk; I'm the Chairman and Chief Executive Officer of Team. Joining me again today is Mr. Ted Owen, the company's Executive Vice President and Chief Financial Officer. The purpose of today's conference call is to discuss our recently released financial results for the company's second fiscal quarter ending November 30, 2010. As with past calls, our primary objective is to provide our shareholders and potential shareholders with an enhanced understanding of our company's performance and prospects. This discussion is intended to supplement our quarterly earnings releases, 8-K, 10-Q and 10-K filings to the SEC as well as our Annual Report. Ted will begin with a review of the financial results. I will then follow Ted with a few remarks and observations about our performance and prospects. Following our remarks, we will take questions from our listeners. With that Ted, let me turn it over to you.

Thank you, Phil. First, I want to remind everyone as usual that any forward-looking information we discuss today is being provided in accordance with the provisions of the Private Securities Litigation Reform Act of 1995. We have made reasonable efforts to ensure that the information, assumptions and beliefs upon which this forward-looking information is based are current, reasonable and complete. However, a variety of factors could cause actual results to differ materially from those anticipated in any forward-looking information. A description of those factors is set forth in the last paragraph of our press release and in the company's SEC filings. Accordingly there can be no assurance that the forward-looking information discussed today will occur, or that our objectives will be achieved. We assume no obligation to publicly update or revise any forward-looking statements made today, or any other forward-looking statements made by the company whether as a result of new information, future events or otherwise. Now for a discussion of the financial results, revenues in the second quarter were $133.1 million, which is up 8% compared to last year's second quarter. Net income available to common stockholders was $8.1 million in the current quarter versus $5.8 million in last year's second quarter, excluding non-routine charges to SG&A of $600,000 in the current quarter and $1.2 million in the prior year quarter. Adjusted net income was $8.4 million and $6.6 million respectively or $0.43 per share versus $0.34 per share in the prior year quarter, an improvement of 26%. Moving to highlight of the quarter was the completion of the acquisition of 95% Quest Integrity Group on November 1, for a total consideration of $44 million, including $39.1 million of cash, $2.3 million of debt assumed, and $2.6 million of restricted common stock. In 2015, we expect to acquire the remaining 5% of Quest non-controlling interest, which has a current valuation of $4.9 million. Let me comment for a moment about the impact of Quest on the current quarter's financial statement. First, remember that Quest results were only included for one month in the quarter or in other words from the date of acquisition or November 1. So total revenues contributed by Quest were $1.6 million just for the month of November. Additionally we incurred $600,000 of transaction cost associated with the acquisition, which were expensed in the quarter pursuant to the new accounting rules for acquisitions. Additionally, you will notice a new line item in our income statement pertaining to the Quest acquisition. On the income statement you'll see the line item for the separate Quest net income or loss that's attributable to the 5% non-controlling interest. This is added or subtracted from net income to result in net income available to common shareholders. For the current quarter that amounted to $25,000 loss due to the inclusion of only month of operations and due to the expensing of the transaction cost associated with the transaction for the acquisition. That line item will continue to appear in our financial statements until that 5% non-controlling interest is acquired in 2015. Now just a few more cash flow related items. Capital expenditures for the quarter were $2.8 million. Depreciation and amortization was $3.3 million. And non-cash compensation expense was $1.5 million. Adjusted EBITDA for the quarter that is excluding the non-recurring items was $19.3 million and adjusted EBITDA for the trailing 12 months was $52.6 million. On November 30, our total debt was $77.7 million. Our cash balances were $14.3 million, and so, net debt was $63.4 million. Even with the use of approximately $41 million of cash in the Quest Integrity acquisition our net debt to adjusted EBITDA was still only about $1.21. And at the end of the quarter, the availability under our credit agreements was in excess of $66 million. So with that, Phil, I'll turn it back to you.

Thanks Ted. Now we would like to provide some additional perspectives on our recent performance and outlook. In my remarks, I will be mentioning several comparisons of operating results for this fiscal year and the prior year. To present apples-to-apples comparisons my comments will be based on adjusted financial results that exclude non-routine charges. Overall we are pleased with our performance both in the second quarter, and year-to-date. In many respects, the second quarter results reflect a continuation of several positive trends from the first quarter. For the third consecutive quarterly period Team posted organic revenue growth. Organic growth in the recently completed second quarter was about 7%, slightly higher than the 4% rate of organic growth achieved in the first quarter. Similar to the first quarter, Team's growth occurred primarily in U.S markets, where the overall organic growth rate was 12%, for the quarter. Within the U.S., while we achieved modest growth in onstream services, the big driver of growth was expanded turnaround activity versus prior year's level. We experienced the most robust turnaround season, since the fall of 2008. While the total number of turnaround projects wasn't significantly larger than in the most recent turnaround seasons. We did experience many situations this fall, with the volume of work provided by team expanded significantly from the original turnaround project scope. Traditionally this circumstance is quite normal. Some types of equipment wear or damage cannot be determined until physically inspected at the beginning of a turnaround. Therefore these additional repair items are added after the turnaround has begun. In contrast, for the previous three turnaround seasons, expansion of turnaround scope was the exception and in some situations, we even experienced some shrinkage of scope, as work initially planned for a particular turnaround, was deferred after the turnaround began. The key question for our customers during this downturn has been, can we run it safely until the next planned turnaround. If yes, let's defer the repair until that time. I think the greater prevalence of expanded scope turnarounds in this most recent period reflects both reduced ability to defer the specific repairs any longer, as well as a shift back toward a solid, longer time horizon in maintenance planning. Our business growth, combined with good cost management across our company has generated attractive profit growth during both the current quarter and the year-to-date. Overall, operating profit margins increased in both of these periods. In the second quarter EBIT margins were 10.9% up approximately 1.5 percentage points from the prior year period. Year-to-date, EBIT margins were 8.9% up approximately 2 points. About 1 percentage point of this improvement in both periods occurred at the gross margin level. For the second quarter, gross margin improved to 32.9%. Year-to-date gross margin improved to 31.7%. All of this gross margin improvement was the result of lower indirect costs due to previous cost reduction actions, improved labor utilization, and volume leverage of the fixed costs. The remainder of the operating margin improvement came from lower SG&A expenses as a percentage of revenue. Total SG&A expenses net of non-routine charges and the addition of Quest were approximately flat in the second quarter and year-to-date verses the prior year periods. Due to the business growth, SG&A expenses as a percentage of revenue declined about 1.5 percentage points to 22.2% in the quarter. The improving revenue growth combined with steady margins and our good cost management resulted in attractive operating leverage for Team. In the second quarter, incremental operating profit was $2.9 million and incremental revenue was about $9.9 million, yielding incremental operating leverage of about 30%. We're pleased with these results and I am expecting continued attractive operating leverage as we continue to grow. My expectation is that Team will achieve operating leverage in the 30% range for our organic revenue growth over the next few quarters as we go back to past peak activity levels. The incremental leverage related to the acquired Quest business is not expected to be material this year consistent with our modest near-term earnings expectations for this new business. Now let me just say another word or two about our recent acquisitions of Quest Integrity Group. We remain delighted with the new acquisition and are off to a good start. We continue to be extremely excited about our longer term growth potential both within Quest, as well as its potential impact on Team's other field service businesses. It will take a little time for us to build the momentum and capitalize on specific opportunities. Summarizing our outlook for the remaining of the year, we expect a continuation of the business growth and performance achieved in the first half of the year. Reflecting the strong first half results and these positive expectations for the remainder of the year, we have revised upward our forecast for the full fiscal year 2011 that ends May 31 in that year, 2011. We are now projecting that full year revenue will be $485 million to $510 million. This revenue estimate reflects our expectations that the organic growth rates or second half revenues for Team's legacy businesses will be similar to the first half levels plus the addition of Quest Integrity Group revenues. We are now projecting that full year earnings will be between $1.10 to $1.25 per fully diluted share, up $0.10 per share from our earlier guidance. Let me wrap up my remarks with a couple of final comments before we take your questions. We are pleased with our performance and confident about our prospects. The second quarter represents the third consecutive quarter of organic revenue growth and attractive profit growth for Team. This is a good start, but only a start. We have an attractive business position from which we can be successful in both the near term and longer term. I see continued attractive growth opportunities for Team and virtually all of our service lines and in all geographic regions both within North America and beyond. We also understand that we have to earn it. The key to being successful in our business is our continued focus on the basics, providing great service with every service opportunity, continuing to capitalize on our service network advantages, continuing aggressive business development initiatives and focus and conducting our business all of the time and all activities in a manner that fosters pride for our Team colleague and respect from our customers. That concludes my remarks. Let's now open it up for questions.

(Operator Instructions) First question is from Arnie Ursaner from CJS Securities.

One mechanical question I have, can you give us your headcount number please for trained technicians?

Well, our total company headcount number I guess, and the difference would be, our total headcount number is just slightly under 3200. Were increased about 150, 160 since the end of the first quarter and those would be virtually all technicians.

And focusing on Quest a little bit, you gave us the one month contribution from Quest. How should we think about the seasonality of their business and the full year contribution you expect from Quest?

Well, as we said for this first kind of stub year for them if you will, for the first kind of half year our planning expectation is zero contribution. It will be just basically a breakeven business on an EBIT basis when you take in consideration all the amortization charges. Again, we haven't finalized valuations and all of that but once we get all of those done, we expect a modest to no kind of contribution in the very short run.

And next year, how should we think about it?

Well, I think the kind of EBITDA margins are, as we pointed out are attractive and we expect it to be a big contributor. What I'd like to suggest is that as we look forward to next year, just kind of look at our overall kind of revenue growth rates and leverage on that would be kind of a good way to think about it. But we will be providing more specific guidance to that as we get to know them better and understand kind of where the leverage is going to be.

And my final question, you had domestic growth of 12% and yet your overall organic growth was 7%. What's holding back your growth rate and what factors do you attribute to causing it?

So, we were down $2 million or about 5% in the non-US markets. Half of that was in Canada and half in the rest of the world. In both instances, that relates to the absence of big projects that were there the prior year period. So we kind of view it as just kind of timing and the lumpiness kind of, of our business. I will tell you my expectations for kind of long term organic growth is at least as high in non-US markets as they are in U.S. markets including Canada.

The next question is from Matt Duncan from Stephens Inc.

This is Jack Atkins on the call for Matt. Could you give us the updated forecast? $485 million to $510 million, is that what you said?

$485 million to $510 million.

(inaudible) gross margin performance was up and was pretty strong in the quarter. You guys talked about (inaudible) execution (inaudible) expenses and making sure your technician (e-relation wise) were high in the quarter. Could you also comment on pricing (inaudible)? Have you seen price increase of services (inaudible) or does it continue to be a challenging pricing (environment) for you guys?

I think the latter is the operative kind of view. It's continuing to be a challenging environment. None of our improvement in margins was a reflection of let's say, job margin improvement or kind of related to pricing. So all of the improvement that I mentioned in that margin was as a result of, let's say productivity or efficiency.

Again (inaudible) could you maybe give us your (guidance) for that season? Do you expect a (good supplier activity this fall) as well?

Yes.

The next question is from Rich Wesolowski from Sidoti & Company.

I have been thinking back to the last question. Are you still being forced to reduce service prices on newly signed agreements?

I am not aware of any reductions recently, but I think they kind of were in kind of a 'hold the line' environment they were in.

Would you mind going into more detail regarding the combination of Quest's engineering assessment with your own NDT business line. How does that (inaudible) change your offering from a customer's point of view and is there anyone outside there offering something similar?

Well, I think that our view is, is a more comprehensive set of capabilities to provide our customers as it relates to their activities to manage the mechanical integrity of their facilities. Our traditional field services are the measurement services of equipment condition in terms of using a variety of technologies to do that. The engineering assessment capabilities are kind of the engineering or kind of (clear) level evaluation approaches and techniques for evaluating a particular condition or situation, or how to interpret that or how frequently to perform those conditions and services. So, we think we have an opportunity to kind of link those and provide a more productive and more efficient solution to our customers. And we have gotten (comments) to that effect that they're very receptive to that enhanced capabilities. We are still going to operate them separately from one another. So, some customers will want them in a more combined basis, others perhaps may not. We will have to evolve that more fully. In terms of the major customer competitors of Quest Integrity Group today, the major competitors that they identify are not companies that do the field assessment services or field measurement services that we do. So we don't think there is a lot of direct competitors already doing this on an integrated basis. That is not to say that there are no technical capabilities by any other of our field service competitors.

So in the past you would gather that the customers to whom you offer the measurement services would turn around to another company for the higher end engineering assessment rather than not getting that latter service at all?

They do it in-house or would be getting assistance from other engineering firms, right.

Now that you've taken a harder look at questions, you purchased a company, do you still expect them to post margins similar to your own TCM Group?

Honestly, yes is the answer, and maybe even superior to that and if you look to kind of a long term potential given their (aspect). But to think that we have any kind of real, clear understanding in the sense we bought it, we have had two holidays and (inaudible) we are just getting settled there. I don's have any new insights to share.

Okay, good point. And then lastly, did you buyback any stock during the quarter?

No.

The next question is from Adam Thalhimer from BB&T.

Congrats on a good quarter. Can you maybe give us a sense for, you tell us that the recent turnaround season was best since the fall of '08. How much better can you get from that? And is this as good as it gets, or is there still room for improvement in the cycle, so to speak?

Yes, I think so. I think we still have a very cautious environment on the part of our customers. And so, is by no means, we'll say, business as usual. So, can we go back to the kind of activity levels that we had several years ago? I think that's a distinct possibility. I would say this though is that we're not kind of hanging our hat on the notion that the market's going to get better because our point of view has always been that the market growth itself is pretty (doggone) modest, if at all, and that (our) growth is market share growth. And we continue to believe that this is a consolidating industry, and there are a lot of very powerful reasons why that is so and why will continue to be so. And we expect to benefit from that. Surely, our other companies also will benefit, but again, we have hundreds of Mom & Pop's active in our business and that is the basic premise for growth, is our premise is that we're going to see continuing, consistent long term share growth.

Okay, that makes sense. And then when you were in a cycle, you said maybe three years ago, what were you seeing that you still aren't seeing today?

I think the number of kind of enhancement projects is way down, half of what it was when we were booming. I don't think there is a lot of the talk about it. There's not none, but there's not very many kind of expansion projects, our future expansion projects being kind of talked about at this point. The exception would be for (Mac). I think that there is a certainly an understanding, an expectation that that will ramp back up. Probably not as hot as it was, but certainly considerably more than what's going on right now. And a lot of projects there. I think the whole downturn has been tough on, not just in our industry, but I think on everybody. There is just a conservatism of approach and posture right now, a little bit of wait and see. We share that by the way. Just I think cautious optimism is the watchword.

I think at one point 85% of your business was maintenance. (inaudible) project.

Down to 85%, yes.

Where are you today, do you think?

Probably 90% to 95%.

And then what's the outlook for project work? You said it's still kind of limited.

I think it's generally limited. It's certainly limited in refining and petrochem. I think pipeline is positive, Power is positive. And again, I think the oil sands is very positive.

But even that business is lumped into maintenance, sounds like. Well, it can get a little better.

Well, just the beauty of our business isn't it? So much of it's tied to just the fact that plants run. You know the degradation that occurs due to operations. So that's why we have a much more stable demand environment. I would say E&C companies are companies that are principally related to new construction or new capacity. So I think it's a very healthy thing that we have so much maintenance activity. And we continue to have it in all of these markets and in all of these plants. So, that is a good thing.

The next question is from Matt Tucker from KeyBanc Capital Markets.

You guys mentioned that you think the spring turnaround season would be I guess as strong as this fall or least as strong. Wondering, how much of the spending in the spring turnaround season do you think would be driven by still this need to catch up on deferred maintenance versus maybe your customers feeling a little better about the environment. And then with respect to the deferred maintenance coming back, I guess how much do you think is kind of still left or really going to be catching up for a while here, or do you think your customer's largely kind of caught up in this fall turnaround season?

Well, those are difficult questions. I guess our optimism about the spring is the number of turnarounds that we are working and then planning to work and the expected size based on the planning scopes that we have that we are working with. Whether those expand still further or contract, time will tell. It's very difficult for us; after the fact, we can look back and say, these things happened, and we think that's because the scope's expanded or didn't, and we think this is the reason why. To have any comprehensive view to say that they were all caught up or not, I'm not in a position to have a view on it. I would say that it wouldn't, because all units aren't kind of down every quarter, every season. I think to think that it would completely catch up in one season doesn't make sense to me, that I think it would just catch up over frankly several seasons. We kind of go through the whole cycle, even if we had a complete return to kind of old practices.

That seems to make sense. Over the past couple of years during the downturn, I believe you have indicated it is difficult to determine whether Team was gaining market share. And you highlighted market share gain as kind of a key to growth. So now that this environment is improving, do you have a better sense whether Team won or lost market share over the past couple of years?

No, I don't really. We don't have an internal view that we have gained a significant amount of share in the last year or so, as we are dealing with kind of changes in procurement practices with kind of our major accounts. We kind of think that we've held our own, but we know there would hadn't been a major transition in the time period. We think we've gained a lot of share in overall five to 10 year period. But I can't say that I can point to very specific things in the short run that would be indicative of big share gains.

And then would you be able to provide the expectation for the Quest revenue contribution in the second half that's built into to your revised revenue guidance.

It's just taking a trailing revenue rates.

The next question is from (Craig Bell) from Americap Partners.

Phil just wanted to clarify again on some of the turnaround activity we saw in the quarter and just sort of maybe rephrase it a little bit. In terms of the work you're talking about some of the catch-up that's happened. Do you think that that's really you're seeing spending come back to sort of normal levels and that's what was driving the expanded scope. Do you think it's more we've deferred some of this work so long we've just got to do it now?

I don't know. I guess so is to me and a little bit the same. Maybe just put a little more color on that. I think what's happening is that and in fairness, if you watch margins, I think for mostly it'd be highly refinery specific in terms of the crude slate and product slate et cetera. But if you look at generic refining margins kind of on the board, the 321 cracks over the last half of the year, but certainly last quarter they've been good. They've been better than they've been in the last several years for refiners. I think that's a little bit of a positive. But I think what we've found in specific instances is that as we got into it, they expanded because things that had been passed on, kind of repairs that have been passed on in the last year and year-and-a-half have not been passed on it. The things have been added back. And that's because they can afford it or because they can't defer anymore. They didn't tell us which is which on that. It just stands to reason to me to know that things you defer, there is a limit to how long you can defer them or maybe you didn't have to repair them in the first place. I don't think there's a whole lot of that happening. So that's what I think is kind of driven by deferrals. And again I think the fact that we have a little bit improvement in margins and on a short run that probably help see attitude a little bit certainly for the refining group.

And then as you look towards the spring, are you seeing any differences in what your initial scope is looking like versus what you were seeing coming into the fall is on the initial looks, not on how it expanded in the quarter?

Because we're talking about so many different individual projects, I don't have a real good read on that. The tone I get from our field guys is that they are optimistic about the spring. They were optimistic about the fall, but I think they're at least as optimistic about the spring. So we're positive about it.

And then just lastly on, I know it's only been two months since the acquisition, but have you guys really started selling the entire suite of services across the group or is it still to some degree operating as the old Team and the old Quest.

I think the latter. We're just getting started. It is resident in our TCM division, so we have a kind of common kind of management. We have key Managers that are the liasons and coordinators for kind of coordinating our commercial presence and looking for the synergies across our groups. But they're going to continue our expectation for many years as they will be closely coordinated, but operating independent of one another. I should say the Quest from our field services groups, because of the nature of the capability. We're talking about scientists and engineers more than a field service organization. So it needs a different level of support, but we're going to coordinate them commercially. But rest of this year activity is to sort out the best way to do that. And again our expectation, we start moving the needle a little bit as we look to next year and not this year.

The next question is from Tim Kang from Olstein Capital Management.

I just have a couple of just follow-up questions I guess. Have you seen any wage pressure in any of your guys on the field.

No.

So your margin expectations and it came in fairly good margin. Your margin expectation sort of on a go-forward basis, obviously market permitting is still kind of what your run rate is basically, right?

Yes. I think very large.

This is more of a technical thing. On your other non-current assets I should say, that is just related to the acquisition rank, the big increase?

Yes.

The next question is from Martin Malloy from Johnson Rice.

Could you talk a little bit about what you see in terms of customer approach to maintenance spending in the utility and petrochemical areas?

I'm afraid because those are smaller segment, I'm afraid I don't have a lot of specific color to offer. I think it's generally positive in both areas. I think there are segments of petrochem that with a weaker dollar that actually is doing quiet well. So their economic circumstance is improved, but I don't have any real color on the segments in detail.

Your next question is from Max Barrett from Tudor, Pickering, Holt.

Both of my questions have been answered. But, Phil, you mentioned Fort McMurray, just hoping to get an update on timing for the oil sands expansion projects. Do we start seeing the impact this spring, summer or is it further out than that?

I think it's going to likely be further out. I mean everything still happening, I'm not aware if anything is canceled, but it all seems to be going slower. I haven't been in brief project-by-project recently, but that's just kind of a viewpoint. So we're not counting on at it some big one fall this fiscal year, although we're well positioned to participate, whatever happens.

The next question is a follow-up question from Rich Wesolowski from Sidoti & Company.

Were there any completed contracts that boosted Quest's revenue during the past year that would perhaps create a through comp for next year's growth?

No, I don't think so.

And then lastly and this might be of a category of too early to have a real view, but can you talk about the make-up of the market for what you do in New Zealand, it's kind of off the map for us, estimated market size, number of refineries. Does it look like it does everywhere else?

Yes, but I think when you say New Zealand and Australia, again what we have is an assessment group that's kind of based there for some historical reasons, I think they serve with those services a much broader environment in just New Zealand and Australia.

So that's just their base.

That's just their base and where they're located. And we do provide a lot of engineering assessment services in the utilities kind of power industry in both of those markets. I haven't actually bothered to study much the refining markets, but they're probably limited I think in those markets just based on their population.

Matt Duncan is on line with a follow-up question from Stephens Inc.

Just one quick follow-up here, I know you just completed the Quest acquisition in November, but I was wondering if you could provide some color on your upper sight for future acquisitions. And what type of transactions and target should we looking for?

I think our appetite remains unchanged following the Quest acquisition. As Ted mentioned, I think without even having to rework any credit agreements, we have about $67 million cash available, should good opportunity come around. I think our attitude is what has always been is that we think we have a very exciting organic growth opportunity. That's the heart of our company, that's what our primary focus is on. If we do that well, we think we're really going to like it, our shareholders are really going to like it. Having, said that. If we can supplement that or accelerate that with an attractive acquisition, we would do so. And what would be attractive is something that would allow our growth to accelerate the growth rates or get us in the markets that we couldn't, otherwise get into effectively, attractively, organically. I think new geographic areas step out service lines will be the categories of kind of things that would kind of be in those buckets.

(Operator Instructions) We have Matt Tucker back on line with a follow-up question from KeyBanc Capital Markets.

The TMS division revenues, the growth was a lot stronger in the quarter in the TCM division. I assume that relates to the more robust turnaround seasons that you saw. But can you maybe just tie that back a little bit to kind of the end-market picture and would you expect the TCM growth to start catching out in the near term or when would you expect to see that?

You're exactly right. The growth rates much higher on the division basis in TMS and TCM for both the quarter and year-to-date. And reflects a couple of things and you refer to one of them. First, if you look at U.S. only, the growth rates are much closer, although still somewhat higher. I have my numbers and 15% and 7% I think were the two numbers for TMS and TCM respectively in the U.S. So what we have is a bigger non-U.S. presence particularly Canada, but also in the Caribbean area for the TCM division. And that's where some of the presences is a lack of projects from the prior year. Secondly, the point you make is I think the concentration turnaround services is greater in TMS and TCM. Remember TCM is both inspection services and the heat treating. Heat treating is almost predominantly a turnaround service much like field machine and bolting, field valve repair, but inspection services is a blend. So if you recall backwards, they've been looking back a year ago, it did not decline like TMS did because of the on-stream services and similarly it's not rebounding today. I think that this reflects a little bit of the fact that our little cautious optimism is that the world just isn't exploding here, and what we've had is just more robust turnaround activity, particularly again in the U.S. markets that have been driving our growth. I know that's a little more flavor or color that's helpful.

Gentlemen at this time there are no further questions.

Then I'll just wrap up. I want to thank everyone for your participation on this call and your continuing interest in Team. We look forward to updating you on our progress with our third quarter call in early April. In the meantime, have a good day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.