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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549





FORM 10-K



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended May 31, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from                      to

Commission File
Number 001-08604





TEAM, INC.

(Exact name of registrant
as specified in its charter)



|                                         |  |                                     
|---------------------------------------- |  | ------------------------------------
|TEXAS                                    |  | 74-1765729                          
|(State of incorporation)                 |  | (I.R.S. Employer Identification No.)
|                                         | 
|200 Hermann Drive, Alvin, Texas          |  | 77511                               
|(Address of principal executive offices) |  | (Zip Code)                          

Registrants telephone number, including area code: (281) 331-6154





Securities registered pursuant to Section 12(b) of the Act:



|                             |  |                                          
|---------------------------- |  | -----------------------------------------
|Title of each Class          |  | Name of Each Exchange on which Registered
|Common Stock, $.30 par value |  | The NASDAQ Global Select Market          

Securities registered pursuant to Section 12(g) of the Act: None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ̈    No  x

Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈     No   ̈

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  x    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

(Check
one):            Large accelerated filer   ̈            Accelerated
filer  x            Non-accelerated filer   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ̈    No  x





|                                                                                                                                                                             |  |   |            
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | -----------
|State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant
as of the completion of the most recent second quarter:
|Voting common stock (November 30, 2008)                                                                                                                                      |  | $ | 443,655,396

For purposes for the foregoing calculation only, all directors, executive officers, the Team, Inc.
Salary Deferral Plan and Trust and known 5% or greater beneficial owners have been deemed affiliates. The 5% beneficial owners have been determined based on summarized December 31, 2008 Section 13 filings.

Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date:

As of July 31, 2009
                        Common Stock, par value $.30 per share
                        18,853,037 shares

Documents Incorporated by Reference

Portions of our definitive proxy statement for the 2009 Annual
Meeting of Stockholders are incorporated by reference into Part III of this report. These will be filed no later than September 28, 2009.









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FORM 10-K INDEX



|           |  |                                                                                                              |  |   
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|PART I     |  | 1                                                                                                           
|           |  |                                                                                                             
|ITEM 1.    |  | BUSINESS                                                                                                     |  | 1 
|           |  | General Information                                                                                          |  | 1 
|           |  | Narrative Description of Business                                                                            |  | 1 
|           |  | Description of Segment and Divisions                                                                         |  | 3 
|           |  | Acquisitions and Dispositions                                                                                |  | 3 
|           |  | Marketing and Customers                                                                                      |  | 4 
|           |  | Seasonality                                                                                                  |  | 4 
|           |  | Employees                                                                                                    |  | 4 
|           |  | Regulation                                                                                                   |  | 4 
|           |  | Compliance Matters                                                                                           |  | 5 
|           |  | Intellectual Property                                                                                        |  | 5 
|           |  | Competition                                                                                                  |  | 5 
|           |  | Available Information                                                                                        |  | 6 
|ITEM 1A.   |  | RISK FACTORS                                                                                                 |  | 6 
|ITEM 1B.   |  | UNRESOLVED STAFF COMMENTS                                                                                    |  | 9 
|ITEM 2.    |  | PROPERTIES                                                                                                   |  | 9 
|ITEM 3.    |  | LEGAL PROCEEDINGS                                                                                            |  | 10
|ITEM 4.    |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                          |  | 10
|           | 
|PART II    |  | 11                                                                                                          
|           |  |                                                                                                             
|ITEM 5.    |  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES |  | 11
|ITEM 6.    |  | SELECTED FINANCIAL DATA                                                                                      |  | 14
|ITEM 7.    |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |  | 15
|ITEM 7A.   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                   |  | 24
|ITEM 8.    |  | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                     |  | 25
|ITEM 9.    |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                         |  | 25
|ITEM 9A.   |  | CONTROLS AND PROCEDURES                                                                                      |  | 25
|ITEM 9B.   |  | OTHER INFORMATION                                                                                            |  | 26
|           |  | Managements Annual Report on Internal Control Over Financial Reporting                                      |  | 27
|           | 
|PART III   |  | 28                                                                                                          
|           |  |                                                                                                             
|ITEM 10.   |  | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                       |  | 28
|ITEM 11.   |  | EXECUTIVE COMPENSATION                                                                                       |  | 28
|ITEM 12.   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS               |  | 28
|ITEM 13.   |  | CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE                                        |  | 28
|ITEM 14.   |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                       |  | 28
|           | 
|PART IV    |  | 29                                                                                                          
|           |  |                                                                                                             
|ITEM 15.   |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                                      |  | 29
|           | 
|SIGNATURES |  | 58                                                                                                          



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Certain items required in Part III of this Form 10-K can be found in our 2009 Proxy Statement and are incorporated
herein by reference. A copy of the 2009 Proxy Statement will be provided, without charge, to any person who receives a copy of this Form 10-K and submits a written request to Team, Inc., Attn: Corporate Secretary, 200 Hermann Drive, Alvin, Texas,
77511.

PART I



|ITEM 1. | BUSINESS
|------- | --------

General Information

Unless otherwise indicated, the terms Team, Inc.,
Team, the Company, we, our and us are used in this report to refer to Team, Inc., to one or more of our consolidated subsidiaries or to all of them taken as a whole. We are incorporated in
the State of Texas and our company website can be found at www.teamindustrialservices.com. Our corporate headquarters is located at 200 Hermann Drive, Alvin, Texas, 77511 and our telephone number is (281) 331-6154. Our stock is traded on
the NASDAQ Global Select Market (NASDAQ) under the symbol TISI and our fiscal year ends on May 31 of each calendar year.

We are a leading provider of specialty maintenance and construction services required in maintaining high temperature and high pressure piping systems and vessels that are utilized extensively in heavy industries. We
offer an array of complementary services including:



| |  |  | leak repair,
| | - |  | ------------



| |  |  | hot tapping,
| | - |  | ------------



| |  |  | fugitive emissions control,
| | - |  | ---------------------------



| |  |  | field machining,
| | - |  | ----------------



| |  |  | technical bolting,
| | - |  | ------------------



| |  |  | field valve repair,
| | - |  | -------------------



| |  |  | non-destructive testing, and
| | - |  | ----------------------------



| |  |  | field heat treating.
| | - |  | --------------------

We offer these
services in over 100 locations throughout the United States and international markets including Aruba, Belgium, Canada, Singapore, The Netherlands, Trinidad and Venezuela.

Narrative Description of Business

Our industrial services are available
24 hours a day, 7 days a week, 365 days a year. We market our services to companies in a diverse array of heavy industries which include the petrochemical, refining, power, pipeline, pulp and paper, steel industries, municipalities,
shipbuilding, original equipment manufacturers (OEMs), distributors and end users, and some of the worlds largest engineering and construction firms. Our services are also provided across a broad geographic reach. For our fiscal
year ended May 31, 2009, our revenues by geographic region originated in the United States (70%), Canada (23%), Europe (5%) and other foreign locations (2%). While we continue to develop different types of services and products which meet
the needs of our customers, the following discussion describes the primary services we currently offer:

Leak Repair
Services.    Our leak repair services consist of on-stream repairs of leaks in pipes, valves, flanges and other parts of piping systems and related equipment. Our on-stream repairs utilize both standard and



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custom-designed clamps and enclosures for piping systems. We use specially developed techniques, sealants and equipment for repairs. Many of our repairs are
furnished as interim measures which allow plant systems to continue operating until more permanent repairs can be made during turnarounds. Our leak repair services involve inspection of the leak by our field crew who record pertinent information
about the faulty part of the system and transmit the information to our engineering department for determination of appropriate repair techniques. Repair materials such as clamps and enclosures are custom designed and manufactured at our ISO-9001
certified manufacturing centers and delivered to the job site. We maintain an inventory of raw materials and semi-finished clamps and enclosures to reduce the time required to manufacture the finished product.

Hot Tapping Services.    Our hot tapping services consist of providing a full range of hot tapping,
Line-stop® and Freeze-stop® services with capabilities for up to 48 diameter pipelines. Hot tapping services involve utilizing special equipment to cut a hole in a pressurized pipeline so
that a new branch pipe can be connected onto the existing pipeline without interrupting operations. Line-stop® services
permit the line to be depressurized downstream so that maintenance work can be performed on the piping system. We typically perform these services by mechanically cutting into the pipeline similar to a hot tap and installing a special plugging
device to stop the process flow. The Hi-stop® is a proprietary and patented procedure that allows stopping of the process
flow in extreme pressures and temperatures. In some cases, we may use a line freezing procedure by injecting liquid nitrogen into installed special external chambers around the pipe to stop the process flow.

Emissions Control Services.    We provide fugitive volatile organic chemical (VOC) emission leak detection
services that include identification, monitoring, data management and reporting primarily for the chemical, refining and natural gas processing industries. These services are designed to monitor and record VOC emissions from specific process
equipment and piping components as required by environmental regulations and customer requests, typically assisting the customer in enhancing an ongoing maintenance program and/or complying with present and/or future environmental regulations. We
provide specialty trained technicians in the use of portable organic chemical analyzers and data loggers to measure potential leaks at designated plant components maintained in customer or our proprietary databases. The measured data is used to
prepare standard reports in compliance with U.S. Environmental Protection Agency (EPA) and local regulatory requirements. We also provide enhanced custom-designed reports to customer specifications.

Field Machining Services; Technical Bolting.    We use portable machining equipment to repair or modify
machinery, equipment, vessels and piping systems not easily removed from a permanent location. As opposed to conventional machining processes where the work piece rotates and the cutting tool is fixed, in field machining, the work piece remains
fixed in position and the cutting tool rotates. Other common descriptions for this service are on-site or in-place machining. Field machining services include flange facing, pipe cutting, line boring, journal turning, drilling and milling. We
provide customers technical bolting as a complimentary service to field machining during turnaround or maintenance activities. These services involve the use of hydraulic or pneumatic equipment with industry standard bolt tightening techniques to
achieve reliable and leak-free connections following plant maintenance turnarounds or expansion projects. Additional services include bolt disassembly and hot bolting, which is a process to remove and replace a bolt as the process is operating.

Field Valve Repair Services.    We perform on-site repairs to manual and control valves, pressure and
safety relief valves as well as specialty valve actuator diagnostics and repair. We are certified and authorized to perform testing and repairs to pressure and safety relief valves by The National Board of Boiler and Pressure Vessel Inspectors. This
certification requires specific procedures, testing and documentation to maintain the safe operation of these essential plant valves. We provide special transportable trailers to the plant site which contain specialty machines to manufacture valve
components without removing the valve from the piping system. In addition, we provide preventive maintenance programs for VOC specific valves and valve data management programs.



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Non-destructive Testing Services.    We offer inspection and evaluation
of piping, piping components and equipment to determine the present condition and predict remaining operability. Our inspection services use all the common methods of non-destructive testing, including radiography, ultrasound, magnetic particle and
dye penetrate, and higher end robotic and newly developed advanced technology systems. Many of the visual inspection programs we provide require specialized training to industry and regulatory standards. Inspection services are marketed to our
traditional industrial customer base, and customers outside our traditional customer base such as the aerospace and automotive industries. Inspection services frequently require industry recognized training and certification processes. We maintain
training and certification programs which are designed to meet or exceed industry standards.

Field Heat Treating
Services.    Our field heat treating services include electric resistance and gas-fired combustion, primarily utilized by industrial users to enhance the metallurgical properties of their process piping and equipment.
Electric resistance heating is the transfer of high energy power sources through attached heaters to the plant component to preheat weld joints, to remove contaminates and moisture prior to welding and post-weld heat treatments to relieve metal
thermal stresses induced by the welding process. Specialty heat treating processes are performed using gas fired combustion on large pressure vessels for stress relieving, to bake specialty paint coatings and controlled drying of abrasion and
temperature resistant refractories. Special high frequency heating commonly called induction heating is used to expand metal parts for assembly or disassembly, expansion of large bolting for industrial turbines and stress relieving projects which is
cost prohibitive for electric resistance or gas-fired combustion.

Description of Segment and Divisions

We operate in only one segmentindustrial services. Within the industrial services segment, we are organized as two divisions. Our TMS division
provides the services of leak repair, hot tapping, fugitive emissions control, field machining, technical bolting and field valve repair. Our TCM division provides the services of non-destructive testing and field heat treating. Each division has
goodwill relating to past acquisitions and we assess goodwill for impairment at the lower TMS and TCM divisional level. Both divisions derive their revenues from providing specialized labor intensive industrial services and the market for their
services is principally dictated by the population of process piping systems in industrial plants and facilities. Services provided by both the TMS and TCM divisions are provided through a network of field branch locations in proximity to industrial
plants. The structure of those branch locations is similar, with locations overseen by a branch/regional manager, one or more sales representatives and a cadre of technicians to service the business requirements of our customers. While TMS and TCM
division field locations are generally separate, both divisions are supported by common and often centralized technical and commercial support staffs, quality assurance, training, finance, legal, human resources and health and safety departments.

Acquisitions and Dispositions

On January 9, 2008, we acquired all the stock of Leak Repairs Specam (LRS), a specialty industrial services company. LRS currently provides a range of services similar to those offered by our TMS
division, including on-stream leak sealing, hot tapping, fugitive emissions monitoring, field machining and bolting services. LRS is headquartered near Vlissingen, The Netherlands and has four service locations in The Netherlands and Belgium. The
purchase price of the acquisition was $18.6 million plus working capital adjustments, professional fees, and net of cash acquired. Financing for the acquisition was obtained through our bank syndicate.

On June 1, 2007, we acquired all of the stock of Aitec, Inc. (Aitec) for $33.8 million, plus working capital adjustments, professional
fees, and net of cash acquired. The final purchase price of $34.7 million includes working capital adjustments of $0.1 million and professional fees of $0.8 million. Aitec, is a non-destructive testing and inspection services company headquartered
near Toronto, Ontario with 13 service locations across Canada. We believe the Aitec acquisition made Team the second-largest inspection service provider in Canada. Financing for the acquisition was obtained through our bank syndicate.



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Marketing and Customers

Our industrial services are marketed principally by personnel based at our service locations. We believe that these service locations are situated to
facilitate timely responses to customer needs with on-call expertise, which is an important feature of selling and providing our services. Our array of integrated services also causes us to benefit from the procurement trends of many of our
customers who are seeking reductions in the number of contractors and vendors in their facilities. No customer accounted for 10% or more of consolidated revenues during any of the last three fiscal years.

Generally, customers are billed on a time and materials basis, although some work may be performed pursuant to a fixed-price bid. Services are usually
performed pursuant to purchase orders issued under written customer agreements. While most purchase orders provide for the performance of a single job, some provide for services to be performed on a run and maintain basis. Substantially all our
agreements and contracts may be terminated by either party on short notice. The agreements generally specify the range of services to be performed and the hourly rates for labor. While many contracts cover specific plants or locations, we also enter
into multiple-site regional or national contracts, which cover multiple plants or locations.

Seasonality

We experience some seasonal fluctuations. Historically, the refining industry has scheduled plant shutdowns (commonly referred to as
turnarounds) for the fall and spring seasons. Large turnarounds can significantly impact our revenues.

Employees

At May 31, 2009, we had approximately 3,400 employees in our worldwide operations. Our employees in the U.S. are predominantly not
unionized. Our Canadian employees and certain employees outside of North America, primarily Europe, are unionized. There have been no employee work stoppages to date and we believe our relations with our employees and their representative
organizations are good. One of our subsidiaries is a party to a collective bargaining agreement with certain employees that requires the subsidiary to pay specified wages, provide certain benefits to their union employees and contribute certain
amounts to multi-employer pension plans and employee benefit trusts. If the participating subsidiary withdrew from, or otherwise terminated participation in, the multi-employer pension plan were to otherwise become under-funded, the subsidiary could
be assessed liabilities for additional contributions related to the under-funding of this plan. The collective bargaining agreement has typically been renegotiated and renewed on similar terms.

Regulation

A significant
portion of our business activities are subject to foreign, federal, state and local laws and regulations. These regulations are administered by various foreign, federal, state and local health and safety and environmental agencies and authorities,
including the Occupational Safety and Health Administration of the U.S. Department of Labor and the EPA. From time to time, we are also subject to a wide range of reporting requirements, certifications and compliance as prescribed by various federal
and state governmental agencies that include, but are not limited to, the Nuclear Regulatory Commission, Chemical Safety Board, Department of Transportation and Federal Aviation Administration. Expenditures relating to such regulations are made in
the normal course of our business and are neither material nor place us at any competitive disadvantage. We do not currently expect compliance with such laws will require us to make material expenditures.

From time to time, in the operation of our environmental consulting and engineering services, the assets of which were sold in 1996, we handled small
quantities of certain hazardous wastes or other substances generated by our customers. Under the Comprehensive Environmental Response, Compensation and Liability Act of



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1980 (the Superfund Act), the EPA is authorized to take administrative and judicial action to either cause parties who are responsible under
the Superfund Act for cleaning up any unauthorized release of hazardous substances to do so, or to clean up such hazardous substances and to seek reimbursement of the costs thereof from the responsible parties, who are jointly and severally liable
for such costs under the Superfund Act. The EPA may also bring suit for treble damages from responsible parties who unreasonably refuse to voluntarily participate in such a clean up or funding thereof. Responsible parties include anyone who owns or
operates the facility where the release occurred (either currently and/or at the time such hazardous substances were disposed of), or who by contract arranges for disposal, treatment, transportation for disposal or treatment of a hazardous
substance, or who accepts hazardous substances for transport to disposal or treatment facilities selected by such person from which there is a release. We believe that our risk of liability is minimized since our handling consisted solely of
maintaining and storing small samples of materials for laboratory analysis that are classified as hazardous. Due to its prohibitive costs, we accordingly do not currently carry insurance to cover liabilities which we may incur under the Superfund
Act or similar environmental statutes.

Compliance Matters

During a recent internal management review of one of our branch operations in Trinidad, we were informed of allegations of improper payments, made by our
local employees, to employees of certain customers, including foreign government owned enterprises. Consequently, the Audit Committee of our Board of Directors initiated an investigation of those allegations with the assistance of independent
outside counsel. The investigation has found evidence suggesting that payments, which may violate the Foreign Corrupt Practices Act (FCPA), were made to employees of foreign government owned enterprises. While the investigation is
ongoing, there has been no indication that the improper payments extend beyond the one Trinidad branch. Based upon the evidence obtained to date, we believe that the total of these improper payments over the past five years did not exceed $50,000.
The total annual revenues from the impacted Trinidad branch represent approximately one-half of one percent of our annual consolidated revenues. Based on current information, we are unable at this time to predict when the investigation will be
completed or what regulatory or other outcomes may result.

We have voluntary disclosed information relating to the initial allegations,
the investigation and the initial findings to the U.S. Department of Justice (DOJ) and to the Securities and Exchange Commission (SEC), and we will cooperate with the DOJ and SEC in connection with their review of this
matter. The outcome of this investigation cannot be predicted at this time; however, the FCPA and related statutes and regulations do provide for potential monetary penalties as well as criminal and civil sanctions in connection with FCPA
violations.

Intellectual Property

While we are the holder of various patents, trademarks, trade secrets and licenses, we do not consider any single intellectual property to be material to our consolidated business operations.

Competition

In general,
competition stems from a large number of other outside service contractors. More than 100 different competitors are currently active in our markets. We believe we have a competitive advantage over most service contractors due to the quality,
training and experience of our technicians, our nationwide and increasingly international service capability, our broad range of services, and our technical support and manufacturing capabilities supporting the service network. However, there are
other competitors that may offer a similar range of coverage or services and include, but are not limited to, Furmanite Corporation, T.D. Williamson, Inc., Acuren Group, Inc. and JV Industrial Companies.



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Available Information

As a public company, we are required to file periodic reports with the SEC within established deadlines. Any document we file with the SEC may be viewed
or copied at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Additional information regarding the Public Reference Room can be obtained by calling the SEC at (800) SEC-0330. Our SEC filings are also available
to the public through the SECs website located at www.sec.gov.

Our internet website address is
www.teamindustrialservices.com. Information contained on our website is not part of this report on Form 10-K. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, Proxy Statements and current reports on Form 8-K filed with
(or furnished to) the SEC are available on our website, free of charge, as soon as reasonably practicable after we file or furnish such material. We also post our code of business conduct and ethics, our governance principles and the charters of our
boards committees on our website. Our governance documents are available in print to any stockholder that makes a written request to Team, Inc., Attn: Corporate Secretary, 200 Hermann Drive, Alvin, Texas, 77511.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

The risk
factors described below should be carefully considered in addition to other information contained or incorporated by reference herein. We operate in a continually changing business environment and new risk factors emerge from time to time. We cannot
predict such risk factors, nor can we assess the impact, if any, of such risk factors on our business or the extent to which any factors may cause actual results to differ materially from those projected. The following risks and uncertainties should
be considered in evaluating our outlook of future Company performance.

The current economic environment may affect our customers
demand for our services.The current economic recession has reduced the availability of liquidity and credit and, in many cases, reduced demand for our customers products. Continued disruption of the credit
markets could also adversely affect our customers ability to finance on-going maintenance and new projects, resulting in contract cancellations or suspensions, and project delays. An extended or deepening recession may result in further plant
closures or other contractions in our customer base. These factors may also adversely affect our ability to collect payment for work we have previously performed. Furthermore, our ability to expand our business could be limited if, in the future, we
are unable to increase our credit capacity under our Credit Facility on favorable terms or at all. Such disruptions, should they occur, could materially impact our results of operations, financial position or cash flows.

Our revenues are heavily dependent on certain industries.    Sales of our services are dependent on customers in
certain industries, particularly the refining and petrochemical industries. As experienced in the past, and as expected to occur in the future, downturns characterized by diminished demand for services in these industries could have a material
impact on our results of operations, financial position or cash flows.

We sell our services in highly competitive markets, which
places pressure on our profit margins and limits our ability to maintain or increase the market share of our services.    Our competition generally stems from other outside service contractors, many of whom offer a
similar range of services. The current economic recession has generally reduced demand for industrial services and thus created a more competitive bidding environment for new and existing work. Additionally, our customers may bring historically
out-sourced services back in-house to improve their staffing utilization and reduce the need for staffing reductions. No assurances can be made that we will continue to maintain our pricing model and our profit margins or increase our market share.

No assurances can be made that we will be successful in maintaining or renewing our contracts with our
customers.    A significant portion of our contracts and agreements with customers may be terminated by either party on short notice. Although we actively pursue the renewal of our contracts, we can not assure that we
will be able to renew these contracts or that the terms of the renewed contracts will be as favorable as the existing contracts. If we are unable to renew or replace these contracts, or if we renew on less favorable terms, we may suffer a material
reduction in revenue and earnings.



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No assurances can be made that we will be successful in hiring or retaining members of a skilled
technical workforce.    We have a skilled technical workforce and an industry recognized technician training program for each of our service lines that prepares new employees as well as further trains our existing
employees. The competition for these individuals is intense. The loss of the services of a number of these individuals or failure to attract new employees could adversely affect our ability to perform our obligations on our customers projects
or maintenance and consequently could negatively impact the demand for our products and services and consequently our financial condition and operating results. Our inability to predict the length and breadth of the current economic recession may
result in staffing levels below the level required to achieve our financial objectives when markets recover.

Unsatisfactory safety
performance can affect customer relationships, result in higher operating costs and negatively impact our ability to hire and retain a skilled technical workforce.    Our workers are subject to the normal hazards
associated with providing services at industrial facilities. Even with proper safety precautions, these hazards can lead to personal injury, loss of life, damage to, or destruction of, property, plant and equipment, lower employee morale and
environmental damage. We are intensely focused on maintaining a strong safety environment and reducing the risk of accidents to the lowest possible level. Poor safety performance may limit or eliminate potential revenue streams from many of our
largest customers and may materially increase our future insurance and other operating costs. Our growth strategy requires that we increase the size of our workforce. While we normally target experienced personnel for employment, we also hire
inexperienced employees. Even with thorough training, inexperienced employees have a higher likelihood of injury which could lead to higher operating costs and insurance rates. Although we maintain insurance coverage, such coverage may be inadequate
to protect us from all expenses related to these risks.

Our operations and properties are subject to extensive governmental
regulation under environmental laws.    These laws and regulations can impose substantial sanctions for violations or operational changes that may limit our services. We must conform our operations to applicable
regulatory requirements and adapt to changes in such requirements in all locations in which we operate. These actions may increase the overall costs of providing our services. Some of our services involve handling or monitoring highly regulated
materials, including hazardous wastes. Environmental laws and regulations generally impose limitations and standards for regulated materials and require us to obtain permits and comply with various other requirements. The improper characterization,
handling, disposal or monitoring of regulated materials or any other failure by us to comply with increasingly complex and strictly enforced federal, state and local environmental laws and regulations or associated environmental permits could
subject us to the assessment of administrative, civil and criminal penalties, the imposition of investigatory or remedial obligations, or the issuance of injunctions that could restrict or prevent our ability to operate our business and complete
contracted services. A defect in our services or faulty workmanship could result in an environmental liability if, as a result of the defect or faulty workmanship, a contaminate is released into the environment.

We currently maintain liability insurance to limit any potential loss, but there can be no assurance that our insurance will fully protect us
against a claim or loss.    We perform services in hazardous environments on or around high-pressure, high temperature systems and our employees are exposed to a number of hazards, including exposure to hazardous
materials, explosion hazards and fire hazards. Incidents that occur at these large industrial facilities or systems, regardless of fault, may be catastrophic and adversely impact our employees and third parties by causing serious personal injury,
loss of life, damage to property or the environment, and interruption of operations. Our contracts typically require us to indemnify our customers for injury, damage or loss arising out of our presence at our customers location, regardless of
fault, or the performance of our services and provide for warranties for materials and workmanship. We may also be required to name the customer as an additional insured under our insurance policies. We maintain insurance coverage against these and
other risks associated with our business in accordance with standard industry practice. This insurance may not protect us against liability for some kinds of events, including events involving pollution, product or professional liability, losses
resulting from business interruption or acts of terrorism or damages from breach of contract by the Company. We cannot assure you our insurance will be adequate in risk coverage or policy limits to cover all



7



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##### Table of Contents

##### Index to Financial Statements

losses or liabilities that we may incur. Moreover, in the future, we cannot assure that we will be able to maintain insurance at levels of risk coverage or
policy limits that we deem adequate. Any future damages caused by our products or services that are not covered by insurance or are in excess of policy limits could have a material adverse effect on our results of operations, financial position or
cash flows.

We are involved and are likely to continue to be involved in legal proceedings, which will increase our costs and, if
adversely determined, could have a material effect on our results of operations, financial position or cash flows.    We are currently a defendant in legal proceedings arising from the operation of our business and it is
reasonable to expect that we will be named in future actions. Most of the legal proceedings against us arise out of the normal course of performing services at customer facilities, and include claims for workers compensation, personal injury
and property damage. Legal proceedings can be expensive to defend and can divert the attention of management and other personnel for significant periods of time, regardless of the ultimate outcome. An unsuccessful defense of a liability claim could
have an adverse affect on our business, results of operations, financial condition or cash flows.

Economic, political and other
risks associated with international operations could adversely affect our business.    A significant portion of our operations are conducted and located outside the United States and, accordingly, our business is subject
to risks associated with doing business internationally, including changes in foreign currency exchange rates, instability in political or economic conditions, differing employee relations, trade protection measures, and difficulty in administering
and enforcing corporate policies which may be different than the normal business practices of local cultures. In many foreign countries, particularly in those with developing economies, it is common to engage in business practices that are
prohibited by U.S. regulations applicable to us such as the FCPA. Our international business operations may include projects in countries where corruption is prevalent. Although we have and continue to implement policies and procedures designed to
ensure compliance with these laws, there can be no assurance that all of our employees, contractors or agents, including those based in or from countries where practices which violate such U.S. laws may be customary, will not take actions in
violation of our policies and procedures. Any violation of foreign or U.S. laws by our employees, contractors or agents, even if such violation is prohibited by our policies and procedures, could have a material adverse effect on our results of
operations, financial position or cash flows.

Our growth strategy entails risk for
investors.We intend to continue to pursue acquisitions in the specialty maintenance and construction services industry to complement and diversify our existing business. We may not be able to
continue to expand our market presence through attractive acquisitions, and any future acquisitions may present unforeseen integration difficulties or costs. From time to time, we make acquisitions of other businesses that enhance our services or
the geographic scope of our Company. No assurances can be made that we will realize the cost savings, synergies or revenue enhancements that we may anticipate from any acquisition, or that we will realize such benefits within the time frame that we
expect. If we are not able to address the challenges associated with acquisitions and successfully integrate acquired businesses, or if our integrated product and service offerings fail to achieve market acceptance, our business could be adversely
affected. The consideration paid in connection with an acquisition may also affect our financial results. To the extent we issue stock or other rights to purchase stock, including options or other rights, existing shareholders may be diluted and
earnings per share may decrease. In addition, acquisitions may result in the incurrence of additional debt.

Our level of
indebtedness could have important consequences to us.    Our level of indebtedness may make it more difficult for us to satisfy our obligations with respect to our indebtedness, increase our vulnerability to general
adverse economic conditions, industry conditions and rising interest rates, limit our ability to take advantage of business opportunities as a result of various restrictive covenants in our debt agreements, place us at a competitive disadvantage
compared to our competitors that have less debt or limit our ability to borrow money or sell stock to fund our working capital, capital expenditures, acquisitions or other corporate requirements.



8



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##### Index to Financial Statements

The price of our outstanding securities may suffer if we cannot control fluctuations in our sales
and operating results.    Historically, our quarterly and annual sales and operating results have fluctuated. We expect fluctuations to continue in the future. In addition to general economic and political conditions, the
following factors affect our sales: the timing of significant customer orders, the timing of planned maintenance projects at customer facilities, changes in competitive pricing, wide variations in profitability by product line, variations in
operating expenses, rapid increases in raw material and labor costs, the timing of announcements or introductions of new products or services by us, our competitors or our respective customers, the acceptance of those services, our ability to
adequately meet staffing requirements with qualified personnel, relative variations in manufacturing efficiencies and costs, and the relative strength or weakness of international markets. Since our quarterly and annual revenues and operating
results vary, we believe that period-to-period comparisons are not necessarily meaningful and you should not rely on those comparisons as indicators of our future performance. Due to the foregoing factors, it is possible that in some future quarter
or quarters our revenues or operating results will not meet the expectations of public stock market analysts or investors, which could cause the price of our outstanding securities to decline or be volatile.

Our business may be adversely impacted by work stoppages, staffing shortages, and other labor matters.    At
May 31, 2009, we had approximately 3,400 employees and contractors, approximately 600 of whom were located in Canada and Europe where employees predominantly are represented by unions. Although we believe that our relations with our employees
are good and we have had no strikes or work stoppages, no assurances can be made that we will not experience these and other types of conflicts with labor unions, works councils, other groups representing employees, or our employees generally, or
that any future negotiations with our labor unions will not result in significant increases in the cost of labor.

Other risk
factors.     Other risk factor may include interruption of our operations, or the operations of our customers due to fire, hurricanes, earthquakes, power loss, telecommunications failure, terrorist attacks, labor
disruptions, health epidemics and other events beyond our control.

Any one of these factors, or a combination of these factors, could
materially affect our future results of operations and whether any forward-looking statements in this Form 10-K ultimately prove to be accurate.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



|ITEM 2. | PROPERTIES
|------- | ----------

We own
several facilities used in our operations. Our 88,000 square foot facility in Alvin, Texas consists of our corporate office, primary training facility and ISO-9001 certified manufacturing facility for clamps, enclosures and sealants. Our 11,000
square foot facility in Pearland, Texas is used as an equipment distribution center to support regional operations. Our 18,000 square foot facility in Houston, Texas, 10,000 square foot facility in Milwaukee, Wisconsin, and our 17,000 square foot
facility in Edmonton, Alberta are offices for our branch service locations in those areas. All other facilities used in our operations are provided through operating leases.

Included in property, plant and equipment is $7.5 million pertaining to land in or around Houston. This primarily consists of $6.9 million attributable
to 50 acres purchased in October 2007 to construct future facilities to replace those currently in Alvin, Texas and Pearland, Texas. Due to the current economic recession and its effect on our growth, we have postponed construction of the future
facilities until such time as the industrial services sector recovers.

We believe that our property and equipment are adequate for our
current needs, although additional investments are expected to be made in property and equipment for expansion, replacement of assets at the end of their useful lives and in connection with corporate development activities.



9



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##### Index to Financial Statements

|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

We
have, from time to time, provided temporary leak repair services for the steam operations of Consolidated Edison of New York (Con Ed) located in New York City. In July 2007, a Con Ed steam main located in midtown Manhattan ruptured
causing one death and other injuries and property damage. Multiple separate lawsuits have been filed against Con Ed, the City of New York and us in the Supreme Courts of New York located in Kings, New York and Bronx County, alleging that our
temporary leak repair services may have contributed to the cause of the rupture. The lawsuits seek generally unspecified compensatory damages for personal injury, property damage and business interruption. Additionally, on March 31, 2008 we
received a letter from Con Ed alleging that our contract with Con Ed requires us to indemnify and defend Con Ed for additional claims filed against Con Ed as a result of the rupture. Con Ed filed an action to join Team and the City of New York as
defendants in all lawsuits filed against Con Ed that did not include Team and the City of New York as direct defendants. We intend to vigorously defend the lawsuits and Con Eds claim for indemnification. We are unable to estimate the amount of
liability to us, if any, associated with these lawsuits and the claim for indemnification. We maintain insurance coverage, subject to a deductible limit of $250,000, which we believe should cover these claims and have placed our insurers on notice.
We do not believe the final resolution of these matters will have a material adverse effect on our results of operations, financial position or cash flows.

We are involved in various claims, suits, investigations, and legal proceedings. We accrue a liability when we believe that it is both probable that a liability has been incurred and the amount of the loss can be
reasonably estimated. We review these accruals at least quarterly and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. However, litigation is inherently unpredictable.
Therefore, we could incur judgments or enter into settlements of claims that could adversely affect our results of operations, financial position or cash flows.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

None



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##### Index to Financial Statements

PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Market Information

Our common stock is listed on the
NASDAQ under the ticker symbol TISI. The table below reflects the high and low closing sales prices of our common stock on the NASDAQ by quarter for the fiscal years ended May 31, 2009 and 2008, respectively.



|                  |  |             |       |     |   |      
|----------------- |  | ----------- | ----- | --- | - | -----
|                  |  | Sales Price
|                  |  | High        |       | Low
|2009              |  |             |       |     |   |      
|Quarter Ended:    |  |             |       |     |   |      
|August 31, 2008   |  | $           | 39.66 |     | $ | 30.94
|November 30, 2008 |  | $           | 39.43 |     | $ | 19.89
|February 28, 2009 |  | $           | 27.89 |     | $ | 12.87
|May 31, 2009      |  | $           | 15.87 |     | $ | 10.32
|2008              |  |             |       |     |   |      
|Quarter Ended:    |  |             |       |     |   |      
|August 31, 2007   |  | $           | 24.19 |     | $ | 20.26
|November 30, 2007 |  | $           | 34.35 |     | $ | 22.46
|February 29, 2008 |  | $           | 38.00 |     | $ | 27.46
|May 31, 2008      |  | $           | 34.52 |     | $ | 27.22



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##### Index to Financial Statements

Performance Graph

The following performance graph compares the performance of our common stock to the NASDAQ Composite Index and a Peer Group Index. The comparison assumes $100 was invested on May 31, 2004 in our common stock, the
NASDAQ Composite Index and in the Peer Group Index. The values of each investment are based on share price appreciation, with reinvestment of all dividends, assuming any were paid. For each graph, the investments are assumed to have occurred at the
beginning of each period presented. The following companies are included in the Peer Group Index used in the graph: Furmanite Corporation, Matrix Service Company, T-3 Energy Services, and Versar, Inc.

LOGO



|* | $100 invested on 5/31/04 in stock or index, including reinvestment of dividends.
|- | --------------------------------------------------------------------------------

Fiscal year ending May 31.



|                 |  |      |        |      |   |        |  |      |        |      |   |        |  |   |        |  |   |       
|---------------- |  | ---- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ------ |  | - | ------ |  | - | ------
|                 |  | 5/04 |        | 5/05 |   | 5/06   |  | 5/07 |        | 5/08 |   | 5/09  
|Team, Inc.       |  | $    | 100.00 |      | $ | 121.02 |  | $    | 200.32 |      | $ | 249.62 |  | $ | 408.15 |  | $ | 180.25
|NASDAQ Composite |  | $    | 100.00 |      | $ | 104.91 |  | $    | 113.08 |      | $ | 136.66 |  | $ | 132.60 |  | $ | 92.61 
|Peer Group       |  | $    | 100.00 |      | $ | 64.58  |  | $    | 169.85 |      | $ | 286.61 |  | $ | 371.27 |  | $ | 136.79

Notes: The above information was provided by Research Data Group, Inc.

Holders

There were 194 holders of record of our
common stock as of July 31, 2009 excluding beneficial owners of stock held in street name.

Dividends

No cash dividends were declared or paid during the fiscal years ended May 31, 2009, 2008 and 2007. We are not permitted to pay cash dividends without
the consent of our bank syndicate. Accordingly, we have no present intention to pay cash dividends in the foreseeable future. Additionally, any future dividend payments will continue to depend on our financial condition, market conditions and other
matters deemed relevant by the Board of Directors.



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##### Index to Financial Statements

Description of Securities

On July 25, 2007, we announced a two-for-one stock split in the form of a 100 percent dividend payable on August 29, 2007 to all shareholders of record on August 15, 2007. To fund the requirement of new
shares, we utilized approximately 1 million shares of treasury stock and issued an additional 8 million shares of common stock. All share and per share information has been retroactively adjusted to reflect the stock split.

Securities Authorized for Issuance Under Equity Compensation Plans

This information has been omitted from this report on Form 10-K as we intend to file such information in our definitive proxy statement no later than 120 days following the close of our fiscal year ended May 31,
2009. The information required regarding equity compensation plans is hereby incorporated by reference.



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##### Index to Financial Statements

|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following is a summary of selected financial information for the five years ended May 31, 2009 (amounts in thousands, except per share data):



|                                               |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|---------------------------------------------- |  | --------------------------- | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                               |  | Twelve Months Ended May 31,
|                                               |  | 2009                        |         | 2008 |   | 2007    |  | 2006 |         | 2005
|Revenues                                       |  | $                           | 497,559 |      | $ | 478,475 |  | $    | 318,348 |      | $ | 259,838 |  | $ | 193,035
|Net income from continuing operations          |  |                             | 22,911  |      |   | 23,623  |  |      | 15,515  |      |   | 10,630  |  |   | 4,284  
|Net income from discontinued operations (1)    |  |                             |        |      |   |        |  |      |        |      |   | 6       |  |   | 504    
|                                               |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|Net income                                     |  | $                           | 22,911  |      | $ | 23,623  |  | $    | 15,515  |      | $ | 10,636  |  | $ | 4,788  
|                                               |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|Net income per share: Basic                    |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|From continuing operations                     |  | $                           | 1.22    |      | $ | 1.30    |  | $    | 0.88    |      | $ | 0.63    |  | $ | 0.26   
|From discontinued operations (1)               |  |                             | 0.00    |      |   | 0.00    |  |      | 0.00    |      |   | 0.00    |  |   | 0.03   
|                                               |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|Total                                          |  | $                           | 1.22    |      | $ | 1.30    |  | $    | 0.88    |      | $ | 0.63    |  | $ | 0.29   
|                                               |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|Net income per share: Diluted                  |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|From continuing operations                     |  | $                           | 1.16    |      | $ | 1.20    |  | $    | 0.82    |      | $ | 0.58    |  | $ | 0.24   
|From discontinued operations (1)               |  |                             | 0.00    |      |   | 0.00    |  |      | 0.00    |      |   | 0.00    |  |   | 0.03   
|                                               |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|Total                                          |  | $                           | 1.16    |      | $ | 1.20    |  | $    | 0.82    |      | $ | 0.58    |  | $ | 0.27   
|                                               |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|Weighted average shares outstanding            |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|Basic                                          |  |                             | 18,793  |      |   | 18,226  |  |      | 17,540  |      |   | 16,826  |  |   | 16,280 
|Diluted                                        |  |                             | 19,725  |      |   | 19,676  |  |      | 18,866  |      |   | 18,398  |  |   | 17,964 
|Cash dividend declared, per common share       |  | $                           | 0.00    |      | $ | 0.00    |  | $    | 0.00    |      | $ | 0.00    |  | $ | 0.00   
|                                               | 
|                                               |  | May 31,                    
|                                               |  | 2009                        |         | 2008 |   | 2007    |  | 2006 |         | 2005
|Balance Sheet data:                            |  |                             |         |      |   |         |  |      |         |      |   |         |  |   |        
|Total assets                                   |  | $                           | 275,921 |      | $ | 280,461 |  | $    | 171,054 |      | $ | 139,971 |  | $ | 143,326
|Long-term debt and other long-term liabilities |  | $                           | 82,628  |      | $ | 102,955 |  | $    | 49,260  |      | $ | 40,208  |  | $ | 62,089 
|Stockholders equity                           |  | $                           | 146,501 |      | $ | 120,762 |  | $    | 84,203  |      | $ | 63,885  |  | $ | 48,942 
|Working capital                                |  | $                           | 109,845 |      | $ | 100,470 |  | $    | 70,229  |      | $ | 49,219  |  | $ | 49,089 



|(1) | Discontinued operations consist of the operating results of Climax, an equipment rental company, and interest on debt allocated to such operations.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------



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##### Index to Financial Statements

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following review of our results of operations and financial condition should be read in conjunction with Item 1 Business,
Item 1A Risk Factors, Item 2 Properties, and Item 8 Consolidated Financial Statements and Supplementary Data, included in this Form 10-K.

CAUTIONARY STATEMENT FOR THE PURPOSE OF

SAFE HARBOR PROVISIONS OF THE

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on behalf of the Company in other materials we release to the public including all statements, other than
statements of historical facts, included or incorporated by reference in this Form 10-K, that address activities, events or developments which we expect or anticipate will or may occur in the future. You can generally identify our forward-looking
statements by the words anticipate, believe, expect, plan, intend, estimate, project, projection, predict, budget,
forecast, goal, guidance, target, will, could, should, may and similar expressions.

We based our forward-looking statements on our reasonable beliefs and assumptions, and our current expectations, estimates and projections about
ourselves and our industry. We caution that these statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In addition, we based many of these forward-looking statements on
assumptions about future events that may prove to be inaccurate. We wish to ensure that such statements are accompanied by meaningful cautionary statements, so as to obtain the protections of the safe harbor established in the Private Securities
Litigation Reform Act of 1995. Accordingly, you should carefully consider the statements under Risk Factors, which address factors that could cause our actual results to differ materially from those set forth in forward-looking
statements. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

This Managements Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to the accompanying consolidated financial statements and notes to help provide an
understanding of our financial condition, changes in financial condition, and results of operations.

General Information

We are a leading provider of specialty maintenance and construction services required in maintaining high temperature and high pressure piping systems and
vessels that are utilized extensively in heavy industries. We offer an array of complimentary services including:



| |  |  | leak repair,
| | - |  | ------------



| |  |  | hot tapping,
| | - |  | ------------



| |  |  | fugitive emissions control,
| | - |  | ---------------------------



| |  |  | field machining,
| | - |  | ----------------



| |  |  | technical bolting,
| | - |  | ------------------



| |  |  | field valve repair,
| | - |  | -------------------



| |  |  | non-destructive testing, and
| | - |  | ----------------------------



| |  |  | field heat treating.
| | - |  | --------------------



15



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##### Index to Financial Statements

We offer these services in over 100 locations throughout the United States and international markets
including Aruba, Belgium, Canada, Singapore, The Netherlands, Trinidad and Venezuela.

Our industrial services are available 24 hours
a day, 7 days a week, 365 days a year. We market our services to companies in a diverse array of industries which include the petrochemical, refining, power, pipeline, pulp and paper, steel industries, municipalities, shipbuilding, OEMs,
distributors and end users and some of the worlds largest engineering and construction firms. Our products and services are provided across a broad geographic reach.

Year Ended May 31, 2009 Compared to Year Ended May 31, 2008

The following table sets
forth the components of revenue and operating income from our continuing operations for fiscal 2009 and 2008 (in thousands):



|                                        |  |                        |         |                        |   |                     |   |   |        |   |  |     |   
|--------------------------------------- |  | ---------------------- | ------- | ---------------------- | - | ------------------- | - | - | ------ | - |  | --- | --
|                                        |  | Year endedMay 31, 2009 |         | Year endedMay 31, 2008 |   | Increase (Decrease) |  
|                                        |  |                        |         | $                      |   |                     | % |  
|Revenues:                               |  |                        |         |                        |   |                     |   |   |        |   |  |     |   
|TCM Division                            |  | $                      | 270,420 |                        | $ | 274,531             |   | $ | (4,111 | ) |  | (1  | )%
|TMS Division                            |  |                        | 227,139 |                        |   | 203,944             |   |   | 23,195 |   |  | 11  | % 
|                                        |  |                        |         |                        |   |                     |   |   |        |   |  |     |   
|Total revenues                          |  |                        | 497,559 |                        |   | 478,475             |   |   | 19,084 |   |  | 4   | % 
|                                        |  |                        |         |                       
|Gross margin:                           |  |                        |         |                        |   |                     |   |   |        |   |  |     |   
|TCM Division                            |  |                        | 81,654  |                        |   | 84,145              |   |   | (2,491 | ) |  | (3  | )%
|TMS Division                            |  |                        | 75,405  |                        |   | 71,520              |   |   | 3,885  |   |  | 5   | % 
|                                        |  |                        |         |                        |   |                     |   |   |        |   |  |     |   
|Total gross margin                      |  |                        | 157,059 |                        |   | 155,665             |   |   | 1,394  |   |  | 1   | % 
|                                        |  |                        |         |                       
|S, G&A expenses:                        |  |                        |         |                        |   |                     |   |   |        |   |  |     |   
|Field Operations                        |  |                        | 96,571  |                        |   | 91,390              |   |   | 5,181  |   |  | 6   | % 
|Corporate costs                         |  |                        | 20,190  |                        |   | 18,402              |   |   | 1,788  |   |  | 10  | % 
|                                        |  |                        |         |                        |   |                     |   |   |        |   |  |     |   
|Total S, G&A                            |  |                        | 116,761 |                        |   | 109,792             |   |   | 6,969  |   |  | 6   | % 
|Earnings from unconsolidated affiliates |  |                        | 973     |                        |   |                    |   |   | 973    |   |  | 100 | % 
|                                        |  |                        |         |                        |   |                     |   |   |        |   |  |     |   
|Operating income                        |  | $                      | 41,271  |                        | $ | 45,873              |   | $ | (4,602 | ) |  | (10 | )%
|                                        |  |                        |         |                        |   |                     |   |   |        |   |  |     |   

Revenues.    Our revenues for the year ended May 31, 2009
were $497.6 million compared to $478.5 million for the year ended May 31, 2008, an increase of $19.1 million or 4%. Our revenues for the year ended May 31, 2009 include incremental revenues associated with the LRS acquisitions of $14.2
million. Revenues for our TCM division for the year ended May 31, 2009 were $270.4 million compared to $274.5 million for the year ended May 31, 2008, a decrease of $4.1 million or 1%. Revenues for our TMS division (inclusive of LRS) for
the year ended May 31, 2009 were $227.1 million compared to $203.9 million for the year ended May 31, 2008, an increase of $23.2 million or 11%. The increase in revenues during the current year was primarily due to the positive sales
environment in the first half of our 2009 fiscal year. The effects of the economic recession did not dramatically affect our revenues until the second half of our fiscal year. Specifically, revenues for the second half of the fiscal year were $225.5
million, sequentially down $46.6 million or 17% from the first half of the year, and down $27.2 million or 11% from the same period in the prior year. This second half decrease reflects the change in spending habits of our customers who sought to
cancel or delay projects, cut discretionary project spending, and delay maintenance when and where possible. While several industrial sectors which we serve are more economically distressed than others, nearly all our customers are adopting more
conservative near-term spending postures. As a result, we are seeing more frequent deferrals and downsizing of turnarounds, a shift to reduced spending by many customers, and more discussions about the need for rate adjustments. Consistent with
these observations, we experienced recent revenue softness in virtually all service lines and geographic areas. Additionally, exchange rate fluctuations, specifically between the United States and Canada, further adversely affected revenues by $19.0
million.



16



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##### Index to Financial Statements

Gross Margin.    Our gross margin for the year ended May 31, 2009
was $157.1 million compared to $155.7 million for the year ended May 31, 2008, an increase of $1.4 million or 1%. Gross margin as a percentage of revenue was 32% for the year ended May 31, 2009 compared to 33% for the year ended
May 31, 2008. Gross margin for our TCM division for the year ended May 31, 2009 was $81.7 million compared to $84.1 million for the year ended May 31, 2008, a decrease of $2.5 million or 3%. TCM division gross margin as a percentage
of revenue was 30% for the year ended May 31, 2009 and 31% for the year ended May 31, 2008. Gross margin for our TMS division (inclusive of LRS) was $75.4 million for the year ended May 31, 2009 compared to $71.5 million for the year
ended May 31, 2008, an increase of $3.9 million or 5%. TMS division gross margin as a percentage of revenue was 33% for the year ended May 31, 2009 and 35% for the year ended May 31, 2008.

Selling, General and Administrative Expenses.    Our S,G&A for the year ended May 31, 2009 was $116.8 million
compared to $109.8 million for the year ended May 31, 2008, an increase of $7.0 million or 6%. This reflects investments in our network of over 100 locations. Approximately $5.2 million of the increase in S,G&A was due to field operations
and $1.8 million of the increase was due to centralized corporate support costs. The $1.8 million increase in corporate support costs in the current period included a $1.4 million increase of stock based employee compensation expense. S,G&A as a
percentage of revenue was 23% for the year ended May 31, 2009 consistent with the year ended May 31, 2008.

Earnings From
Unconsolidated Affiliates.    Our earnings from unconsolidated affiliates consists entirely of our joint venture (50% ownership) formed in May 2008, to perform non-destructive testing and inspection services in Alaska.
The joint venture is an integral part of our operations in Alaska and all technicians working on behalf of the joint venture are our employees.

Interest.    Interest expense was $4.9 million for the year ended May 31, 2009 compared to $6.5 million for the year ended May 31, 2008. This decrease is the result of lower levels of
outstanding borrowings during the year and lower interest rates applied to those borrowings.

Taxes.    The provision for income taxes was $13.5 million on pretax income of $36.4 million for the year ended May 31, 2009. The provision for income taxes was $15.8 million on pretax income of
$39.4 million for the year ended May 31, 2008. The effective tax rate for fiscal 2009 was 37% compared to 40% for fiscal 2008. The lower effective tax rate for fiscal 2009 is primarily due to the recognition of employment and research tax
credits and the mixture of state and foreign taxes to which the income is subject.

Year Ended May 31, 2008 Compared to Year Ended May 31, 2007

The following table sets forth the components of revenue and operating income from our continuing operations for fiscal 2008 and 2007 (in
thousands):



|                   |  |                        |         |                        |   |          |  |   |         |  |    |  
|------------------ |  | ---------------------- | ------- | ---------------------- | - | -------- |  | - | ------- |  | -- | -
|                   |  | Year endedMay 31, 2008 |         | Year endedMay 31, 2007 |   | Increase | 
|                   |  |                        |         | $                      |   | %        | 
|Revenues:          |  |                        |         |                        |   |          |  |   |         |  |    |  
|TCM Division       |  | $                      | 274,531 |                        | $ | 171,030  |  | $ | 103,501 |  | 61 | %
|TMS Division       |  |                        | 203,944 |                        |   | 147,318  |  |   | 56,626  |  | 38 | %
|                   |  |                        |         |                        |   |          |  |   |         |  |    |  
|Total revenues     |  |                        | 478,475 |                        |   | 318,348  |  |   | 160,127 |  | 50 | %
|                   |  |                        |         |                       
|Gross margin:      |  |                        |         |                        |   |          |  |   |         |  |    |  
|TCM Division       |  |                        | 84,145  |                        |   | 54,478   |  |   | 29,667  |  | 54 | %
|TMS Division       |  |                        | 71,520  |                        |   | 55,684   |  |   | 15,836  |  | 28 | %
|                   |  |                        |         |                        |   |          |  |   |         |  |    |  
|Total gross margin |  |                        | 155,665 |                        |   | 110,162  |  |   | 45,503  |  | 41 | %
|                   |  |                        |         |                       
|S, G&A expenses:   |  |                        |         |                        |   |          |  |   |         |  |    |  
|Field Operations   |  |                        | 91,390  |                        |   | 65,377   |  |   | 26,013  |  | 40 | %
|Corporate costs    |  |                        | 18,402  |                        |   | 14,448   |  |   | 3,954   |  | 27 | %
|                   |  |                        |         |                        |   |          |  |   |         |  |    |  
|Total S, G&A       |  |                        | 109,792 |                        |   | 79,825   |  |   | 29,967  |  | 38 | %
|                   |  |                        |         |                        |   |          |  |   |         |  |    |  
|Operating income   |  | $                      | 45,873  |                        | $ | 30,337   |  | $ | 15,536  |  | 51 | %
|                   |  |                        |         |                        |   |          |  |   |         |  |    |  



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##### Index to Financial Statements

Revenues.    Our revenues from continuing operations for the year ended
May 31, 2008 were $478.5 million compared to $318.3 million for the year ended May 31, 2007, an increase of $160.1 million or 50%. Our revenues for the year ended May 31, 2008 include revenues associated with the recent Aitec and LRS acquisitions of
$53.9 million and $11.6 million, respectively. Organic revenue growth also continues to be broad based across all service lines and geographic regions. Revenues for our TCM division (inclusive of Aitec) for the year ended May 31, 2008 were $274.5
million compared to $171.0 million for the year ended May 31, 2007, an increase of $103.5 million or 61%. Revenues for our TMS division (inclusive of LRS) for the year ended May 31, 2008 were $203.9 million compared to $147.3 million for the
year ended May 31, 2007, an increase of $56.6 million, or 38%.

Gross Margin.    Our gross margin for the
year ended May 31, 2008 was $155.7 million compared to $110.2 million for the year ended May 31, 2007, an increase of $45.5 million or 41%. Gross margin as a percentage of revenue was relatively consistent with the prior year as
improvements in the TCM divisional gross margin percentages during the current year offset decreases in the TMS divisional gross margin percentages. Gross margin for our TCM division for the year ended May 31, 2008 was $84.1 million compared to
$54.5 million for the year ended May 31, 2007, an increase of $29.7 million or 54%. TCM division gross margins as a percentage of revenue was 31% for the year ended May 31, 2008 and 32% for the year ended May 31, 2007. Gross margin
for our TMS division was $71.5 million for the year ended May 31, 2008 compared to $55.7 million for the year ended May 31, 2007, an increase of $15.8 million or 28%. TMS division gross margin as a percentage of revenue was 35% for the
year ended May 31, 2008 and 38% for the year ended May 31, 2007 down slightly from the Katrina/Rita hurricane influenced prior year period in which there was an abundance of high margin projects.

Selling, General and Administrative Expenses.    Our S,G&A for the year ended May 31, 2008 was $109.8 million
compared to $79.8 million for the year ended May 31, 2007, an increase of $30.0 million or 38%. This reflects investments in our network of over 100 service locations. Approximately $26.0 million of the increase in S,G&A was due to field
operations and $4.0 million of the increase was due to centralized corporate support costs. The $4.0 million increase in corporate support costs in the current period included a $1.9 million increase of stock based employee compensation. S,G&A
as a percentage of revenue was 23% for the year ended May 31, 2008 compared to 25% for the year ended May 31, 2007.

Interest.    Interest expense was $6.5 million for the year ended May 31, 2008 as compared to $4.2 million for the year ended May 31, 2007. This increase is the result of higher interest rates on
our LIBOR based debt and higher levels of outstanding borrowings during the year.

Taxes.    The
provision for income taxes was $15.8 million on pretax income of $39.4 million for the year ended May 31, 2008. The provision for income taxes was $10.6 million on pretax income of $26.1 million for the year ended May 31, 2007. The
effective tax rate for the year ended May 31, 2008 was 40% compared to 41% for the year ended May 31, 2007. The rate differential is due to the mixture of non-deductible expenses in relation to taxable income and the mixture of state and
foreign taxes to which the income is subject.

Liquidity and Capital Resources

Financing for our operations consists primarily of vendor financing and leasing arrangements, a bank facility and cash flows attributable to our
operations, which we believe are sufficient to fund our business needs.

Vendor Financing.    In February
2009, we renewed our enterprise agreement with a vendor for server and desktop volume licensing with software assurance for a term of three years. Financing for the agreement was provided by the vendor under a three year non-interest bearing note
(the Software Licensing Note) with monthly payments of $26,901. The Software Licensing Note has been discounted at 3.5%, which approximated our effective borrowing rate at the time we entered into the agreement. At May 31, 2009, the
outstanding principal balance of the Software Licensing Note was $0.8 million.



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##### Index to Financial Statements

Leasing Arrangements.We also entered into operating leases to rent
facilities and obtain vehicles and equipment for our field operations. Our obligations under non-cancellable operating leases, primarily consisting of facility and auto leases, were approximately $35.0 million at May 31, 2009 and are as
follows (in thousands):



|                            |  |                 |       
|--------------------------- |  | --------------- | ------
|Twelve Months Ended May 31, |  | OperatingLeases
|2010                        |  | $               | 13,368
|2011                        |  |                 | 9,832 
|2012                        |  |                 | 6,219 
|2013                        |  |                 | 3,467 
|2014                        |  |                 | 1,928 
|Thereafter                  |  |                 | 188   
|                            |  |                 |       
|Total                       |  | $               | 35,002
|                            |  |                 |       

Total rent expense resulting from operating leases for the twelve months ended May 31, 2009, 2008
and 2007 was $19.9 million, $18.7 million and $12.9 million, respectively.

Bank Facility.    In May
2007, we amended and restated our existing banking facility comprised of a term loan and a revolving credit facility. Our existing banking facility, further amended in June 2008, provides us with a $145 million revolving line of credit and a $15
million term loan through a banking syndicate. In January 2008, we amended our existing banking facility to allow us to borrow in Euros or U.S. Dollars. Our existing banking facility, as amended (collectively, the Credit Facility) bears
interest based on a variable Eurodollar rate option (LIBOR plus 1.25% at May 31, 2009) and the margin is set based on our financial covenants as set forth in the Credit Facility. The Credit Facility matures in May 2012 and is secured by virtually
all of our domestic assets and a majority of the stock of our foreign subsidiaries, and has commitment fees of .25% that are applied to unused borrowing capacity. It also contains financial covenants and restrictions on the creation of liens on
assets, the acquisition or sale of subsidiaries and the incurrence of certain liabilities. At May 31, 2009, there were $1.0 million of capitalized loan costs which are being amortized over the life of the Credit Facility. At May 31, 2009, we were in
compliance with all covenants of the Credit Facility.

On May 31, 2007, we entered into an interest rate swap with our bank to hedge
at a fixed pay rate of 4.97%, a portion of the variable cash flows associated with the variable Eurodollar interest expense on our Credit Facility. The portion of the Credit Facility hedged begins with a notional value of $30.0 million effective
June 1, 2007 and decreases to $16.3 million by March 1, 2010. Changes in the cash flows of the interest rate swap are expected to be highly effective in offsetting the changes in cash flows attributable to fluctuations in the variable
LIBOR rate on the notional amounts of the Credit Facility. The interest rate swap agreement is designated as a cash flow hedge, with the changes in fair value, to the extent the swap agreement is effective, recognized in other comprehensive income
until the hedged interest expense is recognized in earnings.

On February 12, 2008, we borrowed 12.3 million under the
Credit Facility to serve as an economic hedge of our net investment in our European operations as fluctuations in the fair value of the borrowing attributable to the U.S. Dollar/Euro spot rate will offset translation gains or losses attributable to
our investment in our European operations.

In October 2008, our Canadian subsidiary entered into a revolving credit facility with a bank
(the Canadian Line of Credit). The Canadian Line of Credit allows our subsidiary to borrow up to $7.5 million Canadian (approximately $6.8 million U.S.). We have provided an unconditional guarantee of borrowings by our Canadian
subsidiary, effectively making Team, Inc. liable to the bank as principal debtor. The Canadian Line of Credit also contains cross-default provisions with our Credit Facility. Borrowings under the Canadian Line of Credit are used for working capital
and other general needs of our Canadian operations, bear interest at a LIBOR based interest rate (LIBOR plus 1.25% at May 31, 2009) and matures in May 2012.

In order to secure our insurance programs, we are required to post letters of credit generally issued by a bank as collateral. A letter of credit commits the issuer to remit specified amounts to the holder, if the
holder



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##### Index to Financial Statements

demonstrates that we failed to meet our obligations under the letter of credit. If this were to occur, we would be obligated to reimburse the issuer for any
payments the issuer was required to remit to the holder of the letter of credit. At May 31, 2009, we were contingently liable for outstanding stand-by letters of credit totaling $6.8 million. Outstanding letters of credit reduce amounts
available under our Credit Facility and are considered as having been funded for purposes of calculating our financial covenants under the Credit Facility.

Restrictions On Cash.    Included in our cash and cash equivalents at May 31, 2009 is $3.1 million of cash in Europe. Any repatriation of cash from Europe, if deemed to be a dividend
from our European subsidiary for tax purposes, would result in adverse tax consequences. While not legally restricted from repatriating this cash, we consider all earnings of our European subsidiary to be permanently reinvested and access to cash in
Europe to be limited.

Cashflows Attributable to Our Operations.    For the year ended May 31, 2009,
cash provided by operating activities was $38.9 million. Net income of $22.9 million, when adjusted for non-cash items such as depreciation and amortization, deferred financing costs, allowance for doubtful accounts, non-cash compensation and
deferred tax charges, was $41.4 million.

Cashflows Attributable to Our Investing Activities.    For
the year ended May 31, 2009, cash used in investing activities was $14.7 million, consisting primarily of $16.4 million of capital expenditures (we incurred approximately $25.6 million and $16.5 million for capital expenditures
during fiscal years 2008 and 2007, respectively). Capital expenditures can vary depending upon specific customer needs that may arise unexpectedly. We anticipate capital expenditures for the next twelve months to be approximately $10 million to $15
million for equipment.

Cashflows Attributable to Our Financing Activities.    For the year ended
May 31, 2009, cash used in financing activities was $16.2 million. Repayments of the Credit Facility used $19.4 million of cash.

Critical Accounting Policies

The process of preparing financial statements in accordance with Generally Accepted Accounting
Principles in the U.S. (GAAP) requires our management to make estimates and judgments. It is possible that materially different amounts could be recorded if these estimates and judgments change or if actual results differ from these
estimates and judgments. We have identified the following six critical accounting policies that require a significant amount of estimation and judgment and are considered to be important to the portrayal of our financial position and results of
operations:



| |  |  | Revenue Recognition,
| | - |  | --------------------



| |  |  | Valuation of Intangible Assets,
| | - |  | -------------------------------



| |  |  | Income Taxes,
| | - |  | -------------



| |  |  | Workers Compensation, Auto, Medical and General Liability Accruals,
| | - |  | -------------------------------------------------------------------



| |  |  | Allowance for Doubtful Accounts Receivable, and
| | - |  | -----------------------------------------------



| |  |  | Estimated Useful Lives.
| | - |  | -----------------------

Revenue Recognition.    We determine our revenue recognition guidelines for our operations based on guidance provided in applicable accounting standards and positions adopted by the Financial Accounting
Standards Board (FASB) or the SEC. Most of our projects are short-term in nature and we predominantly derive revenues by providing a variety of industrial services on a time and material basis. For all of these services our revenues are
recognized when services are rendered or when product is shipped and risk of ownership passes to the customer. However, due to various contractual terms with our customers, at the end of any reporting period there may be earned but unbilled revenue
that is accrued to properly match revenues with related costs. At



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##### Index to Financial Statements

May 31, 2009 and 2008, the amount of earned but unbilled revenue was $6.5 million and $7.5 million, respectively. For services performed pursuant to a
fixed price bid, revenues are recognized upon completion of the job. Costs associated with such jobs are deferred until completion, resulting in deferred costs of $0.5 million and $0.4 million at May 31, 2009 and 2008, respectively.

Valuation of Intangible Assets.    Intangible assets consists primarily of goodwill. Goodwill represents the excess
of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but are instead tested for impairment at least
annually in accordance with the provisions of FASB Statement No. 142, Goodwill and Other Intangible Assets(FASB No. 142). Intangible assets with estimated useful lives are amortized over their respective estimated
useful lives to their estimated residual values and reviewed for impairment in accordance with FASB Statement No. 144, Accounting for Impairment or Disposal of Long-Lived Assets(FASB No. 144).

Our annual goodwill impairment test is conducted by first comparing the estimated fair value of the reporting unit to which the intangible asset is
attributable and then comparing the implied fair value of goodwill with its carrying amount. The estimated fair value of the reporting unit is determined by using discounted future cash flow estimates. The reporting units used for
purposes of computing the annual impairment test of goodwill, pursuant to FASB No. 142, are the TCM and TMS divisions, both of which comprise our industrial services segment. All goodwill assigned to those reporting units is attributable to
business acquisitions that are part of those units. There was $56.5 million and $62.9 million of goodwill at May 31, 2009 and 2008, respectively. Based upon results of the annual impairment testing, conducted in May 2009, there have been
no impairments of goodwill.

Income Taxes.    We follow the guidance in FASB Statement No. 109,
Accounting for Income Taxes (FASB No. 109) which requires that we use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant temporary differences. As part
of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax payable and related tax expense
together with assessing temporary differences resulting from differing treatment of certain items, such as depreciation, for tax and accounting purposes. These differences can result in deferred tax assets and liabilities, which are included within
our consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that it is more likely than not (a likelihood of more than 50%) that some
portion or all of the deferred tax assets will not be realized, we must establish a valuation allowance. We consider all available evidence, both positive and negative, to determine whether, based on the weight of the evidence, a valuation allowance
is needed. Evidence used includes information about our current financial position and our results of operations for the current and preceding years, as well as all currently available information about future years, including our anticipated future
performance, the reversal of deferred tax liabilities and tax planning strategies.

Management believes future sources of taxable income,
reversing temporary differences and other tax planning strategies will be sufficient to realize assets for which no reserve has been established. While we have considered these factors in assessing the need for a valuation allowance, there is no
assurance that a valuation allowance would not need to be established in the future if information about future years change. Any change in the valuation allowance would impact our income tax provision and net income in the period in which such a
determination is made. As of May 31, 2009, we believe that it is more likely than not that we will have sufficient future taxable income to allow us to realize the benefits of the net deferred tax assets. Our belief is based upon our track
record of consistent earnings over the past five years and projections of future taxable income over the periods in which the deferred tax assets are deductible. Accordingly, no valuation allowance has been recorded.



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##### Index to Financial Statements

Workers Compensation, Auto, Medical and General Liability
Accruals.In accordance with FASB Statement No. 5, Accounting for Contingencies (FASB No. 5), we record a loss contingency when it is probable that a liability has been incurred and the
amount of the loss can be reasonably estimated. We review our loss contingencies on an ongoing basis to ensure that we have appropriate reserves recorded on our balance sheet. These reserves are based on historical experience with claims incurred
but not received, estimates and judgments made by management, applicable insurance coverage for litigation matters, and are adjusted as circumstances warrant. For workers compensation, automobile liability and general liability claims, our
self-insured retention is $500,000 per occurrence. For medical claims, our self-insured retention is $150,000 per individual claimant determined on an annual basis. For environmental liability claims, our self-insured retention is $100,000 per
occurrence. We maintain insurance for claims that exceed such self-retention limits. The insurance is subject to terms, conditions, limitations and exclusions that may not fully compensate us for all losses. Our estimates and judgments could change
based on new information, changes in laws or regulations, changes in managements plans or intentions, or the outcome of legal proceedings, settlements or other factors. If different estimates and judgments were applied with respect to these
matters, it is likely that reserves would be recorded for different amounts.

Allowance for Doubtful
Accounts.    In the ordinary course of business, a percentage of our accounts receivable are not collected due to billing disputes, customer bankruptcies, dissatisfaction with the services we performed and other various
reasons. To account for those accounts receivable that will eventually be deemed uncollectible we establish an allowance. The allowance for doubtful accounts is based on a combination of our historical experience and managements review of long
outstanding accounts receivable. The allowance for doubtful accounts was $3.7 million and $3.6 million at May 31, 2009 and 2008, respectively.

Estimated Useful Lives.    The estimated useful lives of our long-lived assets are used to compute depreciation expense, future asset retirement obligations and are also used in
impairment testing. Estimated useful lives are based, among other things, on the assumption that we provide an appropriate level of associated capital expenditures and maintenance while the assets are still in operation. Without these continued
associated capital expenditures and maintenance, the useful lives of these assets could decrease significantly. Estimated useful lives could be impacted by such factors as future energy prices, environmental regulations, various legal factors and
competition. If the useful lives of these assets were found to be shorter than originally estimated, depreciation expense may increase, liabilities for future asset retirement obligations may be insufficient and impairments in carrying values of
tangible and intangible assets may result.

Accounting Principles Not Yet Adopted

FASB No. 168.In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles (FASB No. 168). FASB No. 168 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements
of nongovernmental entities that are presented in conformity with GAAP. FASB No. 168 will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the
Codification will be come non-authoritative. FASB No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We do not believe this pronouncement will have any effect on our results of
operations, financial position or cash flows.

FASB No. 167.    In June 2009, the FASB issued Statement
No. 167, Amendments to FASB Interpretation No. 46(R), which amends the consolidation guidance applicable to variable interest entities. The amendments will significantly affect the overall consolidation analysis under FASB Interpretation No.
46(R). This statement is effective as of the beginning of the first fiscal year that begins after November 15, 2009. We are still assessing the impact of this statement on our results of operations, financial position or cash flows.

FASB No. 165.In May 2009, the FASB issued Statement No. 165, Subsequent Events, which established principles
and requirements for subsequent events. The statement details the period after the balance sheet date during which the Company should evaluate events or transactions that may occur for potential recognition or



22



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##### Index to Financial Statements

disclosure in the financial statements, the circumstances under which the Company should recognize events or transactions occurring after the balance sheet
date in its financial statements and the required disclosures for such events. This statement is effective for interim or annual reporting periods ending after June 15, 2009. We do not believe this pronouncement will have a material effect on our
results of operations, financial position or cash flows.

FASB No. 141R.    In December 2007,
the FASB issued Statement No. 141 (revised 2007), Business Combinations (FASB No. 141R) which replaces FASB No. 141, Business Combinations. FASB No. 141R applies to all business
combinations, including combinations among mutual entities and combinations by contract alone. FASB No. 141R requires that all business combinations will be accounted for by applying the acquisition method. FASB No. 141R is effective for
business combinations consummated in fiscal years beginning on or after December 15, 2008. Early application is prohibited. We are still assessing what impact this pronouncement will have on our results of operations, financial position or cash
flows.

Newly Adopted Accounting Principles

FASB No. 162.In May 2008, the FASB issued Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles (FASB No. 162). FASB No. 162 identifies
the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of non-governmental entities that are presented in conformity with generally accepted accounting principles.
FASB No. 162 directs the hierarchy to the entity, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with generally accepted accounting principles. FASB No. 162 became effective
on November 13, 2008 and had no effect on our results of operations, financial position or cash flows.

FASB No.
161.    In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133 (FASB No. 161). FASB No. 161
requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for, and how such derivative instruments affect an entitys financial position, financial
performance and cash flows. FASB No. 161 became effective for us on November 15, 2008 and did not have a material effect on our results of operations, financial position or cash flows.

FASB No. 159.    In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial
Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 (FASB No. 159), which permits an entity to choose to measure financial instruments and certain other items similar to financial instruments
at fair value. All subsequent changes to fair value for the financial instrument would be reported in earnings. FASB No. 159 was effective June 1, 2008. We did not adopt the fair value option permitted under this statement.

FASB No. 157.    In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (FASB No.
157). This statement defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements for financial assets and liabilities, as well as any other assets and liabilities that are
carried at fair value on a recurring basis in financial statements. It applies under other accounting pronouncements that require or permit fair value measurements, and does not require any new fair value measurements. The application of FASB No.
157, however, may change current practice within an organization. FASB No. 157 was effective January 1, 2008, applied prospectively. In February 2008, the FASB issued FASB Staff Position No. 157- 2, Effective Date of FASB Statement No. 157,
which provided a one-year deferral for the implementation of FASB No. 157 for certain non-financial assets and liabilities measured on a nonrecurring basis. Effective June 1, 2008, we adopted the provisions of FASB No. 157 relating to financial
assets and liabilities. The adoption of FASB No. 157 with respect to financial assets and liabilities did not have a material financial impact on our consolidated results of operations, financial condition or cash flows. We are



23



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##### Table of Contents

##### Index to Financial Statements

currently evaluating the impact of implementation with respect to non-financial assets and liabilities measured on a nonrecurring basis on our consolidated
financial statements, which will be primarily limited to asset impairments including goodwill, intangible assets and other long-lived assets, assets acquired and liabilities assumed in a business combination.

FSP FAS 157-3.    In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset
When the Market for That Asset Is Not Active (FSP FAS 157-3). This FSP clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of
a financial asset when the market for that financial asset is not active. This FSP was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 had no effect on our results
of operations, financial position or cash flows.

EITF 06-3.In June 2006, the FASBs Emerging
Issues Task Force (the Task Force) issued consensus 06-3 , How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)
(EITF 06-3). In EITF 06-3, the Task Force reached a consensus that the presentation of tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a
customer and disclosed on either a gross basis (included in revenues and costs) or a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. In addition, for any such taxes that are reported on a gross basis, an
entity should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. EITF 06-3 is effective for reporting periods beginning after
December 15, 2006. The adoption of EITF 06-3 on June 1, 2007 did not have a material effect on our results of operations, financial position or cash flows.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

We have operations in foreign countries with a functional currency that is not the U.S. Dollar. We are exposed to market risk, primarily related to
foreign currency fluctuations related to these operations. A significant part of these assets relate to our operations in Europe and Canada. During the year ended May 31, 2009, the exchange rate with the Euro decreased from $1.55 per Euro to
$1.41 per Euro, a decrease of 9%. During the same period, the exchange rate with the Canadian Dollar decreased from near parity with the U.S. Dollar to $0.91 per Canadian Dollar, a decrease of 9%. For foreign subsidiaries whose functional
currency is not the U.S. Dollar, such as our operations in Europe and Canada, assets and liabilities are translated at period ending rates of exchange. Translation adjustments for the assets and liability accounts are included as a separate
component of accumulated other comprehensive income in stockholders equity. We had $9.5 million of foreign currency translation losses in other comprehensive income for the year ended May 31, 2009.

We carry Euro based debt to serve as an economic hedge of our net investment in our European operations as fluctuations in the fair value of the
borrowing attributable to the U.S. Dollar/Euro spot rate will offset translation gains or losses attributable to our investment in our European operations. We are exposed to market risk, primarily related to foreign currency fluctuations related to
the unhedged portion of our investment in our European operations.

We carry Canadian Dollar based debt on our Canadian Line of Credit. The
Canadian Line of Credit supports the operating and investing activities of our Canadian operations. We are exposed to market risk, primarily related to foreign currency fluctuations related to our Canadian Line of Credit and our investment in our
Canadian operations.



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##### Index to Financial Statements

We hold certain floating-rate obligations. We are exposed to market risk primarily related to potential
increases in interest rates related to our debt.

From time to time, we have utilized, and expect to utilize, derivative financial
instruments with respect to a portion of our interest rate risks to achieve a more predictable cash flow by reducing our exposure to interest rate fluctuations. These transactions generally are interest rate swap agreements and are entered into with
major financial institutions. Derivative financial instruments related to our interest rate risks are intended to reduce our exposure to increases in the LIBOR-based interest rates underlying our floating rate Credit Facility. We do not enter into
derivative financial instrument transactions for speculative purposes.

At May 31, 2007 we entered into an interest rate swap
agreement with a fixed pay rate of 4.97% that has a notional value of $30.0 million beginning on June 1, 2007 and decreasing to $16.3 million by March 1, 2010. The interest rate swap agreement is designated as a cash flow hedge, with the
changes in fair value, to the extent the swap agreement is effective, recognized in other comprehensive income until the hedged interest expense is recognized in earnings. At May 31, 2009, the notional amount of our swap was $21.3 million.



|ITEM 8. | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | --------------------------------------------------------

Our financial statements and financial statement schedules, found at the end of this annual report on Form 10-K, and are incorporated herein by reference.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

There have been no disagreements concerning accounting and financial disclosures with our independent accountants during any of the periods presented.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Limitations on Effectiveness of Control.    Our management, including the principal executive and financial officers, does not expect that our disclosure controls and procedures or our internal control over
financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of our
control system reflects the fact that there are resource constraints and the benefits of such controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control failures and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part on certain
assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of managements assessments of the current
effectiveness of our disclosure controls and procedures and its internal control over financial reporting are subject to risks. However, our disclosure controls and procedures are designed to provide reasonable assurance that the objectives of our
control system are met.

Evaluation of Disclosure Controls and Procedures.    As of the end of the
period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), of the
effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). This evaluation included consideration of the various processes carried out under the direction
of our disclosure committee in an effort to ensure that information required to be disclosed in our SEC reports is



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##### Index to Financial Statements

recorded, processed, summarized and reported within the time periods specified by the SEC. This evaluation also considered the work completed relating to our
compliance with Section 404 of the Sarbanes-Oxley Act of 2002, which is further described below.

Based on this evaluation, our CEO
and CFO concluded that, as of May 31, 2009, our disclosure controls and procedures were operating effectively to ensure that the information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the
requisite time periods and that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting.    There were no changes in our internal control over
financial reporting (as defined in Rules 13a-13(f) and 15d-15(f) of the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting during the fourth quarter of fiscal 2009.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None



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##### Index to Financial Statements

Managements Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for
external purposes in accordance with U.S. generally accepted accounting principles.

Internal control over financial reporting cannot
provide absolute assurance of achieving financial objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected
on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not
eliminate, this risk.

We have used the framework set forth in the report entitled Internal ControlIntegrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our internal control over financial reporting. We have concluded that our internal control over financial reporting was effective as of
May 31, 2009.



|                                     |  |                                                             
|------------------------------------ |  | ------------------------------------------------------------
|                                     | 
|/S/    PHILIP J. HAWK                |  | /S/    TED W.
OWEN                                          
|Philip J. Hawk                       |  | Ted W. Owen                                                 
|Chairman and Chief Executive Officer |  | Principal Financial Officer and Principal Accounting Officer



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PART III

The information for the following items of Part III has been omitted from this Report on Form 10-K since we will file, not later than 120 days
following the close of our fiscal year ended May 31, 2009, our definitive proxy statement. The information required by Part III will be included in that proxy statement and such information is hereby incorporated by reference, with the
exception of the information under the headings Compensation Committee Report.



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------



|ITEM 13. | CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|-------- | ---------------------------------------------------------------------



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------



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PART IV



|ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|-------- | ---------------------------------------

(a) 1. Financial Statements

The financial statements and notes thereto can be found on the following
pages:



|                                                                                                |  |   
|----------------------------------------------------------------------------------------------- |  | --
|Reports of Independent Registered Public Accounting Firm                                        |  | 30
|Consolidated Balance Sheets as of May 31, 2009 and 2008                                         |  | 32
|Consolidated Statements of Operations for the Years Ended May 31, 2009, 2008 and 2007           |  | 33
|Consolidated Statements of Comprehensive Income for the Years Ended May 31, 2009, 2008 and 2007 |  | 34
|Consolidated Statements of Stockholders Equity for the Years Ended May 31, 2009, 2008 and
2007 |  | 35
|Consolidated Statements of Cash Flows for the Years Ended May 31, 2009, 2008 and 2007           |  | 36
|Notes to Consolidated Financial Statements                                                      |  | 37



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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Team, Inc. and Subsidiaries:

We have audited Team, Inc. and Subsidiaries internal control over financial reporting as of May 31, 2009, based on criteria
established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Team, Inc. and Subsidiaries management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Annual Report on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the Companys internal control over financial reporting based on our audit.

We conducted our audit in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Team, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of May 31, 2009,
based on criteria established in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Team, Inc. and Subsidiaries as of May 31, 2009 and 2008, and
the related consolidated statements of operations, comprehensive income, stockholders equity, and cash flows for each of the years in the three-year period ended May 31, 2009, and our report dated August 11, 2009 expressed an unqualified
opinion on those consolidated financial statements.

/s/    KPMG LLP

Houston, Texas

August 11, 2009



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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Team, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Team, Inc. and Subsidiaries as of May 31, 2009 and 2008, and the related
consolidated statements of operations, comprehensive income, stockholders equity, and cash flows for each of the years in the three-year period ended May 31, 2009. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Team, Inc. and Subsidiaries as of May 31, 2009 and 2008, and the results of
their operations and their cash flows for each of the years in the three-year period ended May 31, 2009, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Team, Inc. and Subsidiaries internal control over financial reporting as of May 31, 2009,
based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated August 11, 2009 expressed an unqualified opinion on the
effectiveness of the Companys internal control over financial reporting.

/s/    KPMG LLP

Houston, Texas

August 11, 2009



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TEAM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in
thousands, except share and per share data)



|                                                                                                              |  |         |         |   |      |   |        
|------------------------------------------------------------------------------------------------------------- |  | ------- | ------- | - | ---- | - | -------
|                                                                                                              |  | May 31,
|                                                                                                              |  | 2009    |         |   | 2008
|ASSETS                                                                                                        |  |         |         |   |      |   |        
|Current Assets:                                                                                               |  |         |         |   |      |   |        
|Cash and cash equivalents                                                                                     |  | $       | 12,632  |   |      | $ | 6,600  
|Receivables, net of allowance of $3,662 and $3,586                                                            |  |         | 114,279 |   |      |   | 126,854
|Inventory                                                                                                     |  |         | 19,647  |   |      |   | 16,408 
|Income tax receivable                                                                                         |  |         | 1,461   |   |      |   | 834    
|Deferred income taxes                                                                                         |  |         | 944     |   |      |   | 687    
|Prepaid expenses and other current assets                                                                     |  |         | 7,674   |   |      |   | 6,831  
|                                                                                                              |  |         |         |   |      |   |        
|Total Current Assets                                                                                          |  |         | 156,637 |   |      |   | 158,214
|Property, plant and equipment, net                                                                            |  |         | 59,582  |   |      |   | 56,138 
|Intangible assets, net of accumulated amortization of $1,734 and $1,308                                       |  |         | 953     |   |      |   | 1,276  
|Goodwill                                                                                                      |  |         | 56,453  |   |      |   | 62,904 
|Other assets, net                                                                                             |  |         | 2,296   |   |      |   | 1,929  
|                                                                                                              |  |         |         |   |      |   |        
|Total Assets                                                                                                  |  | $       | 275,921 |   |      | $ | 280,461
|                                                                                                              |  |         |         |   |      |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                          |  |         |         |   |      |   |        
|Current Liabilities:                                                                                          |  |         |         |   |      |   |        
|Current portion of long-term debt                                                                             |  | $       | 4,813   |   |      | $ | 6,249  
|Accounts payable                                                                                              |  |         | 14,928  |   |      |   | 21,462 
|Other accrued liabilities                                                                                     |  |         | 23,102  |   |      |   | 25,636 
|Insurance note payable                                                                                        |  |         | 3,949   |   |      |   | 3,397  
|                                                                                                              |  |         |         |   |      |   |        
|Total Current Liabilities                                                                                     |  |         | 46,792  |   |      |   | 56,744 
|Deferred income taxes                                                                                         |  |         | 5,939   |   |      |   | 6,137  
|Long-term debt                                                                                                |  |         | 76,689  |   |      |   | 96,818 
|                                                                                                              |  |         |         |   |      |   |        
|Total Liabilities                                                                                             |  |         | 129,420 |   |      |   | 159,699
|Commitments and contingencies                                                                                 |  |         |         |   |      |   |        
|Stockholders Equity:                                                                                         |  |         |         |   |      |   |        
|Preferred stock, 500,000 shares authorized, none issued                                                       |  |         |        |   |      |   |       
|Common stock, par value $.30 per share, 30,000,000 shares authorized; 18,836,709 and 18,580,171 shares issued |  |         | 5,651   |   |      |   | 5,573  
|Additional paid-in capital                                                                                    |  |         | 63,125  |   |      |   | 55,251 
|Retained earnings                                                                                             |  |         | 80,278  |   |      |   | 57,367 
|Accumulated other comprehensive income (loss)                                                                 |  |         | (2,553  | ) |      |   | 2,571  
|                                                                                                              |  |         |         |   |      |   |        
|Total Stockholders Equity                                                                                    |  |         | 146,501 |   |      |   | 120,762
|                                                                                                              |  |         |         |   |      |   |        
|Total Liabilities and Stockholders Equity                                                                    |  | $       | 275,921 |   |      | $ | 280,461
|                                                                                                              |  |         |         |   |      |   |        



See notes to
consolidated financial statements.



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TEAM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)



|                                             |  |                             |         |      |   |         |  |   |        
|-------------------------------------------- |  | --------------------------- | ------- | ---- | - | ------- |  | - | -------
|                                             |  | Twelve Months Ended May 31,
|                                             |  | 2009                        |         | 2008 |   | 2007   
|Revenues                                     |  | $                           | 497,559 |      | $ | 478,475 |  | $ | 318,348
|Operating expenses                           |  |                             | 340,500 |      |   | 322,810 |  |   | 208,186
|                                             |  |                             |         |      |   |         |  |   |        
|Gross margin                                 |  |                             | 157,059 |      |   | 155,665 |  |   | 110,162
|Selling, general and administrative expenses |  |                             | 116,761 |      |   | 109,792 |  |   | 79,825 
|Earnings from unconsolidated affiliates      |  |                             | 973     |      |   |        |  |   |       
|                                             |  |                             |         |      |   |         |  |   |        
|Operating income                             |  |                             | 41,271  |      |   | 45,873  |  |   | 30,337 
|Interest expense, net                        |  |                             | 4,872   |      |   | 6,491   |  |   | 4,204  
|                                             |  |                             |         |      |   |         |  |   |        
|Earnings before income taxes                 |  |                             | 36,399  |      |   | 39,382  |  |   | 26,133 
|Provision for income taxes                   |  |                             | 13,488  |      |   | 15,759  |  |   | 10,618 
|                                             |  |                             |         |      |   |         |  |   |        
|Net income                                   |  | $                           | 22,911  |      | $ | 23,623  |  | $ | 15,515 
|                                             |  |                             |         |      |   |         |  |   |        
|Net income per share: Basic                  |  | $                           | 1.22    |      | $ | 1.30    |  | $ | 0.88   
|Net income per share: Diluted                |  | $                           | 1.16    |      | $ | 1.20    |  | $ | 0.82   
|Weighted average shares outstanding          |  |                             |         |      |   |         |  |   |        
|Basic                                        |  |                             | 18,793  |      |   | 18,226  |  |   | 17,540 
|Diluted                                      |  |                             | 19,725  |      |   | 19,676  |  |   | 18,866 



See notes to
consolidated financial statements.



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TEAM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)



|                                        |  |                             |        |   |      |   |        |      |  |   |        |  
|--------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                        |  | Twelve Months Ended May 31, |       
|                                        |  | 2009                        |        |   | 2008 |   |        | 2007 | 
|Net income                              |  | $                           | 22,911 |   |      | $ | 23,623 |      |  | $ | 15,515 |  
|Foreign currency translation adjustment |  |                             | (9,541 | ) |      |   | 4,935  |      |  |   | 429    |  
|Interest rate swap                      |  |                             | (151   | ) |      |   | (665   | )    |  |   |       |  
|Foreign currency hedge                  |  |                             | 1,767  |   |      |   | (1,163 | )    |  |   |       |  
|Tax provision                           |  |                             | 2,801  |   |      |   | (1,181 | )    |  |   | (148   | )
|                                        |  |                             |        |   |      |   |        |      |  |   |        |  
|Comprehensive income                    |  | $                           | 17,787 |   |      | $ | 25,549 |      |  | $ | 15,796 |  
|                                        |  |                             |        |   |      |   |        |      |  |   |        |  



See notes to
consolidated financial statements.



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TEAM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(in thousands)



|                                                      |  |              |   |  |                |   |  |             |       |               |   |        |                          |  |   |                  |   |  |                                            |        |   |                          |   |        |   |  |   |         |  
|----------------------------------------------------- |  | ------------ | - |  | -------------- | - |  | ----------- | ----- | ------------- | - | ------ | ------------------------ |  | - | ---------------- | - |  | ------------------------------------------ | ------ | - | ------------------------ | - | ------ | - |  | - | ------- | -
|                                                      |  | CommonShares |   |  | TreasuryShares |   |  | CommonStock |       | TreasuryStock |   |        | AdditionalPaid inCapital |  |   | RetainedEarnings |   |  | AccumulatedOtherComprehensiveIncome (Loss) |        |   | TotalStockholdersEquity |  
|Balance at June 1, 2006                               |  | 19,318       |   |  | (1,018         | ) |  | $           | 2,898 |               | $ | (5,032 | )                        |  | $ | 44,723           |   |  | $                                          | 20,932 |   |                          | $ | 364    |   |  | $ | 63,885  |  
|Net income                                            |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   |                 |   |  |                                            | 15,515 |   |                          |   |       |   |  |   | 15,515  |  
|Foreign currency translation adjustment, net of tax   |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   |                 |   |  |                                            |       |   |                          |   | 281    |   |  |   | 281     |  
|Non-cash compensation                                 |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   | 1,425            |   |  |                                            |       |   |                          |   |       |   |  |   | 1,425   |  
|Shares issued                                         |  | 4            |   |  |               |   |  |             | 1     |               |   |       |                          |  |   | 59               |   |  |                                            |       |   |                          |   |       |   |  |   | 60      |  
|Exercise of stock options                             |  | 574          |   |  |               |   |  |             | 85    |               |   |       |                          |  |   | 1,626            |   |  |                                            |       |   |                          |   |       |   |  |   | 1,711   |  
|Tax benefit from exercise of stock options            |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   | 1,326            |   |  |                                            |       |   |                          |   |       |   |  |   | 1,326   |  
|                                                      |  |              |   |  |                |   |  |             |       |               |   |        |                          |  |   |                  |   |  |                                            |        |   |                          |   |        |   |  |   |         |  
|Balance at May 31, 2007                               |  | 19,896       |   |  | (1,018         | ) |  |             | 2,984 |               |   | (5,032 | )                        |  |   | 49,159           |   |  |                                            | 36,447 |   |                          |   | 645    |   |  |   | 84,203  |  
|Net income                                            |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   |                 |   |  |                                            | 23,623 |   |                          |   |       |   |  |   | 23,623  |  
|Foreign currency translation adjustment, net of tax   |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   |                 |   |  |                                            |       |   |                          |   | 3,052  |   |  |   | 3,052   |  
|Foreign currency hedge, net of tax                    |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   |                 |   |  |                                            |       |   |                          |   | (716   | ) |  |   | (716    | )
|Interest rate swap, net of tax                        |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   |                 |   |  |                                            |       |   |                          |   | (410   | ) |  |   | (410    | )
|Non-cash compensation                                 |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   | 3,329            |   |  |                                            |       |   |                          |   |       |   |  |   | 3,329   |  
|Shares issued                                         |  | 1            |   |  |               |   |  |             | 1     |               |   |       |                          |  |   | 59               |   |  |                                            |       |   |                          |   |       |   |  |   | 60      |  
|Stock split                                           |  | (2,035       | ) |  | 1,018          |   |  |             | 2,397 |               |   | 5,032  |                          |  |   | (4,726           | ) |  |                                            | (2,703 | ) |                          |   |       |   |  |   |        |  
|Exercise of stock options                             |  | 718          |   |  |               |   |  |             | 191   |               |   |       |                          |  |   | 3,117            |   |  |                                            |       |   |                          |   |       |   |  |   | 3,308   |  
|Tax benefit of exercise of stock options              |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   | 4,313            |   |  |                                            |       |   |                          |   |       |   |  |   | 4,313   |  
|                                                      |  |              |   |  |                |   |  |             |       |               |   |        |                          |  |   |                  |   |  |                                            |        |   |                          |   |        |   |  |   |         |  
|Balance at May 31, 2008                               |  | 18,580       |   |  |               |   |  |             | 5,573 |               |   |       |                          |  |   | 55,251           |   |  |                                            | 57,367 |   |                          |   | 2,571  |   |  |   | 120,762 |  
|Net income                                            |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   |                 |   |  |                                            | 22,911 |   |                          |   |       |   |  |   | 22,911  |  
|Foreign currency translation adjustment, net of tax   |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   |                 |   |  |                                            |       |   |                          |   | (6,119 | ) |  |   | (6,119  | )
|Foreign currency hedge, net of tax                    |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   |                 |   |  |                                            |       |   |                          |   | 1,089  |   |  |   | 1,089   |  
|Interest rate swap, net of tax                        |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   |                 |   |  |                                            |       |   |                          |   | (94    | ) |  |   | (94     | )
|Non-cash compensation                                 |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   | 4,626            |   |  |                                            |       |   |                          |   |       |   |  |   | 4,626   |  
|Shares issued                                         |  | 4            |   |  |               |   |  |             | 1     |               |   |       |                          |  |   | 134              |   |  |                                            |       |   |                          |   |       |   |  |   | 135     |  
|Exercise of stock options and vesting of stock awards |  | 253          |   |  |               |   |  |             | 77    |               |   |       |                          |  |   | 1,544            |   |  |                                            |       |   |                          |   |       |   |  |   | 1,621   |  
|Tax benefit of exercise of stock options              |  |             |   |  |               |   |  |             |      |               |   |       |                          |  |   | 1,570            |   |  |                                            |       |   |                          |   |       |   |  |   | 1,570   |  
|                                                      |  |              |   |  |                |   |  |             |       |               |   |        |                          |  |   |                  |   |  |                                            |        |   |                          |   |        |   |  |   |         |  
|Balance at May 31, 2009                               |  | 18,837       |   |  |               |   |  | $           | 5,651 |               | $ |       |                          |  | $ | 63,125           |   |  | $                                          | 80,278 |   |                          | $ | (2,553 | ) |  | $ | 146,501 |  
|                                                      |  |              |   |  |                |   |  |             |       |               |   |        |                          |  |   |                  |   |  |                                            |        |   |                          |   |        |   |  |   |         |  



See notes to
consolidated financial statements.



35



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##### Index to Financial Statements

TEAM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                  |  | Twelve Months EndedMay 31, |        
|                                                                                  |  | 2009                       |         |   | 2008 |   |         | 2007 | 
|Cash Flows From Operating Activities:                                             |  |                            |         |   |      |   |         |      |  |   |         |  
|Net income                                                                        |  | $                          | 22,911  |   |      | $ | 23,623  |      |  | $ | 15,515  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                            |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization                                                     |  |                            | 12,116  |   |      |   | 11,285  |      |  |   | 7,777   |  
|Amortization of deferred loan costs                                               |  |                            | 189     |   |      |   | 278     |      |  |   | 446     |  
|Allowance for doubtful accounts                                                   |  |                            | 76      |   |      |   | 1,238   |      |  |   | 1,094   |  
|Minority interest in earnings and other                                           |  |                            | (973    | ) |      |   | (8      | )    |  |   | (303    | )
|Deferred income taxes                                                             |  |                            | 2,350   |   |      |   | 2,299   |      |  |   | 2,085   |  
|Non-cash compensation cost                                                        |  |                            | 4,761   |   |      |   | 3,329   |      |  |   | 1,425   |  
|Changes in assets and liabilities, net of effects from business acquisitions:     |  |                            |         |   |      |   |         |      |  |   |         |  
|(Increase) decrease:                                                              |  |                            |         |   |      |   |         |      |  |   |         |  
|Accounts receivable                                                               |  |                            | 7,320   |   |      |   | (23,292 | )    |  |   | (17,103 | )
|Inventory                                                                         |  |                            | (3,461  | ) |      |   | (3,929  | )    |  |   | (993    | )
|Prepaid expenses and other current assets                                         |  |                            | (351    | ) |      |   | 1,172   |      |  |   | 30      |  
|Increase (decrease):                                                              |  |                            |         |   |      |   |         |      |  |   |         |  
|Accounts payable                                                                  |  |                            | (6,545  | ) |      |   | 5,780   |      |  |   | 2,582   |  
|Other accrued liabilities                                                         |  |                            | (1,158  | ) |      |   | 2,960   |      |  |   | (992    | )
|Income taxes payable                                                              |  |                            | 1,727   |   |      |   |        |      |  |   | (4,837  | )
|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|Net cash provided by operating activities                                         |  |                            | 38,962  |   |      |   | 24,735  |      |  |   | 6,726   |  
|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|Cash Flows From Investing Activities:                                             |  |                            |         |   |      |   |         |      |  |   |         |  
|Capital expenditures                                                              |  |                            | (16,383 | ) |      |   | (25,612 | )    |  |   | (16,497 | )
|Proceeds from sale of assets                                                      |  |                            | 136     |   |      |   | 47      |      |  |   | 262     |  
|(Increase) decrease in other assets, net                                          |  |                            | 1,500   |   |      |   | (1,934  | )    |  |   | 465     |  
|Acquisition of minority interest                                                  |  |                            |        |   |      |   | (297    | )    |  |   |        |  
|Business acquisitions, net of cash acquired                                       |  |                            |        |   |      |   | (53,261 | )    |  |   |        |  
|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|Net cash used in investing activities                                             |  |                            | (14,747 | ) |      |   | (81,057 | )    |  |   | (15,770 | )
|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|Cash Flows From Financing Activities:                                             |  |                            |         |   |      |   |         |      |  |   |         |  
|Borrowings (payments) under revolving credit agreement                            |  |                            | (13,428 | ) |      |   | 53,120  |      |  |   | 12,250  |  
|Payments related to term loans                                                    |  |                            | (6,000  | ) |      |   | (4,852  | )    |  |   | (4,317  | )
|Tax benefit of stock option exercises                                             |  |                            | 1,570   |   |      |   | 4,313   |      |  |   | 1,326   |  
|Loan financing fees                                                               |  |                            |        |   |      |   | (99     | )    |  |   | (510    | )
|Issuance of common stock                                                          |  |                            | 1,621   |   |      |   | 3,368   |      |  |   | 1,771   |  
|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) financing activities                               |  |                            | (16,237 | ) |      |   | 55,850  |      |  |   | 10,520  |  
|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|Effect of exchange rate changes on cash                                           |  |                            | (1,946  | ) |      |   | 2,737   |      |  |   | 281     |  
|Net increase in cash and cash equivalents                                         |  |                            | 6,032   |   |      |   | 2,265   |      |  |   | 1,757   |  
|Cash and cash equivalents at beginning of year                                    |  |                            | 6,600   |   |      |   | 4,335   |      |  |   | 2,578   |  
|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of year                                          |  | $                          | 12,632  |   |      | $ | 6,600   |      |  | $ | 4,335   |  
|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|Supplemental disclosure of cash flow information:                                 |  |                            |         |   |      |   |         |      |  |   |         |  
|Cash paid during the period for:                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|Interest                                                                          |  | $                          | 5,336   |   |      | $ | 5,720   |      |  | $ | 4,034   |  
|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  
|Income taxes                                                                      |  | $                          | 7,909   |   |      | $ | 8,952   |      |  | $ | 13,078  |  
|                                                                                  |  |                            |         |   |      |   |         |      |  |   |         |  



See notes to
consolidated financial statements.



36



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##### Table of Contents

##### Index to Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

Introduction.    Unless otherwise indicated, the terms Team, Inc., Team, the Company, we, our and us are used in this report to refer
to Team, Inc., to one or more of our consolidated subsidiaries or to all of them taken as a whole. We are incorporated in the State of Texas and our company website can be found at www.teamindustrialservices.com . Our corporate headquarters
is located at 200 Hermann Drive, Alvin, Texas, 77511 and our telephone number is (281) 331-6154. Our stock is traded on the NASDAQ Global Select Market (NASDAQ) under the symbol TISI and our fiscal year ends on
May 31 of each calendar year.

We are a leading provider of specialty maintenance and construction services required in maintaining
high temperature and high pressure piping systems and vessels that are utilized extensively in heavy industries. We offer an array of complimentary services including:



| |  |  | leak repair,
| | - |  | ------------



| |  |  | hot tapping,
| | - |  | ------------



| |  |  | fugitive emissions control,
| | - |  | ---------------------------



| |  |  | field machining,
| | - |  | ----------------



| |  |  | technical bolting,
| | - |  | ------------------



| |  |  | field valve repair,
| | - |  | -------------------



| |  |  | non-destructive testing, and
| | - |  | ----------------------------



| |  |  | field heat treating.
| | - |  | --------------------

We offer these
services in over 100 locations throughout the United States and international markets including Aruba, Belgium, Canada, Singapore, The Netherlands, Trinidad and Venezuela.

Our industrial services are available 24 hours a day, 7 days a week, 365 days a year. We market our services to companies in a diverse array of
industries which include the petrochemical, refining, power, pipeline, pulp and paper, steel industries municipalities, shipbuilding, OEMs, distributors and end users and some of the worlds largest engineering and construction firms. Our
products and services are provided across a broad geographic reach. For fiscal year ending May 31, 2009, our revenues by geographic region originated in the United States (70%), Canada (23%), Europe (5%) and other locations outside of
North America (2%).

Consolidation.    Our consolidated condensed financial statements include the
financial statements of Team, Inc. and our majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in operating entities where we have the ability to exert significant
influence, but where we do not control their operating and financial policies, are accounted for using the equity method.

Use of
Estimates.    Our accounting policies conform to Generally Accepted Accounting Principles in the U.S. (GAAP). Our most significant accounting policies are described below. The preparation of consolidated
financial statements in conformity with GAAP requires management to make estimates and judgments that affect our reported financial position and results of operations. We review significant estimates and judgments affecting our consolidated
financial statements on a recurring basis and record the effect of any necessary adjustments prior to their publication. Estimates and judgments are based on information available at the time such estimates and judgments are made. Adjustments made
with respect to the use of these estimates and judgments often relate to information not previously available. Uncertainties with respect to such estimates and judgments are inherent in the preparation of financial statements. Estimates and
judgments are used in, among other things, (1) aspects of revenue recognition, (2) analyzing tangible and intangible assets for possible impairment, (3) assessing future



37



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##### Table of Contents

##### Index to Financial Statements

tax exposure and the realization of tax assets, (4) estimating various factors used to accrue liabilities for workers compensation, auto, medical and
general liability, (5) establishing an allowance for uncollectible accounts receivable, and (6) estimating the useful lives of our assets.

Fair Value of Financial Instruments.    Our financial instruments consist primarily of cash, cash equivalents, accounts receivable, accounts payable and debt obligations. The
carrying amount of cash, cash equivalents, trade accounts receivable and trade accounts payable are representative of their respective fair values due to the short-term maturity of these instruments. The fair value of our Credit Facility is
representative of the carrying value based upon the variable terms and managements opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the Credit Facility.

Cash and Cash Equivalents.    Cash and cash equivalents consist of all demand deposits and funds invested in
highly liquid short-term investments with original maturities of three months or less.

Inventories.    Inventories are stated at the lower of cost (first-in, first-out method) or market. Inventories include material, labor and certain fixed overhead costs.

Property, Plant and Equipment.    Property, plant and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization of assets are computed by the straight-line method over the following estimated useful lives of the assets:



|                                |  |            
|------------------------------- |  | -----------
|Classification                  |  | Useful Life
|Buildings                       |  | 20-40 years
|Leasehold improvements          |  | 2-10 years 
|Machinery and equipment         |  | 2-10 years 
|Furniture and fixtures          |  | 2-10 years 
|Computers and computer software |  | 2-5 years  
|Automobiles                     |  | 2-5 years  

Goodwill and Other Intangible Assets.    Goodwill represents the
excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but are instead tested for impairment at
least annually in accordance with the provisions of the Financial Accounting Standards Board (FASB) Statement No. 142, Goodwill and Other Intangible Assets (FASB No. 142). Intangible assets with estimated useful
lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with FASB Statement No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

Our annual goodwill impairment test is conducted by first comparing the estimated fair value of the reporting unit to which the intangible
asset is attributable and then comparing the implied fair value of goodwill with its carrying amount. The estimated fair value of the reporting unit is determined by using discounted future cash flow estimates. The reporting units used
for purposes of computing the annual impairment test of goodwill, pursuant to FASB No. 142, are the divisions one level below our industrial segment, which comprise our industrial services segment. All goodwill assigned to those reporting units
is attributable to business acquisitions that are part of those units. There was $56.5 million and $62.9 million of goodwill at May 31, 2009 and 2008, respectively. Based upon results of the annual impairment testing, conducted in May 2009,
there have been no impairments of goodwill. A summary of goodwill as of May 31, 2009 and 2008 is as follows (in thousands):



|                                            |  |                            |        |   |      |   |       
|------------------------------------------- |  | -------------------------- | ------ | - | ---- | - | ------
|                                            |  | Twelve Months EndedMay 31,
|                                            |  | 2009                       |        |   | 2008
|Balance at beginning of year                |  | $                          | 62,904 |   |      | $ | 26,452
|Acquisitions and purchase price adjustments |  |                            | (3,097 | ) |      |   | 35,238
|Foreign currency adjustments                |  |                            | (3,354 | ) |      |   | 1,214 
|Impairments                                 |  |                            |       |   |      |   |      
|                                            |  |                            |        |   |      |   |       
|Balance at end of year                      |  | $                          | 56,453 |   |      | $ | 62,904
|                                            |  |                            |        |   |      |   |       



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##### Index to Financial Statements

Income Taxes.    We follow the guidance in FASB Statement
No. 109,Accounting for Income Taxes,which requires that we use the asset and liability method of accounting for deferred income taxes and provide deferred income taxes for all significant temporary differences. As part of the process
of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our actual current tax payable and related tax expense together with
assessing temporary differences resulting from differing treatment of certain items, such as depreciation, for tax and accounting purposes. These differences can result in deferred tax assets and liabilities, which are included within our
consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that it is more likely than not (a likelihood of more than 50%) that some portion
or all of the deferred tax assets will not be realized, we must establish a valuation allowance. We consider all available evidence, both positive and negative, to determine whether, based on the weight of the evidence, a valuation allowance is
needed. Evidence used includes information about our current financial position and our results of operations for the current and preceding years, as well as all currently available information about future years, including our anticipated future
performance, the reversal of deferred tax liabilities and tax planning strategies.

Allowance for Doubtful
Accounts.    In the ordinary course of business, a percentage of our accounts receivable are not collected due to billing disputes, customer bankruptcies, dissatisfaction with the services we performed and other various
reasons. To account for those accounts receivable that will eventually be deemed uncollectible we establish an allowance. The allowance for doubtful accounts is based on a combination of our historical experience and managements review of long
outstanding accounts receivable.

Workers Compensation, Auto, Medical and General Liability
Accruals.In accordance with FASB Statement No. 5, Accounting for Contingencies (FASB No. 5), we record a loss contingency when it is probable that a liability has been incurred and the
amount of the loss can be reasonably estimated. We review our loss contingencies on an ongoing basis to ensure that we have appropriate reserves recorded on our balance sheet. These reserves are based on historical experience with claims incurred
but not received, estimates and judgments made by management, applicable insurance coverage for litigation matters, and are adjusted as circumstances warrant. As of May 31, 2009, for workers compensation, automobile liability and general
liability claims, our self-insured retention increased to $500,000 per occurrence. For medical claims, our self-insured retention is $150,000 per individual claimant determined on an annual basis. For environmental liability claims, our self-insured
retention is $100,000 per occurrence. We maintain insurance for claims that exceed such self-retention limits. The insurance is subject to terms, conditions, limitations and exclusions that may not fully compensate us for all losses. Our estimates
and judgment could change based on new information, changes in laws or regulations, changes in managements plans or intentions, or the outcome of legal proceedings, settlements or other factors. If different estimates and judgments were
applied with respect to these matters, it is likely that reserves would be recorded for different amounts.

Revenue
Recognition.    We determine our revenue recognition guidelines for our operations based on guidance provided in applicable accounting standards and positions adopted by the FASB or the SEC. Most of our projects are
short-term in nature and we predominantly derive revenues by providing a variety of industrial services, on a time and material basis. For all of these services our revenues are recognized when services are rendered or when product is shipped and
risk of ownership passes to the customer. However, due to various contractual terms with our customers, at the end of any reporting period there may be earned but unbilled revenue that is accrued to properly match revenues with related costs. At
May 31, 2009 and 2008, the amount of earned but unbilled revenue included in accounts receivable was $6.5 million and $7.5 million, respectively.

Concentration of Credit Risk.    No single customer accounts for more than 10% of consolidated revenues.

Earnings Per Share.    Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted
earnings per share are computed by dividing net income by the sum of (1) the weighted-average number of shares of common stock outstanding during the period and (2) the dilutive effect of the assumed exercise of stock options using the
treasury stock



39



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##### Table of Contents

##### Index to Financial Statements

method. There is no difference, for any of the years presented, in the amount of net income (numerator) used in the computation of basic and diluted earnings
per share. With respect to the number of weighted average shares outstanding (denominator), diluted shares reflects only the pro forma exercise of options to acquire common stock to the extent that the options exercise prices are less than the
average market price of common shares during the period.

Options to purchase 695,000, 659,000 and 209,000 shares of common stock were
outstanding during the twelve month periods ended May 31, 2009, 2008 and 2007, respectively, but were not included in the computation of diluted earnings per share because the options exercise prices were greater than the average market
price of common shares during the period.

Foreign Currency.    For subsidiaries whose functional
currency is not the U.S. Dollar, assets and liabilities are translated at period ending rates of exchange and revenues and expenses are translated at period average exchange rates. Translation adjustments for the asset and liability accounts are
included as a separate component of accumulated other comprehensive income in stockholders equity. There were no material transaction gains or losses in any periods presented.

Accounting Principles Not Yet Adopted

FASB No. 168.In
June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (FASB No. 168). FASB No. 168 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. FASB No. 168 will supersede all then-existing non-SEC accounting and
reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will be come non-authoritative. FASB No. 168 is effective for financial statements issued for interim and annual periods ending after
September 15, 2009. We do not believe this pronouncement will have any effect on our results of operations, financial position or cash flows.

FASB No. 167.    In June 2009, the FASB issued Statement No. 167, Amendments to FASB Interpretation No. 46(R), which amends the consolidation guidance applicable to variable interest entities.
The amendments will significantly affect the overall consolidation analysis under FASB Interpretation No. 46(R). This statement is effective as of the beginning of the first fiscal year that begins after November 15, 2009. We are still assessing the
impact of this statement on our results of operations, financial position or cash flows.

FASB No.
165.In May 2009, the FASB issued Statement No. 165, Subsequent Events, which established principles and requirements for subsequent events. The statement details the period after the balance sheet date
during which the Company should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which the Company should recognize events or transactions occurring after the
balance sheet date in its financial statements and the required disclosures for such events. This statement is effective for interim or annual reporting periods ending after June 15, 2009. We do not anticipate FASB No. 165 will have a material
effect on our results of operations, financial position or cash flows.

FASB
No. 141R.    In December 2007, the FASB issued Statement No. 141 (revised 2007), Business Combinations (FASB No. 141R) which replaces FASB No. 141, Business
Combinations. FASB No. 141R applies to all business combinations, including combinations among mutual entities and combinations by contract alone. FASB No. 141R requires that all business combinations will be accounted for by
applying the acquisition method. FASB No. 141R is effective for business combinations consummated in fiscal years beginning on or after December 15, 2008. Early application is prohibited. We are still assessing what impact this
pronouncement will have on our results of operations, financial position or cash flows.



40



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##### Index to Financial Statements

Newly Adopted Accounting Principles

FASB No. 162.In May 2008, the FASB issued Statement No. 162, The Hierarchy of Generally Accepted Accounting
Principles (FASB No. 162). FASB No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of non-governmental entities that are
presented in conformity with generally accepted accounting principles. FASB No. 162 directs the hierarchy to the entity, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity
with generally accepted accounting principles. FASB No. 162 became effective on November 13, 2008 and had no effect on our results of operations, financial position or cash flows.

FASB No. 161.    In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133 (FASB No. 161). FASB No. 161 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items
are accounted for, and how such derivative instruments affect an entitys financial position, financial performance and cash flows. FASB No. 161 became effective for us on November 15, 2008 and did not have a material effect on our results of
operations, financial position or cash flows.

FASB No. 159.    In February 2007, the FASB issued
Statement No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115 (FASB No. 159), which permits an entity to choose to measure financial instruments and
certain other items similar to financial instruments at fair value. All subsequent changes to fair value for the financial instrument would be reported in earnings. FASB No. 159 was effective June 1, 2008. We did not adopt the fair value option
permitted under this statement.

FASB No. 157.    In September 2006, the FASB issued Statement No. 157,
Fair Value Measurements (FASB No. 157). This statement defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements for financial assets and liabilities, as
well as any other assets and liabilities that are carried at fair value on a recurring basis in financial statements. It applies under other accounting pronouncements that require or permit fair value measurements, and does not require any new fair
value measurements. The application of FASB No. 157, however, may change current practice within an organization. FASB No. 157 was effective January 1, 2008, applied prospectively. In February 2008, the FASB issued FASB Staff Position No. 157- 2,
Effective Date of FASB Statement No. 157, which provided a one-year deferral for the implementation of FASB No. 157 for certain non-financial assets and liabilities measured on a nonrecurring basis. Effective June 1, 2008, we adopted
the provisions of FASB No. 157 relating to financial assets and liabilities. The adoption of FASB No. 157 with respect to financial assets and liabilities did not have a material financial impact on our consolidated results of operations, financial
condition or cash flows. We are currently evaluating the impact of implementation with respect to non-financial assets and liabilities measured on a nonrecurring basis on our consolidated financial statements, which will be primarily limited to
asset impairments including goodwill, intangible assets and other long-lived assets, assets acquired and liabilities assumed in a business combination.

FSP FAS 157-3.    In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (FSP FAS
157-3). This FSP clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is
not active. This FSP was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 had no effect on our results of operations, financial position or cash flows.



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EITF 06-3.    In June 2006, the FASBs Emerging Issues Task
Force (the Task Force) issued consensus 06-3 , How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation) (EITF
06-3). In EITF 06-3, the Task Force reached a consensus that the presentation of tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer and
disclosed on either a gross basis (included in revenues and costs) or a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. In addition, for any such taxes that are reported on a gross basis, an entity
should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. EITF 06-3 is effective for reporting periods beginning after
December 15, 2006. The adoption of EITF 06-3 on June 1, 2007 did not have a material effect on our results of operations, financial position or cash flows.

2. ACQUISITIONS AND DISPOSITIONS

On January 9, 2008, we acquired all the stock of Leak Repair
Specam, (LRS), a specialty industrial services company. LRS provides a range of services similar to those offered by our TMS division including on-stream leak sealing, hot tapping, fugitive emissions monitoring, field machining and
bolting services. LRS is headquartered near Vlissingen, The Netherlands and has four service locations in The Netherlands and Belgium. The purchase price of the acquisition including working capital adjustments, professional fees, and net of cash
acquired, was $18.6 million. Financing for the acquisition was obtained through our banking syndicate. Information regarding the allocation of the purchase price to our acquisition, including intangible assets amortizing over five years, is set
forth below (in thousands):



|                                  |  |             |       
|--------------------------------- |  | ----------- | ------
|                                  |  | (unaudited)
|Receivables                       |  | $           | 6,030 
|Inventory                         |  |             | 579   
|Prepaids and other current assets |  |             | 760   
|Property, plant and equipment     |  |             | 1,499 
|Intangible assetsTrade-mark      |  |             | 237   
|Goodwill                          |  |             | 13,737
|                                  |  |             |       
|Total Assets Acquired             |  | $           | 22,842
|                                  |  |             |       
|Accounts payable                  |  | $           | 1,871 
|Accrued liabilities and other     |  |             | 2,412 
|                                  |  |             |       
|Total Liabilities Assumed         |  |             | 4,283 
|                                  |  |             |       
|Net Assets Acquired               |  | $           | 18,559
|                                  |  |             |       



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On June 1, 2007, we acquired all the stock of Aitec, Inc. (Aitec). The final purchase
price of $34.7 million includes working capital adjustments of $0.1 million and professional fees of $0.8 million. Aitec is a non-destructive testing and inspection services company headquartered near Toronto, Ontario with 13 service locations
across Canada. Financing for the acquisition was obtained through our banking syndicate. Information regarding the allocation of the purchase price to our acquisition, including intangible assets amortizing over five years, is set forth below (in
thousands):



|                                  |  |             |       
|--------------------------------- |  | ----------- | ------
|                                  |  | (unaudited)
|Receivables                       |  | $           | 12,983
|Inventory                         |  |             | 382   
|Prepaids and other current assets |  |             | 1,415 
|Property, plant and equipment     |  |             | 4,460 
|Intangible assetsNon-competes    |  |             | 1,250 
|Goodwill                          |  |             | 20,622
|                                  |  |             |       
|Total Assets Acquired             |  | $           | 41,112
|                                  |  |             |       
|Accounts payable                  |  | $           | 3,251 
|Accrued liabilities and other     |  |             | 3,021 
|Deferred taxes                    |  |             | 99    
|                                  |  |             |       
|Total Liabilities Assumed         |  |             | 6,371 
|                                  |  |             |       
|Net Assets Acquired               |  | $           | 34,741
|                                  |  |             |       

3. RECEIVABLES

A summary of accounts receivable as of May 31, 2009 and 2008 is as follows (in thousands):



|                                |  |         |         |   |      |   |         |  
|------------------------------- |  | ------- | ------- | - | ---- | - | ------- | -
|                                |  | May 31, |        
|                                |  | 2009    |         |   | 2008 |  
|Trade accounts receivable       |  | $       | 111,465 |   |      | $ | 122,943 |  
|Unbilled revenues               |  |         | 6,476   |   |      |   | 7,497   |  
|Allowance for doubtful accounts |  |         | (3,662  | ) |      |   | (3,586  | )
|                                |  |         |         |   |      |   |         |  
|Total                           |  | $       | 114,279 |   |      | $ | 126,854 |  
|                                |  |         |         |   |      |   |         |  

The allowance for doubtful accounts is our best estimate of the amount of probable credit losses
in our existing accounts receivable. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is remote. The following summarizes the activity in the allowance for
doubtful accounts as of May 31, 2009 and 2008 (in thousands):



|                                |  |                            |        |   |      |   |       |  
|------------------------------- |  | -------------------------- | ------ | - | ---- | - | ----- | -
|                                |  | Twelve Months EndedMay 31, |       
|                                |  | 2009                       |        |   | 2008 |  
|Balance at beginning of year    |  | $                          | 3,586  |   |      | $ | 2,348 |  
|Provision for doubtful accounts |  |                            | 3,406  |   |      |   | 1,824 |  
|Write-off of bad debt           |  |                            | (3,330 | ) |      |   | (586  | )
|                                |  |                            |        |   |      |   |       |  
|Balance at end of year          |  | $                          | 3,662  |   |      | $ | 3,586 |  
|                                |  |                            |        |   |      |   |       |  



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4. INVENTORY

A summary of inventory as of May 31, 2009 and 2008 is as follows (in thousands):



|                 |  |         |        |      |   |       
|---------------- |  | ------- | ------ | ---- | - | ------
|                 |  | May 31,
|                 |  | 2009    |        | 2008
|Raw materials    |  | $       | 3,071  |      | $ | 2,817 
|Work in progress |  |         | 674    |      |   | 498   
|Finished goods   |  |         | 15,902 |      |   | 13,093
|                 |  |         |        |      |   |       
|Total            |  | $       | 19,647 |      | $ | 16,408
|                 |  |         |        |      |   |       

5. PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment as of May 31, 2009 and 2008 is as follows (in thousands):



|                                          |  |         |         |   |      |   |         |  
|----------------------------------------- |  | ------- | ------- | - | ---- | - | ------- | -
|                                          |  | May 31, |        
|                                          |  | 2009    |         |   | 2008 |  
|Land                                      |  | $       | 945     |   |      | $ | 986     |  
|Buildings and leasehold improvements      |  |         | 7,939   |   |      |   | 7,643   |  
|Machinery and equipment                   |  |         | 88,129  |   |      |   | 74,063  |  
|Furniture and fixtures                    |  |         | 1,659   |   |      |   | 1,508   |  
|Computers and computer software           |  |         | 5,942   |   |      |   | 4,596   |  
|Automobiles                               |  |         | 2,311   |   |      |   | 2,273   |  
|Construction in progress                  |  |         | 8,081   |   |      |   | 8,559   |  
|                                          |  |         |         |   |      |   |         |  
|Total                                     |  |         | 115,006 |   |      |   | 99,628  |  
|Accumulated depreciation and amortization |  |         | (55,424 | ) |      |   | (43,490 | )
|                                          |  |         |         |   |      |   |         |  
|Property, plant, and equipment, net       |  | $       | 59,582  |   |      | $ | 56,138  |  
|                                          |  |         |         |   |      |   |         |  

Included in property, plant and equipment is $0.4 million of capitalized interest attributable to
50 acres purchased in October 2007 to construct future facilities in Houston, Texas. Due to the current economic recession and its effect on our growth, we have postponed construction of the future facilities until such time as the industrial
services sector recovers, and accordingly, have ceased to further capitalize interest until the project resumes.

6. OTHER ACCRUED LIABILITIES

A summary of other accrued liabilities as of May 31, 2009 and 2008 is as follows (in thousands):



|                                        |  |         |        |      |   |       
|--------------------------------------- |  | ------- | ------ | ---- | - | ------
|                                        |  | May 31,
|                                        |  | 2009    |        | 2008
|Payroll and other compensation expenses |  | $       | 14,698 |      | $ | 15,723
|Insurance accruals                      |  |         | 5,020  |      |   | 4,087 
|Property, sales and other taxes         |  |         | 1,082  |      |   | 1,158 
|Auto lease rebate                       |  |         | 446    |      |   | 992   
|Other                                   |  |         | 1,856  |      |   | 3,676 
|                                        |  |         |        |      |   |       
|Total                                   |  | $       | 23,102 |      | $ | 25,636
|                                        |  |         |        |      |   |       



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7. INCOME TAXES

Income tax expense for the years ended May 31, 2009, 2008 and 2007 was as follows (in thousands):



|                                                                                                                                                                      |  |                             |        |   |      |   |        |      |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                                                      |  | Twelve Months Ended May 31, |       
|                                                                                                                                                                      |  | 2009                        |        |   | 2008 |   |        | 2007 | 
|Income tax expense attributable to income                                                                                                                             |  | $                           | 13,488 |   |      | $ | 15,759 |      |  | $ | 10,618 |  
|Taxes allocated to stockholders equity, related to compensation expense recognized for tax purposes in excess of amounts recognized for
financial reporting purposes |  |                             | (1,565 | ) |      |   | (4,313 | )    |  |   | (1,326 | )
|Taxes allocated to stockholders equity, related to foreign currency translation adjustments                                                                          |  |                             | (3,422 | ) |      |   | 1,883  |      |  |   | 148    |  
|Taxes allocated to stockholders equity, related to interest rate swap                                                                                                |  |                             | (57    | ) |      |   | (255   | )    |  |   |       |  
|Taxes allocated to stockholders equity, related to foreign currency hedge                                                                                            |  |                             | 678    |   |      |   | (447   | )    |  |   |       |  
|                                                                                                                                                                      |  |                             |        |   |      |   |        |      |  |   |        |  
|Total                                                                                                                                                                 |  | $                           | 9,122  |   |      | $ | 12,627 |      |  | $ | 9,440  |  
|                                                                                                                                                                      |  |                             |        |   |      |   |        |      |  |   |        |  

Income tax expense attributable to income for the years ended May 31, 2009, 2008 and 2007 was
as follows (in thousands):



|                         |  |         |        |          |   |       |       |  |   |       
|------------------------ |  | ------- | ------ | -------- | - | ----- | ----- |  | - | ------
|                         |  | Current |        | Deferred |   |       | Total
|Year ended May 31, 2009: |  |         |        |          |   |       |       |  |   |       
|U.S. Federal             |  | $       | 4,383  |          | $ | 2,226 |       |  | $ | 6,609 
|State & local            |  |         | 911    |          |   | 235   |       |  |   | 1,146 
|Foreign jurisdictions    |  |         | 5,844  |          |   | (111  | )     |  |   | 5,733 
|                         |  |         |        |          |   |       |       |  |   |       
|                         |  | $       | 11,138 |          | $ | 2,350 |       |  | $ | 13,488
|                         |  |         |        |          |   |       |       |  |   |       
|Year ended May 31, 2008: |  |         |        |          |   |       |       |  |   |       
|U.S. Federal             |  | $       | 7,608  |          | $ | 1,899 |       |  | $ | 9,507 
|State & local            |  |         | 1,243  |          |   | 198   |       |  |   | 1,441 
|Foreign jurisdictions    |  |         | 4,609  |          |   | 202   |       |  |   | 4,811 
|                         |  |         |        |          |   |       |       |  |   |       
|                         |  | $       | 13,460 |          | $ | 2,299 |       |  | $ | 15,759
|                         |  |         |        |          |   |       |       |  |   |       
|Year ended May 31, 2007: |  |         |        |          |   |       |       |  |   |       
|U.S. Federal             |  | $       | 6,099  |          | $ | 1,900 |       |  | $ | 7,999 
|State & local            |  |         | 854    |          |   | 164   |       |  |   | 1,018 
|Foreign jurisdictions    |  |         | 1,566  |          |   | 35    |       |  |   | 1,601 
|                         |  |         |        |          |   |       |       |  |   |       
|                         |  | $       | 8,519  |          | $ | 2,099 |       |  | $ | 10,618
|                         |  |         |        |          |   |       |       |  |   |       

The components of pre-tax income for the years ended May 31, 2009, 2008 and 2007 were as
follows (in thousands):



|         |  |                             |        |      |   |        |  |   |       
|-------- |  | --------------------------- | ------ | ---- | - | ------ |  | - | ------
|         |  | Twelve Months Ended May 31,
|         |  | 2009                        |        | 2008 |   | 2007  
|Domestic |  | $                           | 19,524 |      | $ | 25,993 |  | $ | 21,661
|Foreign  |  |                             | 16,875 |      |   | 13,389 |  |   | 4,472 
|         |  |                             |        |      |   |        |  |   |       
|         |  | $                           | 36,399 |      | $ | 39,382 |  | $ | 26,133
|         |  |                             |        |      |   |        |  |   |       



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Income tax expense attributable to income differed from the amounts computed by applying the U.S. Federal
income tax rate of 35% to pretax income from continuing operations as a result of the following (in thousands):



|                                                              |  |                             |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                              |  | Twelve Months Ended May 31, |       
|                                                              |  | 2009                        |        |   | 2008 |   |        | 2007 | 
|Net Income                                                    |  | $                           | 36,399 |   |      | $ | 39,382 |      |  | $ | 26,133 |  
|                                                              |  |                             |        |   |      |   |        |      |  |   |        |  
|Computed income taxes at statutory rate                       |  | $                           | 12,740 |   |      | $ | 13,784 |      |  | $ | 9,147  |  
|State income taxes, net of federal benefit                    |  |                             | 816    |   |      |   | 1,018  |      |  |   | 719    |  
|Foreign tax differential                                      |  |                             | (192   | ) |      |   | 103    |      |  |   | 35     |  
|Production activity deduction                                 |  |                             | (75    | ) |      |   | (120   | )    |  |   | (80    | )
|Non-deductible expenses                                       |  |                             | 339    |   |      |   | 415    |      |  |   | 344    |  
|Tax credits                                                   |  |                             | (338   | ) |      |   |       |      |  |   |       |  
|Stock options                                                 |  |                             | 803    |   |      |   | 601    |      |  |   | 441    |  
|Other                                                         |  |                             | 68     |   |      |   | (42    | )    |  |   | 12     |  
|                                                              |  |                             |        |   |      |   |        |      |  |   |        |  
|Current provision for income tax                              |  |                             | 14,161 |   |      |   | 15,759 |      |  |   | 10,618 |  
|Tax credits related to prior years, net of FIN No. 48 reserve |  |                             | (673   | ) |      |   |       |      |  |   |       |  
|                                                              |  |                             |        |   |      |   |        |      |  |   |        |  
|Total provision for income tax                                |  | $                           | 13,488 |   |      | $ | 15,759 |      |  | $ | 10,618 |  
|                                                              |  |                             |        |   |      |   |        |      |  |   |        |  

The tax effects of temporary differences that give rise to significant portions of the deferred
tax assets and deferred tax liabilities are presented below (in thousands):



|                                                          |  |         |         |   |      |   |        |  
|--------------------------------------------------------- |  | ------- | ------- | - | ---- | - | ------ | -
|                                                          |  | May 31, |        
|                                                          |  | 2009    |         |   | 2008 |  
|Deferred tax assets:                                      |  |         |         |   |      |   |        |  
|Accrued compensation & benefits                           |  | $       | 987     |   |      | $ | 807    |  
|Receivables                                               |  |         | 910     |   |      |   | 1,053  |  
|Inventory                                                 |  |         | 612     |   |      |   | 385    |  
|Vendor rebates                                            |  |         | 172     |   |      |   | 381    |  
|Stock options                                             |  |         | 1,458   |   |      |   | 560    |  
|Foreign currency translation and other equity adjustments |  |         | 1,385   |   |      |   |       |  
|Other                                                     |  |         | 173     |   |      |   | 308    |  
|                                                          |  |         |         |   |      |   |        |  
|Total gross deferred tax assets                           |  |         | 5,697   |   |      |   | 3,494  |  
|                                                          |  |         |         |   |      |   |        |  
|Deferred tax liabilities:                                 |  |         |         |   |      |   |        |  
|Property, plant and equipment                             |  |         | (6,338  | ) |      |   | (3,613 | )
|Goodwill and intangible costs                             |  |         | (2,033  | ) |      |   | (1,740 | )
|Foreign currency translation and other equity adjustments |  |         |        |   |      |   | (1,416 | )
|Unremitted earnings of foreign subsidiaries               |  |         | (420    | ) |      |   | (420   | )
|Prepaids                                                  |  |         | (1,901  | ) |      |   | (1,725 | )
|Other                                                     |  |         |        |   |      |   | (30    | )
|                                                          |  |         |         |   |      |   |        |  
|Total gross deferred tax liabilities                      |  |         | (10,692 | ) |      |   | (8,944 | )
|                                                          |  |         |         |   |      |   |        |  
|Net deferred liability                                    |  | $       | (4,995  | ) |      | $ | (5,450 | )
|                                                          |  |         |         |   |      |   |        |  

In assessing the realizability of deferred tax assets, we consider whether it is more likely than
not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become
deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income



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##### Index to Financial Statements

and projection for future taxable income over the periods in which the deferred tax assets are deductible, we believe it is more likely than not that we will
realize the benefits of these deductible temporary differences and therefore a valuation allowance is not necessary at May 31, 2009.

At May 31, 2009, undistributed earnings of foreign operations totaling $2.8 million were considered to be permanently reinvested. We have recognized no deferred tax liability for the remittance of such earnings to the U.S. since it is
our intention to utilize those earnings in the foreign operations. Generally, such earnings become subject to U.S. tax upon the remittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred
tax liability on such undistributed earnings.

We adopted the provisions of FASB Financial Interpretation No. 48, Accounting for
Uncertainty in Income Taxesan interpretation of FASB No. 109 (FIN No. 48) on June 1, 2007. The adoption of FIN No. 48 did not have a material impact on our consolidated financial condition, results of operations or cash
flows. At May 31, 2009, we have established liabilities for tax uncertainties of $0.1 million, inclusive of interest. To the extent these uncertainties are ultimately resolved favorably, the resultant reduction of recorded liabilities would
have an effect on our effective tax rate. We do not believe that any of the liabilities recorded for tax uncertainties will be effectively settled in the next 12 months. In accordance with FIN No. 48, paragraph 19, our policy is to recognize
interest and penalties related to unrecognized tax benefits through the tax provision.

We file income tax returns in the U.S. with federal
and state jurisdictions as well as various foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for fiscal years prior to fiscal year 2005. While
we believe there is appropriate support for the income tax positions taken, and to be taken, on our returns, and that our accruals for tax liabilities are adequate for all open tax years based on an assessment of many factors including past
experience and interpretations of tax law applied to the facts of each matter. The income tax laws and regulations are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our tax
positions that may have a material effect on our results of operations, financial position or cashflows.

Set forth below is a
reconciliation of the changes in our unrecognized tax benefits associated with FIN No. 48 (in thousands):



|                                                                           |  |   |        |  
|-------------------------------------------------------------------------- |  | - | ------ | -
|Balance at June 1, 2008                                                    |  | $ | 2,218  |  
|Additions based on tax positions related to the current year               |  |   | 50     |  
|Additions based on tax positions related to prior years                    |  |   | 75     |  
|Reductions resulting from a lapse of the applicable statute of limitations |  |   | (2,218 | )
|                                                                           |  |   |        |  
|Balance at May 31, 2009                                                    |  | $ | 125    |  
|                                                                           |  |   |        |  

We do not believe that in the next 12 months, any of the $0.1 million of liabilities recorded for
tax uncertainties will be effectively settled.

8. LONG-TERM DEBT, DERIVATIVES AND LETTERS OF CREDIT

In May 2007, we amended and restated our existing banking facility comprised of a term loan and a revolving credit facility. Our existing banking
facility, further amended in June 2008, provides us with a $145 million revolving line of credit and a $15 million term loan through a banking syndicate. In January 2008, we amended our existing banking facility to allow us to borrow in Euros
or U.S. Dollars. Our existing banking facility, as amended (collectively, the Credit Facility) bears interest based on a variable Eurodollar rate option (LIBOR plus 1.25% at May 31, 2009) and the margin is set based on our financial
covenants as set forth in the Credit Facility. The Credit Facility matures in May 2012 and is secured by virtually all of our domestic assets and a majority of the stock of our foreign subsidiaries, and has commitment fees of .25% that are applied
to unused borrowing capacity. It also contains financial covenants and restrictions on the creation of liens on assets,



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##### Index to Financial Statements

the acquisition or sale of subsidiaries and the incurrence of certain liabilities. At May 31, 2009, there were $1.0 million of capitalized loan costs
which are being amortized over the life of the Credit Facility. At May 31, 2009, we were in compliance with all covenants of the Credit Facility.

In October 2008, our Canadian subsidiary entered into a revolving credit facility with a bank (the Canadian Line of Credit). The Canadian Line of Credit allows our subsidiary to borrow up to
$7.5 million Canadian (approximately $6.8 million U.S.). We have provided an unconditional guarantee of borrowings by our Canadian subsidiary, effectively making Team, Inc. liable to the bank as principal debtor. The Canadian Line of
Credit also contains cross-default provisions with our Credit Facility. Borrowings under the Canadian Line of Credit are used for working capital and other general needs of our Canadian operations, bear interest at a LIBOR based interest rate (LIBOR
plus 1.25% at May 31, 2009) and mature in May 2012.

In February 2009, we renewed our enterprise agreement with a vendor for
server and desktop volume licensing with software assurance for a term of three years. Financing for the agreement was provided by the vendor under a three year non-interest bearing note (the Software Licensing Note). The Software
Licensing Note has been discounted at approximately 3.5%, which approximated our effective borrowing rate at the time we entered into the agreement, and the discount of $0.1 million is being amortized to interest expense over a three year period.

A summary of long-term debt as of May 31, 2009 and May 31, 2008 is as follows (in thousands):



|                                              |  |         |        |   |      |   |         |  
|--------------------------------------------- |  | ------- | ------ | - | ---- | - | ------- | -
|                                              |  | May 31, |       
|                                              |  | 2009    |        |   | 2008 |  
|Revolving loan portion of the Credit Facility |  | $       | 76,164 |   |      | $ | 92,298  |  
|Canadian Line of Credit                       |  |         |       |   |      |   |        |  
|Term loan portion of the Credit Facility      |  |         | 4,500  |   |      |   | 10,500  |  
|Software Licensing Note                       |  |         | 821    |   |      |   | 232     |  
|Auto loans                                    |  |         | 17     |   |      |   | 37      |  
|                                              |  |         |        |   |      |   |         |  
|                                              |  |         | 81,502 |   |      |   | 103,067 |  
|Current maturities                            |  |         | (4,813 | ) |      |   | (6,249  | )
|                                              |  |         |        |   |      |   |         |  
|Long-term debt, excluding current maturities  |  | $       | 76,689 |   |      | $ | 96,818  |  
|                                              |  |         |        |   |      |   |         |  

Future maturities of long-term debt are as follows (in thousands):



|           |  |   |       
|---------- |  | - | ------
|2010       |  | $ | 4,813 
|2011       |  |   | 310   
|2012       |  |   | 76,379
|Thereafter |  |   |      
|           |  |   |       
|           |  | $ | 81,502
|           |  |   |       

FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities
(FASB No. 133), established accounting and reporting standards requiring that derivative instruments be recorded at fair value and included in the balance sheet as assets or liabilities. The accounting for changes in the fair value
of a derivative instrument depends on the intended use of the derivative and the resulting designation, which is established at the inception date of a derivative. Special accounting for derivatives qualifying as fair value hedges allow a
derivatives gains and losses to offset related results on the hedged item in the statement of operations. For derivative instruments designated as cash flow hedges, changes in fair value, to the extent the hedge is effective, are recognized in
other comprehensive income until the hedged item is recognized in earnings. Hedge effectiveness is measured at least quarterly based on the relative cumulative changes in fair value between the derivative contract and the hedged item over time.
Credit risks related to derivatives include the possibility that the counter party will not fulfill the terms of the contract. We considered counter party credit risk to our derivative contracts when valuing our derivative instruments.



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On May 31, 2007, we entered into an interest rate swap with our bank to hedge at a fixed pay rate of
4.97%, a portion of the variable cash flows associated with the variable Eurodollar interest expense on our Credit Facility. The portion of the Credit Facility hedged begins with a notional value of $30.0 million effective June 1, 2007 and
decreases to $16.3 million by March 1, 2010. Changes in the cash flows of the interest rate swap are expected to be highly effective in offsetting the changes in cash flows attributable to fluctuations in the variable LIBOR rate on the notional
amounts of the Credit Facility. The interest rate swap agreement is designated as a cash flow hedge, with the changes in fair value, to the extent the swap agreement is effective, recognized in other comprehensive income until the hedged interest
expense is recognized in earnings. We estimate $0.8 million of net losses on the interest rate swap agreement will be transferred into earnings (based on current LIBOR rates). These are currently included in other accumulated comprehensive income
and will be reclassified into earnings prior to settlement of the derivative in June 2010. Losses reclassified from accumulated other comprehensive income into earnings will be located in interest expense.

The amounts recognized in other comprehensive income, and reclassified into income, for the twelve months ended May 31, 2009 and 2008, are as follows (in
thousands):



|                   |  |                                                  |   |  |                                                           |   |  |      |   |  |      |  
|------------------ |  | ------------------------------------------------ | - |  | --------------------------------------------------------- | - |  | ---- | - |  | ---- | -
|                   |  | Gain (Loss)Recognized inOtherComprehensiveIncome |   |  | Loss Reclassifiedfrom OtherComprehensiveIncome toEarnings |  
|                   |  | Twelve MonthsEnded May 31,                       |   |  | Twelve MonthsEnded May 31,                                |  
|                   |  | 2009                                             |   |  | 2008                                                      |   |  | 2009 |   |  | 2008 |  
|Economic hedge     |  | 1,767                                            |   |  | (1,163                                                    | ) |  |     |   |  |     |  
|Interest rate swap |  | (151                                             | ) |  | (665                                                      | ) |  | (744 | ) |  | (140 | )

On February 12, 2008, we borrowed 12.3 million under the Credit Facility to serve
as an economic hedge of our net investment in our European operations as fluctuations in the fair value of the borrowing attributable to the U.S. Dollar/Euro spot rate will offset translation gains or losses attributable to our investment in our
European operations.

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or
loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either
hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. Any ineffectiveness related to our hedges was not material for any of the periods presented.

The following table presents the fair value totals and balance sheet classification for derivatives designated as hedges under FASB No. 133 (in
thousands):



|                   |  |                |  |                       |      |           |      |   |                |           |                       |                   |           |   |        |  
|------------------ |  | -------------- |  | --------------------- | ---- | --------- | ---- | - | -------------- | --------- | --------------------- | ----------------- | --------- | - | ------ | -
|                   |  | 2009           |  |                       | 2008 |          
|                   |  | Classification |  | Balance SheetLocation |      | FairValue |      |   | Classification |           | Balance SheetLocation |                   | FairValue |  
|Economic hedge     |  | Liability      |  | Long-term debt        |      | $         | 604  |   |                | Liability |                       | Long-term debt    |           | $ | (1,163 | )
|Interest rate swap |  | Liability      |  | Other liabilities     |      |           | (816 | ) |                | Liability |                       | Other liabilities |           |   | (665   | )
|                   |  |                |  |                       |      |           |      |   |                |           |                       |                   |           |   |        |  
|Total Derivatives  |  |                |  |                       |      | $         | (212 | ) |                |           |                       |                   |           | $ | (1,828 | )
|                   |  |                |  |                       |      |           |      |   |                |           |                       |                   |           |   |        |  

In order to secure our insurance programs we are required to post letters of credit generally
issued by a bank as collateral. A letter of credit commits the issuer to remit specified amounts to the holder, if the holder demonstrates that we failed to meet our obligations under the letter of credit. If this were to occur, we would be
obligated to reimburse the issuer for any payments the issuer was required to remit to the holder of the letter of credit. At May 31, 2009, we were contingently liable for outstanding stand-by letters of credit totaling $6.8 million.
Outstanding letters of credit reduce amounts available under our Credit Facility and are considered as having been funded for purposes of calculating our financial covenants under the Credit Facility.



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We also entered into operating leases to rent facilities and obtain equipment for our field operations.
Our obligations under non-cancellable operating leases, primarily consisting of facility and auto leases, were approximately $35.0 million at May 31, 2009 and are as follows (in thousands):



|                            |  |                 |       
|--------------------------- |  | --------------- | ------
|Twelve Months Ended May 31, |  | OperatingLeases
|2010                        |  | $               | 13,368
|2011                        |  |                 | 9,832 
|2012                        |  |                 | 6,219 
|2013                        |  |                 | 3,467 
|2014                        |  |                 | 1,928 
|Thereafter                  |  |                 | 188   
|                            |  |                 |       
|Total                       |  | $               | 35,002
|                            |  |                 |       

Total rent expense resulting from operating leases for the twelve months ended May 31, 2009, 2008
and 2007 was $19.9 million, $18.7 million and $12.9 million, respectively.

9. FAIR VALUE MEASUREMENTS

Effective June 1, 2008, we adopted the provisions of FASB No. 157, which among other things, requires enhanced disclosures about assets and liabilities
carried at fair value.

As defined in FASB No. 157, fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks
inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. We primarily apply the market approach for recurring fair value measurements and endeavor to utilize the best
information available. Accordingly, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The use of unobservable inputs is intended to allow for fair value determinations in
situations in which there is little, if any, market activity for the asset or liability at the measurement date. We are able to classify fair value balances based on the observability of those inputs. FASB No. 157 establishes a fair value hierarchy
such that Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market, Level 2 measurements include quoted market prices for identical assets or liabilities in an
active market which have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar
assets, and Level 3 measurements include those that are unobservable and of a highly subjective measure.

The following table
sets forth, by level within the fair value hierarchy, our financial assets and liabilities that are accounted for at fair value on a recurring basis as of May 31, 2009. As required by FASB No. 157, financial assets and liabilities are classified in
their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):



|                                |  |                                                             |   |                                             |   |      |                                         |  |       |   |  |   |      |  
|------------------------------- |  | ----------------------------------------------------------- | - | ------------------------------------------- | - | ---- | --------------------------------------- |  | ----- | - |  | - | ---- | -
|                                |  | Quoted Prices inActive Markets forIdentical Items (Level 1) |   | Significant OtherObservableInputs (Level 2) |   |      | SignificantUnobservableInputs (Level 3) |  | Total |  
|Liabilities:                    |  |                                                             |   |                                             |   |      |                                         |  |       |   |  |   |      |  
|Euro denominated long-term debt |  | $                                                           |  |                                             | $ | 604  |                                         |  | $     |  |  | $ | 604  |  
|Interest rate swap              |  |                                                             |  |                                             |   | (816 | )                                       |  |       |  |  |   | (816 | )
|                                |  |                                                             |   |                                             |   |      |                                         |  |       |   |  |   |      |  
|Total Liabilities               |  | $                                                           |  |                                             | $ | (212 | )                                       |  | $     |  |  | $ | (212 | )
|                                |  |                                                             |   |                                             |   |      |                                         |  |       |   |  |   |      |  



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10. SHARE BASED COMPENSATION

We have adopted stock incentive plans and other arrangements pursuant to which our Board of Directors may grant stock options, restricted stock, stock units, stock appreciation rights, common stock or performance
awards to officers, directors and key employees. At May 31, 2009, there were approximately 2.5 million stock options, restricted stock units and performance awards outstanding to officers, directors and key employees. The exercise price, terms
and other conditions applicable to each form of share-based compensation under our plans is generally determined by the Compensation Committee of our Board of Directors at the time of grant and may vary.

Our share-based payments consist primarily of stock options, stock units and performance awards. The governance of our share-based compensation does not
directly limit the number of future awards so long as the total number of shares ultimately issued does not exceed the total number of shares cumulatively authorized which is 6,620,000 at May 31, 2009. Shares issued in connection with our
share-based compensation are issued out of authorized but unissued common stock. Compensation expense related to share-based compensation totaled $4.7 million, $3.3 million and $1.4 million for the years ended May 31, 2009, 2008 and 2007,
respectively. Tax benefits related to share-based compensation were $1.6 million, $4.3 million and $1.3 million for the years ended May 31, 2009, 2008 and 2007, respectively. At May 31, 2009, $10.5 million of unrecognized compensation
expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of three years.

We
determine the fair value of each stock option at the grant date using a Black-Scholes model and recognize the resulting cost of our stock option awards over the period during which an employee is required to provide services in exchange for the
awards, usually the vesting period. Our options typically vest in equal annual installments over a four year service period. Expense related to an option grant is recognized on a straight line basis over the specify vesting period for those options.
Stock options generally have a ten year term. Transactions involving our stock options during the years ended May 31, 2009, 2008 and 2007 are summarized below:



|                                       |  |                         |   |                         |                              |                         |                |       |   |                              |   |                |  |       |                              |  |   |      
|-------------------------------------- |  | ----------------------- | - | ----------------------- | ---------------------------- | ----------------------- | -------------- | ----- | - | ---------------------------- | - | -------------- |  | ----- | ---------------------------- |  | - | -----
|                                       |  | Year Ended May 31, 2009 |   | Year Ended May 31, 2008 |                              | Year Ended May 31, 2007
|                                       |  | No. ofOptions           |   |                         | WeightedAverageExercisePrice |                         | No. ofOptions  |       |   | WeightedAverageExercisePrice |   | No. ofOptions  |  |       | WeightedAverageExercisePrice
|                                       |  | (in thousands)          |   |                         |                              |                         | (in thousands) |       |   |                              |   | (in thousands) |  |       |                             
|Shares under option, beginning of year |  | 2,627                   |   |                         | $                            | 15.37                   |                | 2,822 |   |                              | $ | 8.58           |  | 2,868 |                              |  | $ | 6.33 
|Changes during the year:               |  |                         |   |                         |                              |                         |                |       |   |                              |   |                |  |       |                              |  |   |      
|Granted                                |  |                        |   |                         |                              |                        |                | 736   |   |                              | $ | 30.22          |  | 552   |                              |  | $ | 14.67
|Exercised                              |  | (253                    | ) |                         | $                            | 6.41                    |                | (718  | ) |                              | $ | 4.63           |  | (574  | )                            |  | $ | 2.99 
|Canceled                               |  | (20                     | ) |                         | $                            | 26.96                   |                | (213  | ) |                              | $ | 14.31          |  | (24   | )                            |  | $ | 11.33
|                                       |  |                         |   |                         |                              |                         |                |       |   |                              |   |                |  |       |                              |  |   |      
|Shares under option, end of year       |  | 2,354                   |   |                         | $                            | 16.24                   |                | 2,627 |   |                              | $ | 15.37          |  | 2,822 |                              |  | $ | 8.58 
|Exercisable at end of year             |  | 1,505                   |   |                         | $                            | 12.19                   |                | 1,178 |   |                              | $ | 8.34           |  | 1,754 |                              |  | $ | 6.00 

For stock options, we determine the fair value of each stock option at the grant date using a
Black-Scholes model, with the following weighted-average assumptions used for grants made during the years ended May 31, 2008 and 2007:



|                                                                             |  |      |  |       |   |  |       |  
|---------------------------------------------------------------------------- |  | ---- |  | ----- | - |  | ----- | -
|                                                                             |  | 2009 |  | 2008  |   |  | 2007  |  
|Risk-free interest rate                                                      |  | N/A  |  | 4.4   | % |  | 4.7   | %
|Volatility factor of the expected market price of the Companys common stock |  | N/A  |  | 40.2  | % |  | 39.2  | %
|Expected dividend yield percentage                                           |  | N/A  |  | 0.0   | % |  | 0.0   | %
|Weighted average expected life                                               |  | N/A  |  | 7 Yrs |   |  | 6 Yrs |  



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##### Index to Financial Statements

Options exercisable at May 31, 2009 had a weighted average remaining contractual life of 5.8 years.
For total options outstanding at May 31, 2009, the range of exercise prices and remaining contractual lives are as follows:



|                 |  |                |  |                              |       |                                        |     
|---------------- |  | -------------- |  | ---------------------------- | ----- | -------------------------------------- | ----
|Range of Prices  |  | No. ofOptions  |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingLife(in years)
|                 |  | (in thousands) |  |                              |       |                                       
|$0.00 to $3.21   |  | 183            |  | $                            | 2.32  |                                        | 1.96
|$3.21 to $6.41   |  | 90             |  | $                            | 4.19  |                                        | 3.71
|$6.41 to $9.62   |  | 554            |  | $                            | 8.43  |                                        | 5.57
|$9.62 to $12.82  |  | 190            |  | $                            | 11.24 |                                        | 6.69
|$12.82 to $16.03 |  | 643            |  | $                            | 15.00 |                                        | 7.08
|$16.03 to $32.05 |  | 694            |  | $                            | 30.20 |                                        | 8.36
|                 |  |                |  |                              |       |                                        |     
|                 |  | 2,354          |  | $                            | 16.24 |                                        | 6.54
|                 |  |                |  |                              |       |                                        |     

Performance awards and stock units are either settled with common stock or cash upon vesting. We
determine the fair value of each performance award and stock unit based on the market price on the date of grant. Performance awards, awarded to our Chairman, vest over the longer of four years or the achievement of performance goals based upon our
future results of operations. Stock units generally vest over four years, although stock units granted to our non-employee directors vest immediately. During the year ended May 31, 2009 we granted 27,383 performance awards with a weighted
average fair value of $27.39. During the fiscal years ended May 31, 2008 and 2007 we granted no performance awards. Transactions involving our stock units during the year ended May 31, 2009 are summarized below:



|                                 |  |                        |   |  |                           |      
|-------------------------------- |  | ---------------------- | - |  | ------------------------- | -----
|                                 |  | Year EndedMay 31, 2009
|                                 |  | No. of StockUnits      |   |  | WeightedAverageFair Value
|Stock units, beginning of period |  |                       |   |  | $                         |     
|Changes during the period:       |  |                        |   |  |                           |      
|Granted                          |  | 133,100                |   |  |                           | 27.53
|Vested and settled               |  | (2,032                 | ) |  |                           | 36.91
|Canceled                         |  | (3,545                 | ) |  |                           | 27.39
|                                 |  |                        |   |  |                           |      
|Stock units, end of period       |  | 127,523                |   |  | $                         | 27.39

11. STOCK SPLIT

On July 25, 2007, we announced a two-for-one stock split in the form of a 100 percent stock dividend payable on August 29, 2007 to all shareholders of record on August 15, 2007. To fund the requirement
of new shares, we utilized approximately 1 million shares of treasury stock and issued an additional 8 million shares of common stock. All share and per share information has been retroactively adjusted to reflect the stock split.

12. EMPLOYEE BENEFIT PLANS

Under the
Team, Inc. Salary Deferral Plan (the Plan), contributions are made to the Plan by qualified employees at their election and our matching contributions to the Plan are made at specified rates. Our contributions to the Plan in fiscal years
2009, 2008 and 2007, were approximately $2.6 million, $2.2 million and $1.2 million, respectively, and are included in selling, general and administrative expenses.



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13. COMMITMENTS AND CONTINGENCIES

We have, from time to time, provided temporary leak repair services for the steam operations of Consolidated Edison of New York (Con Ed) located in New York City. In July 2007, a Con Ed steam main located
in midtown Manhattan ruptured causing one death and other injuries and property damage. Five separate lawsuits have been filed against Con Ed, the City of New York and us in the Supreme Courts of New York located in Kings, New York and Bronx County,
alleging that our temporary leak repair services may have contributed to the cause of the rupture. The lawsuits seek generally unspecified compensatory damages for personal injury, property damage and business interruption. Additionally, on
March 31, 2008 we received a letter from Con Ed alleging that our contract with Con Ed requires us to indemnify and defend Con Ed for additional claims filed against Con Ed as a result of the rupture. Subsequently, Con Ed filed an action to
join Team and the City of New York as defendants in more than 40 separate lawsuits previously filed against Con Ed that did not include Team and the City of New York as direct defendants. We intend to vigorously defend the lawsuits and Con Eds
claim for indemnification. We are unable to estimate the amount of liability to us, if any, associated with these lawsuits and the claim for indemnification. We maintain insurance coverage, subject to a deductible limit of $250,000, for these losses
should they be incurred and have notified our insurers of the incident. We do not believe the final resolution of these matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

We are involved in various claims, suits, investigations, and legal proceedings. We accrue a liability when we believe that it is both
probable that a liability has been incurred and the amount of loss can be reasonably estimated. We review these accruals at least quarterly and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other
relevant information. However, litigation is inherently unpredictable. Therefore, we could incur judgments or enter into settlements of claims that could adversely affect our results of operations, financial position or cash flows.

14. ENTITY WIDE DISCLOSURES

FASB Statement
No. 131, Disclosure about Segments of an Enterprise and Related Information(FASB No. 131), requires we disclose certain information about our operating segments where operating segments are defined as components
of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. We operate in only one
segmentindustrial services. Within the industrial services segment, we are organized as two divisions. Our TMS division provides the services of leak repair, hot tapping, fugitive emissions control, field machining, technical bolting and field
valve repair. Our TCM division provides the services of non-destructive testing and field heat treating. Each division has goodwill relating to past acquisitions and we assess goodwill for impairment at the lower TMS and TCM divisional level. Both
divisions derive their revenues from providing specialized labor intensive industrial services and the market for their services is principally dictated by the population of process piping systems in industrial plants and facilities. Services
provided by both the TMS and TCM divisions are provided through a network of field branch locations located in proximity to industrial plants. The structure of those branch locations is similar, with locations overseen by a branch/regional manager,
one or more sales representatives and a cadre of technicians to service the business requirements of our customers. While TMS and TCM division field locations are generally separate, both divisions are supported by common and often centralized
technical and commercial support staffs, quality assurance, training, finance, legal, human resources and health and safety departments.



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##### Index to Financial Statements

Revenues and total assets in the United States and other countries are as follows for the fiscal years
ended May 31, 2009, 2008 and 2007 (in thousands):



|                        |  |               |         |             |   |        
|----------------------- |  | ------------- | ------- | ----------- | - | -------
|                        |  | TotalRevenues |         | TotalAssets
|FY 2009                 |  |               |         |             |   |        
|United States           |  | $             | 350,001 |             | $ | 180,889
|Canada                  |  |               | 112,930 |             |   | 62,678 
|Europe                  |  |               | 23,443  |             |   | 25,353 
|Other foreign countries |  |               | 11,185  |             |   | 7,001  
|                        |  |               |         |             |   |        
|                        |  | $             | 497,559 |             | $ | 275,921
|                        |  |               |         |             |   |        
|FY 2008                 |  |               |         |             |   |        
|United States           |  | $             | 346,074 |             | $ | 169,491
|Canada                  |  |               | 106,121 |             |   | 73,788 
|Europe                  |  |               | 12,322  |             |   | 25,044 
|Other foreign countries |  |               | 13,958  |             |   | 12,138 
|                        |  |               |         |             |   |        
|                        |  | $             | 478,475 |             | $ | 280,461
|                        |  |               |         |             |   |        
|FY 2007                 |  |               |         |             |   |        
|United States           |  | $             | 276,188 |             | $ | 139,735
|Canada                  |  |               | 26,142  |             |   | 17,051 
|Europe                  |  |               |        |             |   |       
|Other foreign countries |  |               | 16,018  |             |   | 14,268 
|                        |  |               |         |             |   |        
|                        |  | $             | 318,348 |             | $ | 171,054
|                        |  |               |         |             |   |        

15. UNCONSOLIDATED SUBSIDIARIES

Our earnings from unconsolidated affiliates consists entirely of our joint venture (50% ownership) formed in May 2008, to perform non-destructive testing
and inspection services in Alaska. The joint venture is an integral part of our operations in Alaska and all technicians working on behalf of the joint venture are our employees. Our investment in the net assets of the joint venture, accounted for
using the equity method of accounting, was $1.1 million and $1.4 million as of May 31, 2009 and 2008, respectively. Revenues from the joint venture not reflected in our consolidated revenues were $12.6 million and zero as of May 31, 2009 and
2008, respectively.

16. INTERNAL INVESTIGATION

During a recent internal management review of one of our branch operations in Trinidad, we were informed of allegations of improper payments, made by our local employees, to employees of certain customers, including foreign government owned
enterprises. Consequently, the Audit Committee of our Board of Directors initiated an investigation of those allegations with the assistance of independent outside counsel. The investigation has found evidence suggesting that payments, which may
violate the Foreign Corrupt Practices Act (FCPA), were made to employees of foreign government owned enterprises. While the investigation is ongoing, there has been no indication that the improper payments extend beyond the one Trinidad branch.
Based upon the evidence obtained to date, we believe that the total of these improper payments over the past five years did not exceed $50,000. The total annual revenues from the impacted Trinidad branch represent approximately one-half of one
percent of our annual consolidated revenues.

We have voluntary disclosed information relating to the initial allegations, the
investigation and the initial findings to the U.S. Department of Justice (DOJ) and to the Securities and Exchange Commission (SEC), and we will cooperate with the DOJ and SEC in connection with their review of this matter.
The outcome of this investigation cannot be predicted at this time; however, the FCPA and related statutes and regulations do provide for potential monetary penalties as well as criminal and civil sanctions in connection with FCPA violations. It is
possible that monetary penalties could be assessed by the Federal government in connection with this matter. The nature and amount of any monetary penalty cannot be estimated. We have not recorded any provision for monetary penalties or other costs
related to criminal and civil sanctions.



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##### Index to Financial Statements

17. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

The following is a summary of selected quarterly financial data for the years ended May 31, 2009 and 2008 (in thousands, except per share data):



|                              |  |                         |         |               |   |              |  |               |         |           |   |         |  |   |        
|----------------------------- |  | ----------------------- | ------- | ------------- | - | ------------ |  | ------------- | ------- | --------- | - | ------- |  | - | -------
|                              |  | Year ended May 31, 2009
|                              |  | FirstQuarter            |         | SecondQuarter |   | ThirdQuarter |  | FourthQuarter |         | TotalYear
|Revenues                      |  | $                       | 123,338 |               | $ | 148,752      |  | $             | 104,266 |           | $ | 121,203 |  | $ | 497,559
|Operating income              |  | $                       | 9,715   |               | $ | 18,364       |  | $             | 3,470   |           | $ | 9,722   |  | $ | 41,271 
|Net income                    |  | $                       | 4,957   |               | $ | 10,217       |  | $             | 2,181   |           | $ | 5,556   |  | $ | 22,911 
|Net income per share: Basic   |  | $                       | 0.27    |               | $ | 0.54         |  | $             | 0.12    |           | $ | 0.29    |  | $ | 1.22   
|Net income per share: Diluted |  | $                       | 0.25    |               | $ | 0.51         |  | $             | 0.11    |           | $ | 0.29    |  | $ | 1.16   



|                              |  |                         |         |               |   |              |  |               |         |           |   |         |  |   |        
|----------------------------- |  | ----------------------- | ------- | ------------- | - | ------------ |  | ------------- | ------- | --------- | - | ------- |  | - | -------
|                              |  | Year ended May 31, 2008
|                              |  | FirstQuarter            |         | SecondQuarter |   | ThirdQuarter |  | FourthQuarter |         | TotalYear
|Revenues                      |  | $                       | 103,488 |               | $ | 122,310      |  | $             | 108,823 |           | $ | 143,854 |  | $ | 478,475
|Operating income              |  | $                       | 7,771   |               | $ | 14,553       |  | $             | 6,505   |           | $ | 17,044  |  | $ | 45,873 
|Net income                    |  | $                       | 3,512   |               | $ | 7,816        |  | $             | 2,934   |           | $ | 9,361   |  | $ | 23,623 
|Net income per share: Basic   |  | $                       | 0.19    |               | $ | 0.43         |  | $             | 0.16    |           | $ | 0.51    |  | $ | 1.30   
|Net income per share: Diluted |  | $                       | 0.18    |               | $ | 0.40         |  | $             | 0.15    |           | $ | 0.47    |  | $ | 1.20   



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##### Index to Financial Statements

3. Exhibits



|               |  |                                                                                                                                                                                                                                                                                                                                                     
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  |                                                                                                                                                                                                                                                                                                                                                     
|3.1            |  | Second Restated Articles of Incorporation of the Company, as amended through August 31, 1999, (filed as Exhibit 3(a) to the Companys Annual Report on Form 10-K for the year ended
May 31, 1999).                                                                                                                                                  
|               | 
|3.2            |  | Bylaws of the Company (filed as Exhibit 4.2 to the Companys Registration Statement on Form S-2, File No. 33-31663).                                                                                                                                                                                                                                
|               | 
|4.1            |  | Certificate representing shares of common stock of Company (filed as Exhibit 4(1) to the Companys Registration Statement on Form S-1, File No. 2-68928).                                                                                                                                                                                           
|               | 
|10.1          |  | Team, Inc. Salary Deferral Plan (filed as Exhibit 99(a) to the Companys Registration Statement on Form S-8, File No. 333-74062).                                                                                                                                                                                                                   
|               | 
|10.2          |  | Team, Inc. Restated Non-Employee Directors Stock Option Plan as amended through June 24, 2004 (filed as Exhibit 10.3 to the Companys Annual Report on Form 10-K for the
year ended May 31, 2004).                                                                                                                                                 
|               | 
|10.3          |  | Standard Restricted Stock Option Award Agreement by and between Philip J. Hawk and Team, Inc. dated November 2, 1998 (filed as Exhibit 10.3 to the Companys Quarterly Report
on Form 10-Q for the quarter ended November 30, 1998).                                                                                                                
|               | 
|10.4          |  | First Amendment to Price Vested Restricted Stock Option Award Agreement by and between Philip J. Hawk and Team, Inc. dated October 1, 2001 (filed as Exhibit 10.2 to the
Companys Quarterly Report on Form 10-Q for the quarter ended February 28, 2002).                                                                                          
|               | 
|10.5          |  | Second Amendment dated July 11, 2002 to Price Vested Restricted Stock Option Award Agreement by and between Philip J. Hawk and Team, Inc (filed as Exhibit 10.12 to the
Companys Annual Report on Form 10-K for the year ended May 31, 2002).                                                                                                      
|               | 
|10.6          |  | 1998 Incentive Stock Option Plan dated January 29, 1998 as amended through June 24, 2004 (filed as Exhibit 10.13 to the Companys Annual Report on Form 10-K
for the year ended May 31, 2004).                                                                                                                                                      
|               | 
|10.7           |  | Stock Purchase Agreement dated as of April 1, 2004, by and among Team, Inc., Team Industrial Services, Inc. (Team Industrial), Thermal Solutions, Inc. (TSI), the TSI
shareholders named therein and Michael J. Urban as the shareholder representative (filed as Exhibit 2.1 to the Companys Current Report on Form 8-K filed April 16, 2004).
|               | 
|10.8           |  | Escrow Agreement dated April 15, 2004 by and among Team, Inc., Team Industrial, TSI, the TSI shareholders named therein, Michael J. Urban as the shareholder representative and Compass
Bank (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed April 16, 2004).                                                              
|               | 
|10.9           |  | Asset Purchase Agreement dated July 16, 2004 by and among International Industrial Services, Inc., Cooperheat-MQS, Inc., Team Acquisition Corp. and Team, Inc. (filed as Exhibit
99.1 to the Companys Current Report on Form 8-K filed, dated July 16, 2004, filed July 20, 2004).                                                                 
|               | 
|10.11         |  | Team, Inc. 2004 Restricted Stock Option and Award Plan dated June 24, 2004 (filed as Exhibit 10.21 to the Companys Annual Report on Form 10-K for the year ended
May 31, 2004).                                                                                                                                                                    
|               | 
|10.12         |  | Consulting Agreement between Team, Inc. and Emmett J. Lescroart dated July 30, 2004 (filed as Exhibit 10.22 to the Companys Annual Report on Form 10-K for the year
ended May 31, 2004).                                                                                                                                                           
|               | 
|10.13         |  | Restricted Stock Award Agreement by and between Kenneth M. Tholan and Team, Inc. dated September 23, 2004. (filed as Exhibit 10.1 to the Company Quarterly Report on Form 10-Q for the
quarter ended February 28, 2005).                                                                                                                            



56



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##### Table of Contents

##### Index to Financial Statements

|              |  |                                                                                                                                                                                                                                                                                                                                                       
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  |                                                                                                                                                                                                                                                                                                                                                       
|10.14        |  | Employment Agreement by and between Philip J. Hawk and Team, Inc. dated January 31, 2005. (filed as Exhibit 10.2 to the Company Quarterly Report on Form 10-Q for the quarter ended
February 28, 2005).                                                                                                                                               
|              | 
|10.16         |  | Stock Purchase Agreement by and among Climax Technologies, Inc., Team Investment, Inc., Team, Inc. and Climax Portable Machine Tools, Inc. dated November 30, 2005 (filed as Exhibit 2.1 to
the Companys Current Report on Form 8-K filed December 6, 2005).                                                                                         
|              | 
|10.19        |  | Cancellation Agreement Philip J. Hawk Employment Agreement with Team, Inc. (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the Quarter ended February 28,
2007).                                                                                                                                                            
|              | 
|10.20        |  | Team, Inc. 2006 Stock Incentive Plan (as Amended and Restated August 1, 2008) (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on October 17,
2008).                                                                                                                                                                          
|              | 
|10.21        |  | Form of Stock Unit Agreement (filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed on October 17, 2008).                                                                                                                                                                                                                           
|              | 
|10.22        |  | Form of Performance-Based Stock Unit Agreement (filed as Exhibit 10.3 to the Companys Current Report on Form 8-K filed on October 17, 2008).                                                                                                                                                                                                         
|              | 
|10.23         |  | Share Purchase Agreement dated May 13, 2007 (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on May 17, 2007).                                                                                                                                                                                                                
|              | 
|10.24         |  | Amended and Restated Credit Agreement dated as of May 31, 2007 among Team, Inc. as the Borrower, Bank of America, NA, as Administrative Agent, Swing Line Lender and L/C Issuer, and other
Lenders Party thereto (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed on June 6, 2007).                                           
|              | 
|10.25         |  | First Amendment to Amended and Restated Credit Agreement dated January 29, 2008 among Team, Inc. as the Borrower, Bank of America, NA, as Administrative Agent, Swing Line Lender and L/C Issuer,
and other Lenders Party thereto (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended February 29, 2008).     
|              | 
|10.26         |  | Commitment Increase Agreement dated June 13, 2008 to the Amended and Restated Credit Agreement among Team, Inc. as the Borrower, Bank of America, NA, as Administrative Agent, Swing Line Lender
and L/C Issuer, and other Lenders Party thereto (filed as Exhibit 10.24 to the Companys Annual Report on Form 10-K for the year ended May 31, 2008).
|              | 
|14.1          |  | Code of Ethics (filed as Exhibit 14.1 to the Companys Annual Report on Form 10-K for the year ended May 31, 2003).                                                                                                                                                                                                                                   
|              | 
|21            |  | Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                          
|              | 
|23.1          |  | Consent of Independent Registered Public Accounting FirmKPMG LLP                                                                                                                                                                                                                                                                                     
|              | 
|31.1          |  | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                              
|              | 
|31.2          |  | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                              
|              | 
|32.1          |  | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                              
|              | 
|32.2          |  | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                              



| | Management contract or compensation plan or arrangement.
|- | --------------------------------------------------------



57



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##### Table of Contents

##### Index to Financial Statements

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized August 11, 2009.



TEAM, INC.By:

/S/    PHILIP J.
HAWKPhilip J. HawkChief Executive Officer(Principal Executive Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated.



|                                                   |  |                                                                                                                  |  |                
|-------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ---------------
|                                                   |  |                                                                                                                 
|/S/    PHILIP J.
HAWK (Philip J. Hawk)             |  | Chief Executive Officer and Director                                                                             |  | August 11, 2009
|                                                   |  |                                                                                                                 
|/S/    VINCENT D.
FOSTER (Vincent D. Foster)       |  | Director                                                                                                         |  | August 11, 2009
|                                                   |  |                                                                                                                 
|/S/    JACK M. JOHNSON,
JR. (Jack M. Johnson, Jr.) |  | Director                                                                                                         |  | August 11, 2009
|                                                   |  |                                                                                                                 
|/S/    EMMETT J.
LESCROART (Emmett J. Lescroart)   |  | Director                                                                                                         |  | August 11, 2009
|                                                   |  |                                                                                                                 
|/S/    ROBERT A.
PEISER (Robert A. Peiser)         |  | Director                                                                                                         |  | August 11, 2009
|                                                   |  |                                                                                                                 
|/S/    LOUIS A.
WATERS (Louis A. Waters)           |  | Director                                                                                                         |  | August 11, 2009
|                                                   |  |                                                                                                                 
|/S/    SIDNEY B.
WILLIAMS (Sidney B. Williams)     |  | Director                                                                                                         |  | August 11, 2009
|                                                   |  |                                                                                                                 
|/S/    TED W.
OWEN (Ted W. Owen)                   |  | Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer) |  | August 11, 2009



58