Philip J. Hawk - Executive Chairman, Chief Executive Officer and Chairman of Executive Committee Ted W. Owen - President, Chief Financial Officer, Principal Accounting Officer and Director

Arnold Ursaner - CJS Securities, Inc. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division Tahira Afzal - KeyBanc Capital Markets Inc., Research Division Tristan Richardson - D.A. Davidson & Co., Research Division Adam R. Thalhimer - BB&T Capital Markets, Research Division

Good day, ladies and gentlemen, and welcome to the Fourth Quarter Fiscal Year '14 Team Earnings Conference Call. My name is Tahetia and I'll be your operator for today. [Operator Instructions] As a reminder this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Phil Hawk, Team's Chairman. Please proceed. Philip J. Hawk: Thank you, Tahetia, and good morning, everyone. It's again my pleasure to welcome you to that Team web conference call to discuss recent company performance. Again, my name is Phil Hawk, I am the Chairman and CEO of Team. Joining me again this morning is Mr. Ted Owen. I'm delighted to take this opportunity to congratulate Ted on his promotion to President of Team and his election to Team's Board of Directors. Ted's recent promotion is a key step in our CEO leadership transition plan that we announced several weeks ago. I will have more to say about this plan later in the call. The purpose of today's call is to discuss our recently released financial results for the company's fourth quarter and full fiscal year that ended May 31, 2014. As with past calls, our primary objective is to provide you 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. Ted will review Team's financial results and provide more detailed color on the performance and prospects for both Team overall, as well as for each of our business groups. I will then follow Ted with some additional comments and perspectives. Following these remarks, we'll take questions from our listeners. With that introduction, Ted, let me turn it over to you. Ted W. Owen: Thank you, Phil. First this morning, I'll read our traditional Safe Harbor statement and then go into a discussion of financial results for the quarter and provide a little more color on our operating results and outlook. 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've 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. 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 let me summarize our results for the quarter and then discuss more fully our operating results and our business outlook. Adjusted net income available to shareholders was $0.63 per share in the current year quarter versus $0.54 in last year's quarter. That's an improvement of 17% or $0.09 per share. The adjusted net income for the quarter excludes a $2.1 million pretax accounting loss associated with the revaluation of our net assets in Venezuela, as I discussed, at length, on our call on June 24. The adjusted EPS for the quarter and for the year is $0.03 higher than we had indicated in our June pre-announcement due to a favorable effective tax rate for both the quarter and the year as compared to our earlier estimates. By the way, the full fiscal year 2014 35% tax rate and the 33% tax rate for the quarter is due to a unique set of events pertaining to a change in the foreign exchange rate impact on deferred tax liability accounts. We do not expect a similar benefit in the future, so you should model a 36% tax rate in 2015 and beyond. Overall, revenues were $211 million in the quarter, up 5% over last year's quarter, and we are particularly encouraged by the fact that our U.S. growth rate was 11% in the quarter. For the full year, adjusted earnings were $1.48 per-share on revenues of $750 million. Now with respect to some cash flow and balance sheet related items, capital expenditures were $9.2 million for the quarter and depreciation and amortization plus noncash compensation charges were $6.5 million in the quarter. So adjusted EBITDA for the quarter was $27 million and for the trailing 12 months was $78 million. A further word about capital expenditures. As I described in our last call, capital expenditures were higher than usual in fiscal 2014 and will continue to be over the next year due to: a, the recent completion of our renovated and repurposed Alvin Texas Technology and Training Center; and b, the implementation of a new ERP system. We began the design build phase of the ERP system in fiscal 2014 and are now moving into the next phase, which involves extensive testing of the system and training of Team personnel. In fiscal 2015 we will begin to incur a relatively significant amount of training costs associated with the new system. Under accounting rules, those costs will be expensed and not capitalized. You should keep in mind that our earnings plan of $2 per share for fiscal 2015 does not include the nonrecurring expenses associated with ERP training. We will report those costs separately as we go forward and we will begin our first installation late in this fiscal year and expect enterprise-wide implementation to be complete by the end of fiscal year 2016. At the end of fiscal 2014, May 31, our total debt was $74 million which was up only slightly from the debt balance of $73 million at the end of fiscal 2013. In spite of the fact that we incurred $15 million of nonroutine capital expenditures for facilities and ERP, we repurchased $13 million of stock and we used $10 million of cash for a small acquisition. At year end, total cash was $35 million, again not much different from last year's $34 million, thereby our year end net debt was $39 million and our net debt to trailing 12-month EBITDA was 0.5:1. Now let me shift the discussion to our business unit performance. As you all know, we are organized into 3 business groups: Inspection & Heat Treating or IHT, which provided a little more than half of our revenues; Mechanical Services, which represents about 35% of our revenues; and Quest Integrity Group, which is about 10% of our revenues but a larger share of our operating profits. I will discuss the operating results of each of these groups separately. First, IHT. Total IHT revenues were $118 million in the quarter, up 9% over last year's quarter. $91 million of that amount is from inspection services, both traditional NDE and advanced services. These services grew $14 million or 18% in the quarter, of which $12.6 million was organic. For the full year, we continued to enjoy outsized growth in NDE services more than 12% year-over-year. During fiscal '14, we successfully negotiated 8 significant, new or expanded run and maintain relationships; we opened 4 new service locations; we began to generate opportunities related to the low-cost North American energy environment with expanded services in the Bakken, Marcellus and Permian basins; and we secured a new LNG facility inspection contract on the Gulf Coast. Additionally, we continued to expand our services into new areas, with the introduction of rope access services in the Gulf Coast, Southeast and Midwest, as well as the expansion of our TCI tank services, our phased array capabilities and pipeline integrity management services. We continue to be very pleased with the overall historical growth and growth outlook in our inspection services. The growth in inspection services within IHT was partially offset by a decline in heat treating services, which as you'll recall, are associated with project and turnaround activities and represented about $27 million of IHT revenues in the quarter, down about $4 million or 14% year-over-year, principally as a result of fewer large heat treat projects in Canada in comparison to last year. Now let's shift the discussion to Mechanical Services. In total, Mechanical Service revenues for the quarter were relatively flat with last year. As you'll recall, Mechanical Service revenues can be classified into 2 broad areas: Onstream, which represented about $40 million in revenue for the quarter, up $3 million or 8% year-over-year; and turnaround or project activity, which was about $35 million in the quarter and down about $3 million or 10%. The year-over-year decline in project activity was outside the United States, principally in Canada. Our U.S. project activity actually increased year-over-year, a positive indicator. As you're all aware, most of our performance issues over the past year have been within the Mechanical Services Group. We are pleased to report significant progress now within this group. Our relatively flat revenues, we improved operating profit by 100 basis points to 12% of revenues from 11% of revenues in last year's quarter. Over the last year, we have rebalanced resources and have new leaders in several of our Mechanical Service locations. We have enhanced our focus on quality, and job execution and have adjusted to an environment with fewer large projects, especially in Canada, where we had been overweighted toward large upgrader expansion project opportunities. We have recently established a project services group within Mechanical Services to provide more focus in our delivery of turnaround service opportunities, and have also achieved significant wins in the last year, with new MSAs in the U.S. and in Europe and new turnaround opportunities in several facilities that represent new relationships for Team. We are on the right track in Mechanical Services. And now let's talk about Quest. For the quarter, Quest revenues were $18.5 million, up only 5% over last year, far short of Quest's overall growth rate of 15% for the year and the more than 30% compound annual growth rate since we acquired Quest in 2010. We talked extensively about Quest's project deferrals in our pre-announcement call in June. In fact, as you'll recall, about half of our fourth quarter miss against prior expectations was due to the timing of projects at Quest. As we also said though, the issue for Quest was not that projects were lost, rather that there is a complexity to the in-line inspection projects in Quest "unpiggable or difficult to pig" target market. Often with no ILI precedent and limited line condition knowledge, which requires substantial planning and operational preparation in front of Quest inspections. As a consequence, several significant projects have been deferred to the current fiscal year 2015. For Quest, 2014 was also a year of major capability and capacity investment in the forms of next-generation tool development, that is, enhanced capability; and heavy personnel tool production and geographic expansion, that is, enhanced capacity. To put this capacity increase in perspective, we have, over the past 2 years, more than doubled the number of qualified inspection technicians and the number of ILI tools in our inventory. To put capability investment in perspective, we have increased our investment in engineering and development activities, which are expensed by 36% in 2014, far outpacing our 15% revenue growth rate. This heavy investment in capital, personnel and R&D pressured profit margins at a time when significant project activity was being deferred into 2015. As a result, Quest's operating profit for the full year was basically flat with fiscal year 2013 in spite of the 15% increase in revenues. As a result of those investments, Quest is now well positioned to continue its outsized growth rates from a revenue and an operating profit perspective, and from the perspective of supporting our clients with more turnkey project management through our project integrity management service group, or PIM group, that should reduce the number of ILI project delays in the future. In summary, overall, it wasn't a bad quarter. Earnings were 17% over last year, but it clearly did not meet our expectations. So let's talk about our outlook. As we have said to many of you, we certainly recognize that we have had to adjust expectations far too often over the past couple of years. We have issued ranges of guidance for both revenue and earnings, but have lacked credibility in hitting those marks, for varying reasons, including unforeseeable issues, like the weather we experienced in this year's third quarter. Also the tailwinds we expected to be in full force by now are still probably a year away, but we, and the entire industry, continue to believe that they will be there. So we acknowledge that we have not been very good at guiding and we are not going to do that again until we have demonstrated an ability to hit our marks. But what we can do is tell you what we believe and why we believe it, and that is our internal plan for 2015, $842 million of revenue and $2 in earnings per share. And it's important to note that our entire management team is invested in achieving that budget. All our incentive compensation plans are tied to earning $2 per share, so we are all in. And why are we confident? Our expectations for fiscal 2015 reflect revenue growth of $92 million or 12% with an operating leverage on that growth of about 20%, which translates into about $18 million of growth in operating income. That certainly does not take us on an uncharted course. As you will recall, our original fiscal 2014 expectation was about $2 per share on $780 million of revenue. We have set the table in each of our business groups to achieve our expectations. While we believe we will begin to see the benefit of secular tailwinds in fiscal 2015, achievement of our budget does not depend upon it. We may also benefit from acquisitions in fiscal 2015, but again achieving our budget does not depend upon it. What our budget does depend upon is us, it is within our control. Over the past 2 years we have added $125 million in revenue without much to show for it, quite frankly. What we have to do now is get some margin on that growth. Focus on execution, don't spill it, and take advantage of the market opportunities that present themselves by being a great service company and the employer of choice in our space. Now before I close, let me also go ahead and address the question that I know that will be asked and that is, where has the budget fit into prior guidance ranges? When we have previously provided a range of guidance at the beginning of a year, our budget has always been within that range, sometimes on the low end, sometimes in the middle, sometimes at the higher end. What we're doing now is simply saying that we haven't demonstrated much of an ability to specify a range so our shift, if you will, is simply to tell you what our expectations are. I am grateful for the opportunity to lead such a great organization and I am proud of all my Team colleagues. Together, we are all looking forward to a great year. And so with that, Phil, let me turn it back to you for additional comments. Philip J. Hawk: Thank you, Ted. I will wrap up with a few additional comments on our near-term business outlook, but I would like to begin with some additional discussion on Team's CEO leadership transition plan. As described in our July 9 press release, Team's Board of Directors has promoted Ted Owen to President and elected him to our Board of Directors. Once his successor as Team's CFO is in place, we expect to transition Team's CEO responsibilities to Ted. At that time, I will become Team's Executive Chairman. I appreciate that any change in company leadership can create uncertainties. I am confident that our planned leadership transition will represent a very positive change for Team. First, we have no plans or intentions to change Team's strategic direction or how we conduct our business. Team remains extremely well positioned in a very attractive market that is likely to get even more attractive. Our overall course and direction is clear. Second, except for the changes related to Ted and me, our entire senior leadership team remains unchanged. Each of the business group presidents and their team managers continue to lead our business. Ted is the clear and unanimous choice of both our directors and our senior leadership team to be our next Chief Executive Officer. He has been a key senior leader and officer at Team for more than 16 years. He is completely familiar with all aspects of our business, has been a key partner in the development of our business strategies and plans and is well-known to our entire organization, as well as to our key external constituencies. During his tenure, Ted has demonstrated that he has the intellect, values, communication skills and temperament to lead Team. Ted will continue to work closely with our entire leadership group in setting Team's overall direction. In his new role as CEO, it is inevitable that Ted will ask some different questions and challenge our Team in different ways than I have done. This is a good thing. This will bring new energy and perspectives that lead to new ideas. I believe this is a necessary part of continually improving our business and our company. I think our leadership transition plan represents the best of all worlds. We benefit from the continuity of proven, experienced senior leadership and at the same time, we can also benefit from the expected additional energy and freshened perspectives as a result of the new roles for Ted and me. Following the CEO transition, I plan to remain active at Team as Executive Chairman. In this role, I expect to support Ted and the company in all appropriate ways. In addition to board leadership responsibilities, I will be involved with major Team projects where I can be helpful. I'm extremely proud of our company, how we conduct our business, the long-term significant growth and success we have earned, and in my view, the equally exciting prospects ahead. Now let me wrap up with a few final comments on our business prospects. As Ted made clear in his remarks, it's show me time for Team. Given our attractive market and strong position in that market, we expect to earn double-digit growth in both revenues and earnings every year, and we are proud of our long-term performance record that is consistent with these expectations. But as Ted said, we are also fully aware that we have not met these expectations in either of the last 2 years. Our business is, at the same time, both very simple and quite complex. What it takes to be a great service company is reasonably straightforward; we simply need to earn the trust and confidence of our customers with safe, effective, consistently high-quality service and support with every service opportunity. We need to earn a fair profit margin for our service work and we need to balance the resources of the company with the work available. The complexity is increased by the distributed nature of the service business and the variability of demand related to the timing of turnarounds and new projects. In this respect, we are the sum of the results from more than 150,000 service opportunities, served for more than 130 service locations by more than 4,300 Team colleagues. Over the past 2 years, our business has been a little out of balance. Our execution overall has not been up to our high standards. We have identified our improvement opportunities and remain focused on addressing them. We also continue to build exciting new capabilities in several new service segments. Improved execution, new service opportunities and new industry tailwinds all support our confidence that Team will return to our historical growth and performance patterns in the current year. But enough said, it is time to do it and show it with our results. That concludes our remarks. Tahetia, can I now turn it back to you so that we can open it up for questions from our listeners?

[Operator Instructions] Your first question will come from the line of Matt Duncan from Stephens Inc.

This is Will. Just wondering if you guys can talk about -- a little bit about what you're seeing so far in the first quarter. Maybe any updates or color on what you're expecting for the fall turnaround season? Ted W. Owen: Yes I think the -- when we look into the fall again in 2015 in general, I think we're going to see a very strong fall turnaround season. We have some really big turnarounds that are scheduled for the fall. It's a little early to be too precise about that. I think for the summer, it's the summer first of all, and the summer is, as I think everyone knows, our first quarter, June, July, August is one of our seasonally weak quarters. It was impacted last year significantly by a slow start that Quest had to the year. I think Quest is off to a pretty good start for this summer in comparison to a year ago. So I think the summer is kind of a normal summer. The fall looks very good from here. Philip J. Hawk: I think I would just another -- state -- to say it in another way is that in the last couple of years, we've kind of had front-ended or back-ended loaded years with kind of imbalanced kind of turnaround outlook. I think our view this year would be that it's fairly balance, so we expect to kind of good activity throughout the year, kind of on a seasonally adjusted basis.

Your next question will come from the line of Arnie Ursaner from CJS Securities. Arnold Ursaner - CJS Securities, Inc.: In regard to Quest, you mentioned several significant projects were deferred into 2015. Maybe you can quantify what is embedded in your internal budgets for Quest? And how we should think about that for the upcoming year? Ted W. Owen: Yes, Quest -- the growth rate for Quest from a budgeting perspective is about 20%. I think it will be north of $80 million, about $82 million for fiscal 2015. Arnold Ursaner - CJS Securities, Inc.: And the margin there? Ted W. Owen: On order of magnitude of 20% operating margins, I think, Arnie. Arnold Ursaner - CJS Securities, Inc.: Great. And I know one of your bigger challenges over the last year has been -- and you highlighted it again today, balancing resources, making sure you have enough personnel to deal with the expected pick up. But there are 2 questions kind of related to that. One is you have MSA agreements that limit your ability to get price relief even though you may have to pay more to get the workers. And two, this deferral or timing issue that's affecting when you will do the eventual work in the Gulf. Can you walk us through how you're managing through that process? And how you're thinking about it for the upcoming year? Philip J. Hawk: Yes, I think I might clarify your -- one of your premises there a little bit, is that you're right, we have significant number of MSA agreements that govern our relationships, and pricing with regard to major customers. They don't prevent us from adjusting. They just -- It's the mechanism by which we have to adjust them. So we are engaged in significant conversation with all of our customers, with certainly all our -- including our major customers, to talk through, basically, what's happening in our markets, and which varies regionally. But we have every expectation that our historical kind of job margins should stay relatively the same. So we are looking for and discussing the requirement need to pass along, kind of labor cost increases in those rates. And we expect to be able to do so, it's just the timing is governed by those contracts so that we don't -- can't move as quickly. I think the other -- I mean where we had very, very significant imbalances was in Canada, obviously with the shift in the market there. The other areas are more than, I'm going to say on the notion of fine-tuning, it's just being -- it's just executing well, so it's fine-tuning, and staying focused on what great service companies do. So I don't think we have -- the balance issue is harder today than it was 5 years ago, 2 years ago, it's just something we need to focus on. Arnold Ursaner - CJS Securities, Inc.: Okay. And, Ted -- for Phil, it sounds like you'll still be keeping a pretty close eye on Ted not exactly sitting on a lot of things [ph]. Congratulations to the both of you.

Your next question will come from the line of Martin Malloy from Johnson Rice. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division: Congratulations, Ted, on your new position there. I guess first question, could you talk -- you mentioned in your prepared remarks the Bakken, Marcellus, Permian, are you all -- could you talk a little bit more what you all are doing in those different basins? Are you moving to performing more services for upstream companies. Philip J. Hawk: To the extent they relate to their piping systems, maybe a little bit, but not a lot. Virtually, the predominant work that we're doing in those areas would be new pipeline construction inspection, and then hot tapping and tie-in work that would involve with those piping systems. Martin W. Malloy - Johnson Rice & Company, L.L.C., Research Division: Okay, and then with all the petrochemical projects along the Gulf Coast and some recent news regarding potential capacity expansions and changes to refineries to handle, more efficiently, lighter crudes, could can you talk about when you all might be brought into those projects, when you could see a ramp-up in terms of commissioning related work? Philip J. Hawk: I think Ted mentioned it in his remarks that we would have -- 1.5 years ago, we would have expected it by now. If you think about our work that we do in a new project is remarkably similar to the work we would do on a turnaround of that same asset later in life. So it's going to be the -- when the vessels, or the -- a few of the towers are kind of in the final construction and the tie-in of the piping systems is where the bulk of our work is going to be, heat treating around welding and then obviously, field machining, bolting kind of construction activities. So that's going to be towards the back end of the project. There will be some inspection activity throughout, but it's -- the bulk of the work will be later. Just as a reminder to everyone that new construction tailwind, that again, we are excited about, isn't a company maker for us. It's that landing at that last 10%. So it's a significant additional business to us, but we're not really dependent on that really to -- for -- we're not dependent on that really for kind of our core business or back to Ted's comment about making budgets, we're not dependent on that tailwind to meet what we think our reasonable expectations are for the current fiscal year.

Your next question will come from the line of Tahira Afzal from KeyBanc. Tahira Afzal - KeyBanc Capital Markets Inc., Research Division: I guess first question is, so we can kind of get an idea as we look to model out. In the past, what's the difference been between your internal projections and how you provided guidance to the street? Ted W. Owen: As I indicated in my remarks, when we had previously set guidance at the beginning of the year, the range of guidance has -- or our budget has been embedded in that range somewhere. It could have been on the low end of that range, it could have been on the high end of that range or perhaps in the middle of that range, but it's always been within the range somewhere. And so if you think about it, what we're really doing is saying, we just aren't smart enough to know what the right range around that is. We can tell you what the budget is, what our expectation is, what our compensation systems are tied to. So it is the $842 million of revenue and the $2 of earnings that our entire management team is committed to. Tahira Afzal - KeyBanc Capital Markets Inc., Research Division: Got it. And in the past, Ted, when you have actually used your internal projections to set the range, it's like plus or minus $0.50 [ph] I mean, in the past, how spread out has the range been versus say your internal projection? Ted W. Owen: Well at the end of the day, Tahira, it didn't matter much because it wasn't very good. Philip J. Hawk: It wasn't wide enough. Ted W. Owen: It wasn't wide enough because we kept adjusting it. So and that's why we're trying to get out of that business. We don't know -- we're not smart enough to know what the right range is. We can always only tell you -- until we can demonstrate that we can tell you, we're just simply going to tell you what our budget is and how we're doing relative to achieving it. Tahira Afzal - KeyBanc Capital Markets Inc., Research Division: Fair enough. I guess Quest has so much potential in it and we've seen it in the past. Ted, can you talk about the budget that you just -- in terms of the numbers you just provided the 20% growth, how do you sort of take [ph] an approach to that, given in the past you've seen delays and all? Can you talk about where the -- what type of cushion in a sense you've buried and delays of projects, perhaps you saw 30% growth and you've taken 20% or have you just taken it as you see it today? Ted W. Owen: Well again, if you think about Quest for the year, Quest growth rate was 15% over 2013 from a total growth standpoint, all of that being organic growth. And so it's just a little bit lumpy because of the size of the denominator, and because there is a lot of advanced work associated with an individual ILI project. So again, just taking the long view and not focused on a quarter, Quest outlook is terrific. It grew 15% in 2014. It has -- Its compound annual growth rate is 30%. Our internal -- I will tell you our Quest colleagues have much higher aspirations than the 20% growth rates that I discussed, their aspirations are much higher than that. This is just it's a terrific organization, with terrific outlook, great market opportunities from a standpoint of being in a -- again, there's new fresh markets that are relatively untapped and just a very exciting technology. So whether it's in a quarter or not, I can't tell you because projects do move. But at the end of the day Quest will be there and be there in spades. Philip J. Hawk: Just to -- kind of adding a couple of comments to that. I completely agree, the level of enthusiasm we have about the potential for Quest has never been higher. And that will certainly be echoed by our leaders of that kind of business group. That's a multibillion-dollar business and they are on the leading edge of market, and they're on the leading edge of many very, very interesting technologies, which are just fundamental to kind of better insight about pipeline mechanical integrity. The next-generation tools bring in a capability that again, just does not exist in the market today. So it's been a little bit lumpy. Their 15% growth, while it sounds okay in total, it was very disappointing relative to our own internal expectations and what they thought was possible. And again, it wasn't that it's lost, it's just we were overly optimistic about the ability that the way the market would develop and our ability to kind of execute projects with some of the complexities involved with, particularly as Ted mentioned, some of the never been pigged before lines that again, Quest is well suited to address. So it's lumpy, we're learning as we go, but boy, the opportunity is really exciting. Tahira Afzal - KeyBanc Capital Markets Inc., Research Division: I agree on the opportunity there, there's a lot happening there. Last question I had was a bit tricky. If I look at the refinery space. Clearly, as you've mentioned before in the past, there's lot of opportunities for you to gain market share and grow. I guess in the near term, the business is going through some changes and we are seeing the space travel a bit on the macro side. We have several other companies end markets, which we've seen regular long-term trends, near term, it's a bit sluggish. And we have seen public sector companies really consolidate create cost synergies and those will be received well by investors. So could you comment a bit on perhaps, the trends you see in your industry. Could you see some consolidation between some of the larger companies and peers that you have. And perhaps, that leading to some synergies in the near term. Ted W. Owen: Yes, I guess, just my only comment on that, Tahira, would be that consolidations in the service business is really hard because it's inherently a local business, local technicians serving local customers. Our own strategy, as you well know, is one by the way we don't expect to change markedly, is that there's plenty of market opportunity to expand new services to staying [ph] customers and kind of new geographies with our services without worrying too much about consolidating or rolling up a space. So our strategy has certainly not been role up a space from a consolidation standpoint and really don't expect that to change. Philip J. Hawk: I think as we look at our business, the industry has consolidated, the larger companies like Team have gotten bigger over the last 15 years, that's not a new trend at all. And I think we are looking carefully at opportunities where we can provide from a beneficial to the customer standpoint, more integrated services or support where appropriate, it's not always appropriate. So again, some of our more integrated services, Quest is a good example of that, but integrated turnaround services those are again, examples where we're trying to again, tailor or coordinate our services in a way that's most valuable to our customers. That can involve some acquisitions for new capabilities, but I think I will reiterate what Ted said, just blanket rollouts because -- to get scale to me is a false economy, and hasn't really proved to be, I don't think that's successful in the service business.

[Operator Instructions] Your next question will come from the line of Tristan Richardson from D. A. Davidson. Tristan Richardson - D.A. Davidson & Co., Research Division: Just a quick question on Mechanical Services. Ted, I'm curious if you can split for us -- you saw some nice margin improvement there, and I'm curious how much of that was the operational improvements that you guys talked about versus project mix? And as a follow-up to that, beyond normal seasonality, is this sort of a normal margin that you think is achievable in a seasonally strong quarter? Ted W. Owen: Well, I think we can do much better than what we did, we've done it before. I will tell you what I think is -- I think the margin improvement that you're seeing is kind of beginning of kind of more systemic improvements within the Mechanical Services Group. As I indicated, very quietly over the last year, Pete Wallace, who as you know is our business group president, has been making a considerable amount of changes within -- to freshen Mechanical Services. We talked about leadership changes within that group, new leaders in several locations within the Mechanical Services Group. Some of which had been pretty stagnant and we've almost gotten used to underperforming regions, thinking that, well gee, it's just a bad market. No it wasn't a bad market, we've refreshed leadership in some of those places and we're starting to see the difference. Enhancement of kind of some quality initiatives to really focus on the execution of jobs and improve our overall execution. Again, it's not that it was way out of whack, it's just that there is a kind of a new swagger in the step of Mechanical Services, the entire leadership group and it's starting to pay off, we're starting to now see the results of that. Philip J. Hawk: The 12% operating margin for the quarter was -- it's still a couple of hundred basis points below where we were in several years ago. So they're still upside -- again it's just earning it with good execution. Tristan Richardson - D.A. Davidson & Co., Research Division: Sure. I just thought it was notable because there was no growth in the quarter and you still saw decent margin. Ted W. Owen: Absolutely. We thought it was notable too. Philip J. Hawk: Yes, we're not spilling it as much. Tristan Richardson - D.A. Davidson & Co., Research Division: Great. And then I guess my follow-up is could you talk a little bit about, in terms of -- in the near term, you talked about in line projects. And historically, pipeline's been sort of that high single digits, maybe 10%. I mean is '15 -- do you see it being a bigger piece of the overall pie and do you have a feel for -- I mean is pipeline work going to be 20% of your business in the near term or I mean how should we be thinking about that? Ted W. Owen: I don't think so, Tristan. I think it's going to continue to be -- we expect growth in all those sectors that we serve and so we're going to start with a pipeline being 10% of our served market. I think there's a significant, as you point out, significant opportunities for us in the pipeline space, but there's also significant opportunities in the petrochemical space, in the refining space and in other markets. So I think while pipeline will probably grow faster than refining perhaps. Will it be 20%? Not in the next couple of years anyway. Tristan Richardson - D.A. Davidson & Co., Research Division: Sure, okay. And then the last one, could you give us a sense, over the course of '15 and '16, the total in terms of ERP costs and sort of how you see it laying out in terms of calendar. Ted W. Owen: Yes most of the cost will be in fiscal 2015. I think we had earlier said that we expect the total capital cost of the project to be on the order of magnitude of $10 million to $12 million. If -- those who know anything about ERP projects, know that, that can be plus or minus -- well probably not the minus, plus 20% or so. The training cost that I indicated, I don't have a good sense of what those are, we're just getting started with that. We will be training an awful lot of people within Team. We've identified about 80 subject matter experts, if you will, or set of -- either combination subject matter experts and what we refer to as superusers that will be undergoing extensive amount of training on the system over the course of the next year. I think that's probably going to be $1 million to $2 million of training cost that we will call out through 2015. And by the beginning -- our objective is beginning of fiscal '16 all of the United States will have been implemented on the new system, basically the beginning of fiscal '16, probably Canada as well, although that might come a little later, and then in '16 Europe and the rest of the world and perhaps, if we didn't get Canada, at the same time, so probably 80% of the effort will be in fiscal '15 and another 20% in fiscal '16. Tristan Richardson - D.A. Davidson & Co., Research Division: That's helpful. So it means it sounds like maybe a couple of million dollars incremental in SG&A for the first year or so? Ted W. Owen: Yes, I think that would be a reasonable expectation. And again, that's not part -- our $2 plan does not contemplate that number.

Your next question will come from the line of Adam Thalhimer from BB&T Capital Markets. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Did you guys buy back any stock since the end of May? Ted W. Owen: We have not. As you know, we increased the authorization in June to a total of $50 million, which includes the $13 million that we expended in the second quarter. There hasn't been an occasion to pull the trigger on that yet. Adam R. Thalhimer - BB&T Capital Markets, Research Division: Got it. And then, in terms of the broader new construction cycle, and you said, you thought you'd be in a throws of it now, but now it's been delayed about a year, why has it been delayed, is it permitting problem or they're big investments and customers are just going a little slower just because... Ted W. Owen: No, I think in my own view, and I'm not an expert on this, my own view is that facility owners are simply being more rational about timing the projects, that first of all, it's not a race on the part of the facility owners as it felt like it was back in 2005, '06 time in Canadian oil sands. This is a long-term advantage in North American energy low-cost environment. And so I think the facility owners are just being far more rational in the timing of projects, understanding that whether your facility gets on stream in '16 or '17, this is a 30-year advantage and not a 2-year advantage. That's one thing. I think clearly the other thing could be just some demand issues, short-term demand issues, would be my sense of it. Philip J. Hawk: Yes, I think that's right. We don't really know for sure but I think just complex projects take longer than you think. And it's a highly regulated environment our customers operate in and they're dealing it -- so back to permitting. I'm not aware of like the XL pipeline, Keystone when we're we -- where they're prevented from doing things but they have a lot of boxes to check and approvals to get, and I think it just takes longer than we all expected.

And we do have a question, a follow-up question from the line of Arnie Ursaner from CJS Securities. Arnold Ursaner - CJS Securities, Inc.: First to go back on the whole idea of guidance, you might remind people, Phil and Ted, that you in the past had suspended the guidance process back when you had completed Cooper Heat. You also might remind people that when you do give guidance in I think the 12 years we've covered you, you've only changed your guidance one time after Q1. So again, I'll leave the floor to you if you choose to comment on that. Ted W. Owen: Yes. I think what I would simply say is that I think that we've prided ourselves for a very long time of being pretty good about issuing guidance. And to your point, we didn't have to move it very often. Clearly we have, in the course of the last couple of years, have had to lower expectations reasonably often on a quarterly basis. And we expect to get good at it again, but we're just not -- we don't feel that we are right now. Arnold Ursaner - CJS Securities, Inc.: Okay. And in your prepared remarks I think you talked about revenue growth leading to 20% leverage in operating income. And if I recall in the past, it used to be more like a 30% incremental margin. Again, if you care to comment on that. Ted W. Owen: On a yearly basis, it's never been a 30% operating leverage. On a sequential basis, it could be because of the seasonality of the business between -- it could be up and down 25% to 30% a quarter on a sequential basis. Philip J. Hawk: I agree with what you said. I think the other kind of comment is that we planned for a 20%. And frankly, off a high performance, 20% incremental leverage would be outstanding kind of performance and execution. What I -- we would both observe is that we have budgeted -- our budget is kind off of this year, is a 20% operating leverage on our growth, but we look back at $125 million of revenue growth that we didn't put any profit to the line on before, to me all of that is also great opportunity for us. The implied EBIT margin for our budget is about 8%, which is about 1 point up from where we are this year, but frankly 1 point below where we -- 1 point or 2 below where we expect to be and aspire to be kind of on a steady stair -- we haven't been historically in the past. So again back to, I don't think -- that's why we think it's a reasonable target for the year, that it's not where we've never been before.

Ladies and gentlemen, you have no more questions in queue I'd like turn the call back over to Mr. Phil Hawk for closing remarks. Philip J. Hawk: Thank you, Tahetia. And on behalf of both Ted and me, we want to thank all of you for your participation in this call and your continuing interest in Team. We look forward to updating you on our progress during our first quarter conference call which will be around October 1. In the meantime, everyone, have a good day.

Ladies and gentlemen, that would conclude today's conference. Thank you for your participation. You may now disconnect. Have a great day. .