Ted W. Owen – President and CEO Greg L. Boane - SVP, CFO, and Treasurer Philip J. Hawk - Executive Chairman

Arnold Ursaner - CJS Securities Unidentified Analyst - Stephens Inc Adam Thalhimer - BB&T Capital Markets Tahira Afzal – KeyBanc Capital Markets Edward Marshall – Sidoti & Company

Good day, ladies and gentlemen, and welcome to the Second Quarter Fiscal Year 2015 Team Incorporated Earnings Conference Call. My name is Katina and I’ll be your coordinator for today. At this time all participants are in listen-only mode. Later we will facilitate a question-and-answer session. [Operator Instructions]. As a reminder this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call Mr. Ted Owen, President and CEO. Please proceed. Ted W. Owen: Thank you, Katina and good morning everyone. It’s my pleasure to welcome you to the Team, Inc. web conference call to discuss recent company performance. My name is Ted Owen and I am the President and CEO of Team and joining me today are Greg Boane, our new Senior Vice President and Chief Financial Officer and Phil Hawk who as you all know was our CEO for the last 16 years and has now assumed the position of Executive Chairman. The purpose of today’s conference call is to discuss our recently released financial results for our second quarter of fiscal 2015 that ended on November 30 of 2014. As with past calls our primary objective is to provide investors and analysts with an enhanced understanding of our company’s performance and prospects. This discussion is intended to supplement our quarterly earnings releases and our SEC filings. Greg will be begin with a review of our financial results and then I will follow with a few remarks and observations about our performance and outlook. Before opening the call for questions I will then ask Phil to make a few comments about his perspective on our performance and outlook. So Greg let me first welcome you officially to Team. We are delighted to have you join us as our new Chief Financial Officer. Greg L. Boane: Thanks Ted, good morning. First of all I am happy to be here and I look forward to working with the Team organization. I’ll open with our standard legal guidance. Any forward-looking information discussed 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. 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 I’ll focus on the results for the current quarter. Second quarter 2015 was a record quarter for Team. All three business segments posted both record revenues in the current quarter and double-digit growth versus last year’s quarter. We reported a 33% increase in adjusted earnings to $17 million or $0.80 per diluted share compared to $13 million or $0.62 per diluted share for the prior year quarter. Revenues increased 20% to $241 million for the current quarter compared to $200 million for the prior year quarter. There were no non routine items in the current quarter. Adjusted earnings in the prior year quarter excludes $1.4 million net of tax or $0.06 per diluted share of non routine revaluation gain recognized in the prior year quarter. Adjusted earnings before interest and taxes or adjusted EBIT increased 32% to $29 million for the current quarter compared to $22 million in last year’s quarter. Adjusted EBIT margin improved by a full percentage point to 11.9% for the current quarter versus last year’s quarter and operating leverage was 17% in the current quarter. Operating leverage represents the change in adjusted EBIT for the period divided by the change in revenue. Our focus on service execution and cost control initiatives has made a noticeable performance improvement thus far in fiscal year 2015. Adjusted EBITDA increased 26% to $36 million for the current quarter compared to $28 million for last year’s quarter. Trailing 12 month adjusted EBITDA was $88 million. The effective tax rate for both the current quarter and year-to-date was consistent at 36%. Weighted average diluted shares outstanding for the current quarter were 21.8 million shares up from 21.3 million shares for the first quarter of fiscal year 2015. The sequential share increase relates to the revised estimated number of shares to be issued to acquire the remaining 5% non controlling interest of Quest. The actual number of shares issued will be determined after the two year performance measurement period ends in May 2015. We have included the current estimate of 757,000 shares and the diluted shares outstanding for both the current quarter and year-to-date. I’ll finish with some balance sheet information. At quarter-end total debt was $85 million, up from $74 million at the end of May 2014. The increase relates to borrowings to fund our increased accounts receivable related to the overall growth in revenues and operating levels. At quarter end availability under our existing credit facility was $52 million and our ending cash balance was $41 million. Net debt was $44 million and net debt to trailing 12 month EBITDA was 0.50 to 1. Year-to-date CAPEX was $11 million including $4 million related to the new ERP system implementation. That completes the financial review, I’ll now turn it over to Ted. Ted W. Owen: Thanks Greg. First let me say that I couldn’t be prouder of our organization's performance in the second quarter and indeed for all of the first half of the year. As Greg mentioned we achieved record revenues of $241 million and earnings of $0.80 per share for the quarter and our first half performance of $428 million in revenue and $1.12 of adjusted earnings per share is also a record for six months. But what is exciting is not just the absolute performance but that the performance is broad based. All three business units contributed significantly to our second quarter and year-to-date success. We had double-digit growth in all business units in both the quarter and the year-to-date periods. Our EBIT margin for the quarter at 11.9% was the second highest in the history of Team. And you have to go all the way back to the fourth quarter of fiscal 2012 to find a higher EBIT margin. And as Greg reported, we achieved operating leverage of over 17% for both the quarter and for the year-to-date periods. That reflects outstanding execution during the quarter by all our business groups. Now let's look in a little more depth at each of the business groups. As you will recall we are organized into three businesses Inspection and Heat Treating which accounts for a little more than half of our revenues, Mechanical Services which is about 35% of revenues, and Quest Integrity Group which is about 10% of our revenues. The Inspection and Heat Treating Group or IHT continued its growth trend by increasing revenues in the second quarter by $25 million, a 23% increase over the prior year second quarter. We achieved revenue growth across every IHT region with 7 of the 11 regions experiencing double-digit growth. And more impressively all IHT regions reported double-digit operating income percentages. Some of the contributing factors to this broad based growth are pipeline projects in the Northeast region and Canada, new construction and capital projects in the Southeast and Gulf, large heat treating projects in the West and Canada, as well as broad based turnaround and outage services across all regions. We are excited about the outlook for IHT for the second half of the year. We have significant new and continuing customer projects scheduled across most of our regions. We are already benefiting from the development and launch of our wireless mobile smart rig and our heat treating services, and collaborative efforts are underway with Quest to broaden our high energy piping, inspection and assessment capabilities which we expect to expand our addressable markets and continue to support our strong growth in advanced inspection services. We expect continued positive momentum in IHT. Our Mechanical Service Group had a 19% increase in revenues in the quarter, up $13.2 million versus the prior year quarter. The growth was also broad based across all regions and service offerings with five of eight Mechanical Service regions growing at double-digit rates and five of eight regions having double-digit operating income percentages. Helping to fuel that growth were turnaround activities and various service line expansion initiatives. Turnaround activities were strong across most of our regions throughout the quarter. Other contributing factors are service line expansion initiatives in valve repair, field welding, and project services. We are building both our personnel and fixed facilities to support our valve repair service offerings in several regions along with expanded capabilities in Europe associated with our recent acquisition in the UK. Specialty field Orbital Welding Services were enhanced and increased along the Gulf Coast to support the growing demand. Project Services which is a centralized business unit within Mechanical Services was established to coordinate and leverage Team's offering for larger turnarounds, shutdowns in projects. Those are just a few of the business building initiatives that are underway with the Mechanical Service business unit. Looking ahead to the third quarter and beyond, we also have a number of exciting turnarounds and expansion projects scheduled across the entire network. We believe that our spring turnaround activity, our participation in new capital projects, as well as new run and maintain customers will help continue our growth in Mechanical Services throughout remainder of the year. Now let’s talk about Quest. Quest Integrity generated $6.3 million in operating income on $22.5 million in revenue in the second quarter representing 13% and 16% year-over-year growth in revenue and operating income respectively. The 28% operating profit for Quest in the quarter reflects the power of incremental revenues that we’ve described frequently to investors and puts us on track to achieving our annual target of 20% operating income. Our pipeline sector activity including both Inspection and Engineering Assessment Services drove the quarter’s strong performance domestically and abroad. Looking at the full first half of our fiscal year, we see the impact of increased utilization on Quest Integrity’s capacity and infrastructure investments that we have made during fiscal 2014. The first half’s revenue performance of $37 million represents a 13% increase over the prior year and at 7.1 million in operating income, 48% growth over the prior year. We currently see healthy momentum in virtually all business sectors as we move into the second half. Coupled with the commercial implications of several of Quest Integrity’s new NDT tool initiatives which we are beginning to introduce to the market. With applications in the pipeline, process, and power markets we remained comfortable with Quest Integrity’s fiscal 2015 budget expectations of $80 million in revenue and $16 million in operating profit that we have disclosed previously to you. To summarize, we are obviously off to a very good start for the first half of our year and we expect positive momentum into the second half of the year. Having said that, I caution our analyst not to simply extrapolate the first half of the year to the second half. Remember first that the third quarter is always very challenging for us. While we don’t expect the severe weather events this year that we had last year, we still have to deal with the natural seasonal slowness and the resetting of significant benefit cost on January 1st of each year. With that in mind and based on our positive view of the spring turnaround season, we believe though that we are on track to achieving our $840 million revenue target and $2 in EPS target for fiscal 2015. We can’t conclude our prepared remarks however without addressing the question on everyone’s mind. What is the impact of declining oil prices on our business? Believe me we think about this a lot and have our ears firmly to the ground and listening for signals from our customers of any changes in their maintenance or inspection behaviors. At this point in time we are seeing no indication that lower commodity prices will significantly impact our business. If you think about that, this perspective on minimal impact makes sense. 90% of our revenues are associated with the installed base of mostly midstream and downstream energy facilities, generally far removed from upstream production activities. Demand for inspection and maintenance is a function of the population of operating facilities. As we often say, it’s the population of high pressure, high temperature piping systems. If plants are running, our services are required for the safe and efficient operation of those facilities. Even with respect to the 10% of our business that’s associated with new construction activities, we don’t expect much impact. Remember that the industrial expansion renaissance on the Gulf Coast is driven by the abundance of low cost shale gas and not directly related to oil commodity prices. Having said that, lower commodity prices should make us all cautious about the near to mid term outlook even though we have seen no indications of changing behavior from our customers at this time. So with that let me now ask Phil to provide his perspective on our performance and outlook. Philip J. Hawk: Thanks Ted and good morning everyone. I would like to share a few brief additional perspectives on our business. Of course I am also delighted with our strong record results that Team achieved in both the past quarter and year-to-date periods. Several aspects of this performance are noteworthy to me. I am impressed with the breadth of business growth that Team achieved. As Ted indicated all business units and virtually all regions achieved double-digit growth rates. This breadth of growth was achieved despite the tailwinds of major projects and turnaround activities which would tend to concentrate growth in a few areas or regions. I am also impressed with the nice margin improvements and nice improvement in job margins, reflecting very good job execution and a significant management attention on this critical profit lever. And I am impressed with the significant continued emphasis and focus on initiatives that will be the foundations for future growth and business development. Ted mentioned several expansions of Team’s service capabilities that have taken place recently. At the same time Team continues its investment in and commitment to world class quality and safety. In the past year we have significantly expanded and refocused our quality initiatives. We believe that service excellence has been and will continue to be a significant competitive advantage for our company. Looking ahead to the remainder of the year, as Ted indicated there are many reasons to be optimistic but with a measure of caution. I share that optimism and as a final comment let me remind everyone that Team’s business fundamentals continue to be extremely attractive. We serve a very large market with a very large number of customers. Our Inspection and Maintenance Services are necessary to maintain the mechanical integrity of the operating plants and facilities in the segments we serve. Demand for our services does not track the business cycle or even the profitability of our customers. Procurement trends continue to favor the larger multi-service line, multi-location service providers such as Team. And despite Team’s approximate 20 full growth over the past 15 years, overall market share today is still considerably less than 20%. In other words Team’s success does not depend on growing markets or market tailwinds. The key to Team’s continued success and business growth is to remain an outstanding service company in all respects. And I have no doubt that we will do so. Ted, let me now turn it back to you. Ted W. Owen: Thank you Phil, and with that let’s now open up the line for questions from our analysts and investors.

Thank you. [Operator Instructions]. And your first question comes from the line of Arnie Ursaner representing CJS Securities. Please proceed.

Hi, good morning and it’s rare to say congratulations on a great quarter but you guys did it. Within your budget estimate what percent of that is tied to project activity at this point. Ted W. Owen: Thank you. Project activity in total Arnie is probably about half of our total revenues. Within Mechanical Services it would be slightly less than half but our IHT Services virtually all of Heat Treating revenues are associated with projects and about half of our Inspection Services are associated with projects.

And in your customer dialog you were not seeing timing shift questions of being raised about ongoing project activity or even a slowdown in this activity? Ted W. Owen: We’re really not Arnie and believe me we’ve spent a lot of time talking about this and inquiring of our customers and probing with our regional Vice Presidents. We had our quarterly meeting with all of our Vice Presidents just a couple of weeks ago and that as you might expect was the main topic of conversation at that meeting. We are just not seeing any shift, any significant shift as clearly there are some anecdotal examples of shifts and changes. But, from a broad base standpoint we are not seeing any impact at this moment in time.

Incredible thanks. The final question I have is on Quest, you are targeting roughly 20% growth but we are little below that at this point. And you mentioned some new programs or other areas for growth but maybe expand a little bit on why you are comfortable with the 20% growth target for the year? Ted W. Owen: Well one of those anecdotal areas where we have seen a bit of deferral is in the process side of Quest on the inline inspection of some heater projects that indeed were deferred in the first half. Not a major impact on our business but we are seeing those now being teed up for the second half of the year. So just based on the level of kind of projects that we expect for the second half of the year versus the first half of the year, the deferral of some heater projects from the first half that we believe are going to in fact occur in the second half of the year. We just feel pretty comfortable that we will be where we said we would be by the end of the fiscal year.

Fantastic, we’ll see you next week at the conference. Ted W. Owen: Alright, look forward to it Arnie.

Your next question comes from the line of Matt Duncan representing Stephens. Please proceed.

Hey, good morning guys. This is Will on the call for Matt. Ted W. Owen: Okay, hi Will, how are you doing?

Doing well, thanks. I am wondering based on your past experience how long would it usually take into a down cycle for oil before you might start seeing some impact on your business. Ted W. Owen: You know in truth I am not sure we have a lot of past experience that’s all that relevant. We clearly had a significant experience in the days of the deep recession but as we all know there is a lot of other things that were at play there that are not in play right now. I think our caution is and this is our caution within our own organization that while we are not seeing any impact on projects at this moment in time. It will not surprise us to start seeing some impact and maybe that six months removed or nine months removed or certainly as we get and I think would depend upon how long this lower commodity price environment last, right. And so I don’t think -- we don’t have a good historical database but certainly again as we look into the next fiscal year we are cautious. Philip J. Hawk: And just maybe add a comment to that, well this is Phil. If you go back over the last 15 years we have experienced a very wide range of oil prices, energy prices and some rapid changes up and down. We don’t -- I think that’s a good historical base that supports the premises that there really is a decoupling of downstream activities. It is that we did not see with the exception of the great recession which wasn’t really related to energy prices but was related to a broad industry era, a global contingent, a financial system contingent really more than energy prices. So I think the fundamentals are pretty sound that it gets back to the operations of facilities that we serve. I think Ted’s caution though is right on, is that when you have major shifts and changes does it scare people, does it disrupt, I am going to say what would be prudent normal practices in the near term and I think that’s where our caution is.

It is very helpful, appreciate it. And next one from me on the pricing front, if you were starting to see any price, has this drop put a damper on any of that wage inflation you are starting to see, can you just comment on -- Ted W. Owen: I think we have always said that we had expected significant wage price or wage cost pressures over the next year because of the tightening in labor market. I think that dynamic may change a little bit now as we look forward because clearly on the upstream side there are several announced layoffs. The tightness in labor from an upstream perspective won’t be as significant as it might have been and that would create we think more availability in the labor market as we look out over the course of the next year. So I would say that we no longer expect the kind of wage cost increases broadly over the next year that we might have expected in our last quarter’s call.

Very helpful and last one for me, I think you guys had a small acquisition that started to contribute to the business. I am wondering how much of that added to sales and any impact on EPS this quarter? Ted W. Owen: Very insignificant Will. That was a very small business that we acquired in the UK. Its annual revenues are about $10 million. It is very, very significant. We are very excited about it as it -- to support and expand our UK presence particularly in machining and valve repair. But from a financial standpoint to the overall enterprise it’s pretty insignificant.

Great, thanks a lot guys. Great quarter. Ted W. Owen: Thank you.

Your next question comes from the line of Adam Thalhimer representing BB&T Capital Markets. Please proceed.

Hey, good morning guys, nice quarter. Ted W. Owen: Good morning Adam.

And Greg welcome to the Team, look forward to working with you. Greg L. Boane: Thank you, same here.

You had some bullish comments about the spring turnaround season Ted, can you compare that for us a little bit to what you experienced in the fall? Ted W. Owen: I’d say at this moment in time we think the spring is going to look a lot like the fall for us. We had some really nice projects in the fall. We had some really nice projects that are lined up in the spring and so we are optimistic. I mean in all of our business units activity levels look to be -- continue to be very strong throughout for the balance of the year. Again in the absence of any dramatic shifts that we haven’t seen yet.

Yes I mean in terms of the shifts in one place you would -- I would think you might start to see it up in Canada, can you maybe talk a little bit specifically about that? Ted W. Owen: That is absolutely true and that will be the first place that we would probably see it because that -- in particularly Western Canada our business is more tied to upstream activities, the upgraded facilities if you will. But what is different now, remember our Canadian business is significantly smaller if you will then it was three years ago. And what is different particularly on the mechanical side is that our business three years ago was largely associated with project activity, so the new upgrade is coming out of the ground three years ago. Today there is a huge shift in that. It is now more a maintenance focus, much more of our Canadian revenues are associated with install base if you will as opposed to new construction activity. So I think we are well not insulated from shifts and patterns. Clearly we are not as dependent upon new construction activities in the oil sands as we might have been three years ago.

Okay and then real quick, a last one for I guess Phil my quest to find one metric that perfectly forecast your business. I mean one thing you had said was hey look, utilization is really high which it is. I think final utilization is as high as it has been since 2007. I mean is that a better predictor of your business than customer profitability slash crack spreads. Philip J. Hawk: Well I think in some respects it might be coincident with that. We just never found any, I guess the major thing that we would have is that there is just broad stability of demand and therefore let's go get it and earn a bigger piece that rather than being able to track growth or declines changes in demand based on really any operating metric. Ted W. Owen: I just -- just to follow up on that and just say though that certainly higher utilization of a facility would suggest more maintenance and inspection activities but remember Adam, that refining is -- while it is very, very significant it is only about 40% of our total revenue. So looking at a utilization factor of a segment that’s 40% of revenues is not necessarily going to give you a good metric of our overall business.

Okay, thanks guys.

The next question comes from the line of Tahira Afzal representing KeyBanc. Please proceed.

Hi, folks. Congrats, it’s a great quarter. Ted W. Owen: Thank you, Tahira.

Ted, if you look at where you are tracking on your internal budget around this time of the year did you expect to be where you are in terms of earnings or whether it’s a moving thought to positive or negative. Ted W. Owen: Well I think there is always moving parts that are positive and negative. But again I will tell you just I mean, we are delighted with where we are. But where we are is where we expected to be. I mean we are on track to achieving our annual targets. Again my caution is don’t extrapolate the first half and just kind of double it and say because we are at $1.12 that means we ought to be at $2.24 because the third quarter is tough as you know. Historically that’s a tough quarter for us. We have basically 13 weeks of cost and 11 weeks of revenue if you think about it that way. So it makes it -– it’s tough to get through the third quarter. But so, the answer is yes, we’re kind of right where we thought we would be.

Got it, okay. And I think thanks for the word of caution around the third quarter. So I will hopefully keep everyone in check. I guess if I look at as you said and I think you rightly framing the future, the visibility of course even if you are not seeing it right now but you are seeing expansion in your valve repair business through market share gains where you are gaining traction. I know on the pipeline integrity side you gained some visibility through your technologies. And with cost coming down let’s say the revenue line does come under pressure in the next fiscal year, do you feel post the structure changes you have made and the better clarity you have on your cost that on the margin side you can at least maintain margins through a greater degree into whatever is ahead? Ted W. Owen: I think and the answer is yes. I think that we can and I think if you look back on our history where we have gone through dips even in the great recession our revenues were down 9% and looking back on it seems like we performed pretty well during that time. So what’s great about our business again is it’s the broad base of it. We have a very broad network, a very broad end markets that we serve. It is not -- we were not just tied to refining or not just tied to turnarounds its very, very broad based. We’ve gotten a little humble in the last couple of years as we should because of as we said many times in 2013 and 2014 we got a little ahead of ourselves. So we haven’t forgotten that. I will tell you that -- so we’re -- even as we are expecting growth we are cautious and I think again more proud of than anything about the quarter and the year-to-date is the execution and the resource balancing and just the focus on quality and execution. And man when we do that, that’s when our -- we’ve kind of happen earnings engine that’s associated with execution and quality. So even if we slow down on growth a little bit that doesn’t make me any less optimistic about how Team is going to perform.

Got it, okay. Thank you very much and congrats. Ted W. Owen: Thanks.

[Operator Instructions]. Your next question comes from the line of Edward Marshall representing Sidoti & Company. Please proceed.

Good morning guys. Ted W. Owen: Good morning Edward, how are you?

Good, how are you? Ted W. Owen: Okay.

So, I wanted to just clarify for just a second because we are talking about higher utilization rates of refineries and I have always have been on the assumption that you would kind of lag refinery utilization and maybe it wouldn’t be necessarily co-incidental which I guess would imply maybe stronger performance on the go forward. Is that appropriate? Ted W. Owen: You know, I don’t think so. I mean, again it is little hard to know. Remember let's just talk about refining for a second in terms of our services that we offer to refiners. We offer both on-stream services when plants are under pressure and running, right, and we offer turnaround services. And there is always lots of discussion internally and our industry does running harder, need more maintenance, or doesn’t -- or wider crack spread mean you need deferral maintenance because you want to keep running. We just don’t see -- we can't see the granularity of any of that. Our customers are sophisticated customers who maintain their plants for safe and efficient operations. We just haven’t been able to see any correlation frankly between levels of utilization, but certainly within a range right. Now if you shutdown a plant and if you are not going to run then that matters a lot.

So, I guess that was my point right, I mean, technically a turnaround suggest that utilization rates would be lower if you are shutting the plant down? Ted W. Owen: I mean only during the turnarounds but turnaround is a normal -- I mean, that is kind of part of the operations of a facility. You have to bring them down periodically for a turnaround.

Sure. Okay, so spreads look okay, utilization rates are high, you have a good outlook for the spring, and I am just kind of curious and I think I know what you will say but why not raise guidance or rather budget targets for the year as we kind of progress. I mean is it a sense of just being conservative, it is not a budget, it is a budget not guidance, how are you looking at kind of the -- Ted W. Owen: Again we have been in that route before and look back to 2013 we high fived ourselves at midway point and raised guidance and then we had to lower it about three times. And so again, the point is when we look where we are internally we think we are on track. We know that the third quarter will be more difficult if you will than the first quarter was if you are kind of doing the natural comparison of first to third versus second and fourth. I think second and fourth quarter looks probably just from an activity standpoint we think it is going to be strong. Now whether that is $0.80 or $0.82 or $0.78 I couldn’t tell you but the point is I think that we believe we are simply on track. $2 by the way is a really good target. I mean, there -- achieving $2 is a -- we will be doing some high fives around our table because we think that is a very strong performance. It is a 30% improvement. So could we do better than that, yes, if everything goes well. But with the caution and the environment that we have and the fact that we are heading into that difficult third quarter that I think would just not be prudent to raise expectations.

So, are you basically saying you are not quite sure exactly what the third quarter is going to look like at this point? Ted W. Owen: Well of course we are not. I mean, we are never quite sure when we begin a quarter what it is going to look like. You know timing of projects matter, timing can shift. We know what the cost structure is going to look like because we have a resetting of benefit cost. We know that the first or there is about a two or three week period in between mid December or the week before Christmas to this week if you will where activity levels are very, very low because plants aren’t working right. So, projects start resuming, in fact we have some turnarounds that are beginning even this week. So, from an activity standpoint into the third quarter we feel pretty good about the third quarter. But again we are just cautious we know that it is tough.

Shifting gears for just a second, looking at maybe the cost side and I guess you have been striving for some time to get price in line with your labor cost. And I know with labor revisions in the industry, I would assume that maybe labor costs are coming down. I think you have kind of alluded to that earlier. In the event that maybe it lags a little bit I am wondering if you have got pricing in place so that you are actually going to see a margin improvement as your cost come down and just kind of walk me through how that might happen? Ted W. Owen: I mean first of all I don’t -- I think it would be not the right way to look at it and think our costs are going to come down. I think what we are saying is we don’t expect them to go up as much as we previously thought that they would. Because this tightness in the labor market won't be quite as severe as we had thought. So, it isn’t that costs are coming down, it is just that they are not escalating as rapidly as we thought they might. From a pricing standpoint, I think we have achieved some success in getting better pricing from our customers, but again we are also now starting to at least anecdotally feel some pressures from customers that -- because the world has changed a little bit that are putting pressure on prices. So, we feel pretty good about where we are from a margin standpoint. We have had margin expansion because of execution. Our guys have just done a great job in just managing the -- all of the levers from a cost standpoint, labor standpoint, utilization, and because of that we have achieved margin expansion already. So, we feel pretty good about where we are there.

Okay, I guess the last one, when I look at, when we talk about margin I guess we kind of address this question now so, you look kind of year-over-year and second quarter to second quarter, there wasn’t much movement at all. And I just want to kind of understand what is going on. I think you were having some changes in the MS division, and it looks like that margin actually stayed relatively flat. I am just kind of curious have we hit that yet or are we seeing that cost improvements yet or --? Ted W. Owen: You are just talking specifically about Mechanical Service Group as opposed to the entire business.

Right. Ted W. Owen: As we have said that there is a process going on within Mechanical Services that we are delighted with. We had some quality issues a year ago that had been addressed. We have made some kind of personnel changes within that group. And I think you are now starting to see in Q2 the benefit of that. 19% overall top line growth is kind of the evidence of that. So, I am -- while our cost are -- our margin expansion on that growth isn’t quite where Pete is going to take it on, I assure you we are off to a good start where we feel pretty good about where we are.

Okay, thanks guys. Philip J. Hawk: I think one, this is Phil, just one more, kind of a little perspective about kind of the margins and all of that, we have a simple business but it is also complex in its diversity and variety. We do about 150,000 jobs a year. So, just kind of getting all of the timing and balance of all of that activities and kind of branch by branch with where our resources are it is continuing journey. And sometimes you are little out of balance and sometimes you are little ahead of it and benefitting from that. And so I think I wouldn’t get too excited about kind of differences, kind of in short time frames. But I think the point Ted made, I completely agree with it, it is just the amount of focus the organization has on those fundamentals and kind of keeping -- while we are seeing the benefit of that overall and we expect to continue to see that.

Okay, thanks guys. Ted W. Owen: You bet.

With no further questions at this time I would now like to turn the call back over to Mr. Ted Owens for any closing remarks. Ted W. Owen: Thank you. I want to end today's call by speaking directly to our more than 4,400 Team colleagues. As we have said many times we are the product of more than 150,000 service opportunities a year as Phil just mentioned. Our success depends upon outstanding service execution by all of our colleagues all of the time. And we have certainly done that in the second quarter. And I want to thank all of you, our technicians, our operation supervisors and managers, our account representatives, our branch managers, our support personnel, and all our Vice Presidents and leadership team that make that happen every day. Let's keep it going in the second half of the year. And thanks to all of our investors and analysts for your participation in this quarters call and for your interest in Team. We look forward to talking again after our third quarter call in early April. Have a good day.

Thank you. Ladies and gentlemen thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.