Philip J. Hawk - Executive Chairman, Chief Executive Officer and Chairman of Executive Committee Ted W. Owen - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer Peter W. Wallace - Chief Operating Officer and Executive Vice President

Stephen Ragard - Stephens Inc., Research Division Saagar Parikh - KeyBanc Capital Markets Inc., Research Division Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division Michael Laskin Adam R. Thalhimer - BB&T Capital Markets, Research Division Tristan Richardson - D.A. Davidson & Co., Research Division

Very good morning, ladies and gentlemen, and welcome to the Team Third Quarter Fiscal Year '13 Earnings Conference Call. My name is Lisa, and I'll be your coordinator for today. [Operator Instructions] I also like to advise you this conference is being recorded for replay purposes. I'll now turn the conference over to your host, Mr. Phil Hawk. Please proceed. Thank you. Philip J. Hawk: Thank you, Lisa, and good morning and welcome, everyone, to the Team Quarterly Earnings Conference Call. Again, my name is Phil Hawk. I'm Team's Chairman and CEO. Joining me again this morning is Mr. Ted Owen, the company's Chief Financial Officer; and Mr. Pete Wallace, Team's Chief Operating Officer. The purpose of today's conference call is to discuss our recently released financial results for the company's third fiscal quarter ending February 28, 2013. 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, filings to the SEC, as well as our annual report. In view of our press release and conference call just 2 weeks ago, our prepared comments this morning will be fairly brief. Ted will begin with a review of the financial results, then Pete will provide some additional details and color on our operating performance and priorities. I will then follow Ted and Pete with a few personal observations about our performance and outlook. Following these remarks, we'll take questions from our listeners. With that, Ted, let me turn it to you. Ted W. Owen: Thank you, Phil. First, as usual, I want to remind everyone that any forward-looking information that 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 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 the financial results. As you all know, we preannounced disappointing results for the third quarter via a press release on March 14, followed by a conference call on March 15. So the full results that we reported yesterday are consistent with that earlier announcement. For the third quarter, we reported an adjusted net loss attributable to shareholders of $0.01 per diluted share on revenues of $151 million. That reflects a total revenue growth rate of 11% for the quarter and an organic revenue growth rate of 8% for the quarter. The adjusted loss excludes a $600,000 pretax, nonroutine charge associated with the Venezuelan currency devaluation that was announced by its government in February this year. Including this nonroutine charge, our GAAP loss for the quarter was $0.03 per share. In spite of the disappointing results for the third quarter, however, we remain on pace for another record year. For the year-to-date period, revenues were $513 million, up 18% over last year, and adjusted earnings were $1.01 per diluted share compared to adjusted earnings last year of $0.95 per diluted share. Now with respect to some cash flow and other financial-related items. Capital expenditures for the quarter were $6 million, depreciation and amortization was $4.8 million and noncash compensation was $900,000. Adjusted EBITDA for the quarter was $6.3 million and $84 million on a trailing 12-month basis. At February 28, our total debt was $89 million, cash was $36 million, and thus, net debt was $53 million. So our net debt to trailing 12-month EBITDA was 0.6:1. And with that, I'll turn it over now to Pete who will provide a little more color about our third quarter revenues and business. Peter W. Wallace: Thank you, Ted and Phil. It is my pleasure to be with everyone this morning. Let me provide some details on our recent business activity. As indicated in our earnings release and Ted's remarks, our quarterly revenues were $151 million. Total revenue growth for the prior year quarter was $15 million, up 11%. Organic growth was $11 million or 8% during the quarter. From a geographic standpoint, our U.S. business units led our growth this quarter, more than offsetting the revenue declines in Canada and Europe as compared to the prior year period. In the third quarter, our U.S. business grew approximately 17%, reflecting solid inspection and online service activity. Our Canadian business declined 13%, mostly due to very limited turnaround activity and project work. And our European business also declined approximately 15% in the third quarter, which is related to soft project work experienced throughout Europe. From a service line perspective, inspection and assessment continues to lead Team's growth this year for both the quarter and year-to-date periods. Third quarter inspection/assessment revenues grew 25%, reflecting continued strength in our Quest Integrity Group business unit, Team's mechanical integrity program, as well as our legacy nondestructive examination service offerings. Year-to-date, inspection/assessment revenues have grown 35% versus the prior period. Online services grew 7% overall in the quarter, reflecting strong U.S. business activity. Turnaround services, which encompasses our heat treating and all screen mechanical services, declined approximately 5%, due primary to weaker activity levels in Canada. For the year-to-date, inspection/assessment services represent 45% of Team's total business. Turnaround services are approximately 30% and our online services are about 25%, respectively, of total revenues. As we've discussed in previous calls, our third quarter is seasonally a weaker quarter. Our overall turnaround activity levels will be significantly higher in our current fourth fiscal quarter, corresponding with the industry's spring turnaround season. That concludes my comments. Phil? Philip J. Hawk: Thank you. Thanks, Pete and Ted. Let me just add a couple of additional comments prior to opening it up for questions. As announced in our March 14 release, we now expect full year earnings to be in the range of $1.70 to $1.85 per share and revenues to be in the range of $705 million to $720 million. This full year guidance implies fourth quarter earnings guidance of $0.69 to $0.84 per share on total revenues of $192 million to $207 million. As we indicated in our previous call, while we are forecasting a significant uptick in the total number of projects for Team in the fourth quarter, we expect fewer very large projects, that is those greater than $2 million in revenue, compared to last year's fourth quarter. The reason for this is simply that our customers just do not happen to have as many of these very large projects scheduled in this period. But more importantly, we believe the overall market demand for our services remain strong. The underlying business fundamentals for most of our major customer segments remain attractive. Despite some headwinds in the most recent quarter, we still expect Team to achieve record financial results in our current fiscal year. Our organization is focused on staying a great service company, delivering safe and effective service and support to our customers, earning a growing share of market service opportunities and balancing our growth and resources appropriately with our growth in business. As has been the case for nearly all of the last 15 years, Team continues to be extremely well positioned to profitably build and expand its business for the long term, and we expect to do just that. Lisa, that concludes our remarks. Let's now open it up for questions, and let me turn it back to you.

[Operator Instructions] Okay, your first question is from the line of Stephen Ragard with Stephens. Stephen Ragard - Stephens Inc., Research Division: So it sounds like you haven't really changed expectations on the outlook for the spring turnaround season from when you talked about 2 or 3 weeks ago. I guess is it still fair to kind of characterize -- looking at it as the scope of turnaround projects can still change with maybe a higher probability to the upside? Is that fair? Philip J. Hawk: I think your first comment that our outlook has not changed is absolutely correct. The same view -- as we discussed before, we do -- we think the industry is active, and the turnaround season is active. So this is not a weak season, generally. What we said was -- and in fact, the total number of projects that we've identified is larger than last year, significantly larger, but in the 15% to 20% range larger. What we are not seeing for us are the very big projects that we have in the prior year period. Could some of the projects change in scope? Most definitely, yes, both up and down. They could also move in and out of the period as well. So for it to say that it's a -- the inference was that we're -- it will be this or higher, I wouldn't say. It is our best estimate of where we think we are, but we certainly recognize that there'll be a lot of moving pieces that would -- could affect the ultimate actual number. Stephen Ragard - Stephens Inc., Research Division: Okay, that's helpful. And then recently, we've seen -- I guess, last week, Suncor canceled its Voyageur Upgrader project up in Canada. Can you maybe speak to that a little bit, just in terms of general activity up there? And I guess, does this change your longer-term outlook there going forward? Philip J. Hawk: Just general answer to that is it certainly is an additional headwind. It reflects a little bit of moderating attractiveness of the oil field -- of the oil sands kind of environment for those investors in all companies operating there. Having said that, there's still many projects still underway, and there's a growing install base of projects that we will serve over the long term. So yes, it's a headwind, but we don't have a view that it's now no longer an attractive place to operate. Stephen Ragard - Stephens Inc., Research Division: Okay. And then last question for me and I'll jump back in the queue, can guys maybe speak to your outlook on the acquisition pipeline going forward? Philip J. Hawk: I think the posture that we have with regard to acquisitions continues to be the same, is that organic growth continues to drive or, as it has this year, continues to be the core of our business. We're just so well positioned to keep earning a greater share of the business and expand our capabilities from the large base that we have. But having said that, attractive supplement -- attractive acquisitions that extend our capabilities in ways we couldn't do internally and then accelerate our growth or growth prospects are attractive. Just in the last year, the most significant and the largest one was the TCI tank inspection company, which certainly fits that mold in terms of giving us a very significant presence in a -- in one geographic area with a very, very capable and leading service company in the tank inspection business, and we see some exciting opportunities to build on that with additional organic growth based on that enhanced capability. So we're going to be continue -- we'll continue to be receptive to and investigate those kinds of opportunities.

Our next question is from the line of Tahira Afzal of KeyBanc. Saagar Parikh - KeyBanc Capital Markets Inc., Research Division: This is Saagar on for Tahira. So first question, availability of craft labor for you guys, if the need arises, if demand continues to tighten, we've heard a lot of the larger EPC contractors [indiscernible] this out, start to get hit on some of their fixed price work in terms of craft labor, could there be a resource issue for you guys as the petrochemical cycle the -- ramps up over the next couple of years? Philip J. Hawk: I think as -- I've read some of the same reports. I think there a lot of big projects coming. And so certainly, in certain areas, there could be competition for labor that will affect labor rates or wages. I think that's a possibility. Our experience has been that we have not been short labor, and we've been able to find or develop labor sufficient to meet all of our needs, and we don't expect that to change. If labor rates in a region or an area are -- begin to escalate because of this type of competition, the advantage that we have is we're basically a time and materials service. So as our rates go up, they would be the same for any of our competitors. By the way, it would also be the same for our customers. So we will -- we would be -- feel confident that we'll be able to, I guess, address that increased cost through increased billing rates associated with that labor. That has been our experience historically. Saagar Parikh - KeyBanc Capital Markets Inc., Research Division: Okay, great. And then one follow-up, really, the hydrocracker projects. Several hydrocracker projects have come on the map, but some have been delayed in terms of timing. Wondering if these projects are within the company's area of expertise, and specifically, what you could be doing on these type of projects. Philip J. Hawk: I think -- I am not an expert on hydrocrackers, and we would certainly not be a lead contractor in constructing that. But what we would provide for any new facility construction would be inspection services and an array of specialty construction services related to probably heat treating, field machining, bolting, probably some line isolation activity. Hot tapping activity would be typical that would be involved in construction projects of that type.

Our next question is from the line of Martin Malloy of Johnson Rice. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division: Could you talk a little more about the drivers with the inspection business growth? Is it grabbing market share from competitors? Are there technological changes that you all are bringing, or is it regulatory driven? Philip J. Hawk: I think it's a combination of those would be what I would say. The -- Pete mentioned several sources of the growth. It's pretty broad-based actually. The Quest Integrity Group is growing very nicely. That's a nice, kind of additional company a couple of years ago. I think their growth is driven by technological advantages. Their in-line inspection tools and approaches to inspection are -- using proprietary approaches are quite effective. And there's been a lot of the demand for and -- I guess, demand for those services, and they're doing quite well. But we're also kind of gaining share in a number of other areas as well. Pete mentioned mechanical integrity programs, which are kind of helping, particularly, the small or nonmajor companies kind of establish programs to kind of monitor their facilities and inspect them on a systematic basis, using kind of industry-standard approaches. But frankly, when you get into the NDE services, we have nice growth, both in advanced services, but also in the traditional services of radiography, UT, mag particles. So it's pretty broad-based. One of the things I just looked at this morning, I went back and looked at the TCM division, which kind of provides all of those traditional NDE services, and 6 of our 9 regions had double-digit growth year-to-date. So again, it's, to me, a pretty broad-based story, not a single idea or a single approach. I do think that there's going to be industry interest in more inspection services, because that gives them a kind of a better sense of the condition of assets. But I don't sense that there's a huge growth occurring in the industry. I don't know, Pete or Ted, if you have anything. Peter W. Wallace: I think one thing that's driving that, and Phil mentioned it, mechanical integrity, as I did, that there's some deadlines coming up with process safety management or the 1910 and that code of federal regulations that comes up in 2016, and we estimate about 40% of our clients’ needs help in that arena. And there's over 10,000 operating units or plants in the U.S. alone, so that's -- it's a huge market for us, and we see that segment growing. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division: Okay. And then next question, looking out past the next 6, 9 months, assuming that there's a significant buildout along the Gulf Coast of chemical and petrochemical facilities, could you talk about the role the Team might play on those kind of capital projects next couple of... Philip J. Hawk: I think just kind of reiterating a comment I just made on the hydro -- treater-hydrocracker comment is that, again, inspection, as well as our -- really, our turnaround, our full suite of turnaround services, for the most part, are also applicable as specialty construction services in a new facility or new capability builds, so heat treating, field machine, bolting, line isolation and the like. We love new projects. That's great. I just kind of, again, comment or observe that this huge install base and the turnarounds and rehabilitation and ongoing maintenance of those facilities will continue to be the biggest opportunity for us. So these are kind of nice add, but it's the new construction, the 10% to 15%, not the 85% of our business. Peter W. Wallace: One of the things that's really popped up in the new construction, it's related back to the Texas City BP fire, is the PMI work that is required on new construction builds. So that's where we see a lot of work generated from, and then it just leads into us becoming permanent residents when it comes to inspection work.

Our next question is from the line of Arnie Ursaner, please -- of CJS Securities.

This is Michael Laskin filling in for Arnie. So my first question has to do with the pre-announcement regarding Canada from a couple -- well, a couple of weeks ago. Can you provide any more color as to what exactly occurred there? Philip J. Hawk: I think -- again, we had a very, very strong first half of the year. We're kind of aiming and planning for continued growth and expansion, frankly, and we had a couple of -- we had some timing, this incidental timing on little things, but a couple of -- as we mentioned in the last call, a couple of kind of deferrals of the big project and a change in ownership of one of our significant customers up there that, at least, in the short term, has changed our kind of the service relationship and the kind of near-term activity levels. And then net of all of that was a decline in revenue after a very significant growth in the first half of the year. We don't feel like we've lost our position, that we're disadvantaged, that -- but it's just that we were out of balance from activity levels, and obviously, we've been adding some resources up there. As we look forward, I think we continue to be positive and optimistic about Canada. There are some headwinds to be sure in, as we mentioned, with the Voyageur project and just kind of a little bit of pressure on margins, I think, in that environment for the Western Canada. But there's a lot of good things happening in Canada, and we continue to expect it to be a significant and attractive part of our business.

Got it. And my second question is, what do you see as the main factors that will impact where in the guidance range for Q4 that results will fall out? Philip J. Hawk: I think the main driver will be activity levels, volume.

Our next question is from the line of Adam Thalhimer from BB&T Capital Markets. Adam R. Thalhimer - BB&T Capital Markets, Research Division: I wanted to ask quickly about Europe. Is there any reasons for optimism there? Peter W. Wallace: I think if we look at the European market, it's new to us. We think we have only, or less than, 5% of the market share. Even though the European market has slowed down on project work, there are still a lot of opportunities for our online services and our legacy services to gain there. So we're very optimistic that we can continue some growth there in Europe. It slowed down as we reported for this past third quarter, but that's a seasonality of the Europe. But if you remember, the first and second quarter, we did well. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Correct. So that wasn't -- maybe more seasonality, not so much a shift in the overall marketplace or... Philip J. Hawk: Yes. There's no question Europe is kind of facing some kind of issues kind of broadly with the euro. But I think Pete's right on, is that we have low market share, a huge install base. It just looks a lot like North America. We're just a much smaller player right now over there, but we're building -- we have a very strong position in a couple of markets, and we're building in some others. So we're -- we are optimistic. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Okay. And then Venezuela, I kind of thought you guys had written that completely down and more or less out of Venezuela. Why the currency issue this quarter? Ted W. Owen: No, we have not -- that is not the case, Adam. We have a small operation in Venezuela that is actually a very, very nice operation. It's in the TCM region, providing inspection and -- principally heat treating services to the local market, principally PDVSA. We had a -- we are required -- because Venezuela is a hyperinflationary economy, we are required to periodically adjust the translation to the published translation rates. That changed -- so it's not a floating rate. It is rather a fixed rate that change to initially 2 years ago. And so what you're recalling is a -- and a write-down, but not a write-off that occurred 2 years ago, which was fairly significant because of a significant devaluation of the Venezuelan currency. It has been fixed for the last couple of years and was adjusted again by the Venezuelan government in February. So it is a fairly small investment that we have, equivalent to about, U.S. dollars, maybe $2 million on that order of magnitude. But it is a -- so it's a fixed rate of exchange that is adjusted periodically. And if there are -- when there are further adjustments, it would result in a additional charge or credit, whichever way it should go, when the government of Venezuela adjusts those rates. But there's -- again, there's only a continuing investment in Venezuela, order of magnitude of a couple of million dollars. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Okay. And lastly, just kind of high picture, maybe a question for Phil. I mean, when you look at all of the changes that are happening in the North American energy landscape, what gets you most excited vis-à-vis the impact to your business? Philip J. Hawk: Well, I mean, you kind of -- the premise is -- certainly what I agree with is that we are in a incredibly attractive kind of macro environment, I think, right now, and I think it's going to stay that way or perhaps even get better. We have feedstock advantages for refining and petrochem. We have kind of with lower-cost energy, we're going to have thermal advantages for energy-intensive manufacturing operations versus the rest of the world, I think, at least, for the near term. And I think the kind of the prognosticators that I read about or read from, within their thinking is that this could be a decade or maybe 2-decade advantage for North America. That health, that activity level just has to be a good construct for our activities. I think the basic maintenance needs of facilities isn't changing, and it's not automatic that we get it. But surely -- we surely love an opportunity in a market that's healthy and growing. And we like the fact that we're a structurally advantaged service provider, just given our size, scale, both from a geographic standpoint across North America and other markets, but we're talking here about North America, as well as our service line breadth. So we think we're just well positioned. It's been a -- to those of you who followed us a long time, we've grown nicely, consistently over a pretty long period of time. And I just think the future looks -- can look just like the past. We have to earn it, but very, very strong fundamentals in terms of demand and, really, in practically all major industry segments.

Our next question is from the line of Tristan Richardson of D.A. Davidson. Tristan Richardson - D.A. Davidson & Co., Research Division: Just, I guess, a follow-up. Pete, you had talked about mechanical integrity programs, and I think we've definitely seen it over that past couple of years on the pipeline side for pipeline networks. And I'm just curious if you guys are seeing that in other markets. And as a follow-up, just -- these tend to be 2- to 3-year programs, where everyone just sort of digs into the fleet. And are you seeing that once those 2- to 3-year programs end, do they launch a new one? Or -- I'm curious sort of what you're seeing in that market. Peter W. Wallace: Well, process safety management are -- mechanical integrity has been around for a while. And as plants change and develop and they re-engineer things, they have to keep their P&IDs up, and that's what we have -- you get the opportunities to have reworks or re-projects in there. So this is just -- we're at the second phase of the last -- gunning up to the regulatory deadline is 2016. As our government has done in the past, they change regulations and they're going to get more stringent. And I think there's going to be greater opportunities within this service. Philip J. Hawk: I think, Tristan, you mentioned pipelines, which is a exciting opportunity. We are -- really, all of our growth that we revert to is -- really is plant related. We see the pipeline programs as being a great kind of a new emerging opportunity for us, in construct with the Quest Integrity Group and some of their proprietary in-line tools. But we're -- we are building and expanding our capabilities to kind of manage these pipeline maintenance programs and that whole development. And that's a segment that, frankly, as a company, we've been underrepresented in historically. So it's an exciting additional opportunity. Tristan Richardson - D.A. Davidson & Co., Research Division: And on the pipeline side, is there sort of a sweet spot for you guys in terms of either diameter or length, range, et cetera, or is it sort of run the gamut, I mean, you guys can do? Any diameter? Any range? Philip J. Hawk: If you -- it depends on what we're talking about. If you're talking about in line -- in terms of just actually providing an inspection of a pipe, kind of providing the -- if you will, the -- taking the -- the analogy is taking the picture of the pipe and using the in-line Quest Integrity Group tools, their sweet spot are the unpiggable pipelines. So it's going to be the -- they have capability, up to 24 inches now. But we're going to be looking at not the mainline pipeline, but the unpiggable lines, work lines, the feeder lines, lines that weren't anticipated to be kind of built before pigging -- electronic pigging became possible. Those kinds of things. But what I'm speaking to is a broader maintenance capability, which is kind of managing kind of programs, maintenance programs for pipelines or kind of project management and coordinating a number of services, including kind of in-line inspection tools, but it also -- it would include true-up activities and kind of minor maintenance activities to that area. And that's something that, again, we have a small capability in, but we're developing that more fully. In terms of new pipe construction, we'd be involved in the inspection activities for new pipe construction. And we're doing fairly large diameter pipelines in Canada with the Automated Ultrasonic Technology, or AUT. We're less well positioned, candidly, in North America for the large diameter pipeline, so we'd be more -- excuse me, in the U.S. We'd be more likely to be involved in the smaller ones just because of kind of the how the industry is structured. Tristan Richardson - D.A. Davidson & Co., Research Division: Okay, that's great. And then just to follow up on M&A as well. I mean we've seen several transactions on the inspection and NDT side. And I'm curious, have you guys have seen multiples expand? Or I mean, in terms of seller, have seller expectations gone up on price? Philip J. Hawk: The difficulty with that question is that our approach is very, very selective. So we're not buying kind of companies in bulk, kind of on an -- I'm going to say, if you will, on an industry margin. What we're -- as we've said, the -- what's really important to us is fit with us culturally and fit with us strategically, so that it can be a complementary capability that we -- from which we can accelerate growth somewhere, either helping that new entity grow more rapidly because of the support from Team or maybe Team growing because of access to new customers or the like. So we spend a lot of time on the front end really getting to know these companies and vice versa, because the intentions of management are also really critical in terms of their desire to join our team and be part of that. So candidly, when we get to that point, I kind of argue is that this is really -- we have kind of conclude it's really going to be something that's special and good for Team, and then we try to go to kind of market ranges and rates. But frankly, half-point changes or half-turn changes in price, at that point, are really less significant than the fact that we are highly enthusiastic, and the selling company is highly enthusiastic about our working together. I don't know if that's helpful. So we don't kind of look at huge numbers of deals and kind of track multiples.

Ladies and gentlemen, that concludes the question-and-answer session for now. I would now like to turn the conference to Mr. Phil Hawk for closing remarks. Thank you. Philip J. Hawk: Thank you, Lisa, and I want to just thank, everyone, for your participation in this call and your continuing interest in Team. We look forward to updating you on our progress with our fiscal year call that should take place in early August. And in the meantime, I wish everyone a very good day.

Thank you, all, for joining. Ladies and gentlemen, that concludes today's conference. You may now disconnect your lines. Have a good day. Thank you.