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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended February 28, 2010

OR



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

For the transition period
                     to

Commission file number 001-08604





TEAM, INC.

(Exact name of registrant as specified
in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Texas                                                          |  | 74-1765729                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|200 Hermann Drive, Alvin, Texas                                |  | 77511                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             

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





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 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ̈     Accelerated filer  x     Non-accelerated filer   ̈     Smaller reporting company   ̈

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

On March 31, 2010 there were 18,960,875 shares of the Registrants common stock outstanding.









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INDEX



|                                                     |  |                                                                                                                                     |  |         
|---------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------- |  | --------
|                                                     |  |                                                                                                                                     |  | Page No.
|PART IFINANCIAL INFORMATION                         |  | 3                                                                                                                                  
|                                                     |  |                                                                                                                                    
|Item 1.                                              |  | Consolidated Condensed Financial Statements                                                                                         |  | 3       
|                                                     |  |                                                                                                                                    
|                                                     |  | Consolidated Condensed Balance Sheets as of February 28, 2010 (Unaudited) and
May 31, 2009                                          |  | 3       
|                                                     |  |                                                                                                                                    
|                                                     |  | Unaudited Consolidated Condensed Statements of Operations for the Three and Nine Months Ended February 
28, 2010 and 2009           |  | 4       
|                                                     |  |                                                                                                                                    
|                                                     |  | Unaudited Consolidated Condensed Statements of Comprehensive Income for the Three and Nine Months Ended February 28,
 2010 and 2009 |  | 5       
|                                                     |  |                                                                                                                                    
|                                                     |  | Unaudited Consolidated Condensed Statements of Cash Flows for the Nine Months Ended February 
28, 2010 and 2009                     |  | 6       
|                                                     |  |                                                                                                                                    
|                                                     |  | Notes to Unaudited Consolidated Condensed Financial Statements                                                                      |  | 7       
|                                                     |  |                                                                                                                                    
|Item 2.                                              |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                                               |  | 20      
|                                                     |  |                                                                                                                                    
|Item 3.                                              |  | Quantitative and Qualitative Disclosures about Market Risk                                                                          |  | 25      
|                                                     |  |                                                                                                                                    
|Item 4.                                              |  | Controls and Procedures                                                                                                             |  | 26      
|                                                     | 
|PART IIOTHER INFORMATION                            |  | 27                                                                                                                                 
|                                                     |  |                                                                                                                                    
|Item 1.                                              |  | Legal Proceedings                                                                                                                   |  | 27      
|                                                     |  |                                                                                                                                    
|Item 1A.                                             |  | Risk Factors                                                                                                                        |  | 27      
|                                                     |  |                                                                                                                                    
|Item 4.                                              |  | Submission of Matters to a Vote of Shareholders                                                                                     |  | 27      
|                                                     |  |                                                                                                                                    
|Item 5.                                              |  | Other Information                                                                                                                   |  | 28      
|                                                     |  |                                                                                                                                    
|Item 6.                                              |  | Exhibits                                                                                                                            |  | 28      
|                                                     | 
|SIGNATURES                                           |  | 29                                                                                                                                 
|                                                    
|EXHIBITS                                            
|                                                    
|31.1    Certification of CEO Pursuant to Section 302
|31.2    Certification of CFO Pursuant to Section 302
|32.1    Certification of CEO Pursuant to Section 906
|32.2    Certification of CFO Pursuant to Section 906



2



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PART IFINANCIAL INFORMATION



|ITEM 1. | CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|------- | -------------------------------------------

TEAM, INC. AND SUBSIDIARIES

CONSOLIDATED
CONDENSED BALANCE SHEETS

(in thousands except share and per share data)



|                                                                                                              |  |                   |         |   |              |   |         |  
|------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------ | - | ------- | -
|                                                                                                              |  | February 28, 2010 |         |   | May 31, 2009 |  
|                                                                                                              |  | (unaudited)       |         |   |              |  
|ASSETS                                                                                                        |  |                   |         |   |              |   |         |  
|Current Assets:                                                                                               |  |                   |         |   |              |   |         |  
|Cash and cash equivalents                                                                                     |  | $                 | 14,165  |   |              | $ | 12,632  |  
|Receivables, net of allowance of $4,774 and $3,662                                                            |  |                   | 102,833 |   |              |   | 114,279 |  
|Inventory                                                                                                     |  |                   | 19,598  |   |              |   | 19,647  |  
|Income tax receivable                                                                                         |  |                   | 1,888   |   |              |   | 1,461   |  
|Deferred income taxes                                                                                         |  |                   | 1,219   |   |              |   | 944     |  
|Prepaid expenses and other current assets                                                                     |  |                   | 4,158   |   |              |   | 7,674   |  
|                                                                                                              |  |                   |         |   |              |   |         |  
|Total Current Assets                                                                                          |  |                   | 143,861 |   |              |   | 156,637 |  
|Property, plant and equipment, net                                                                            |  |                   | 56,417  |   |              |   | 59,582  |  
|Intangible assets, net of accumulated amortization of $1,943 and $1,734                                       |  |                   | 1,586   |   |              |   | 953     |  
|Goodwill                                                                                                      |  |                   | 56,834  |   |              |   | 56,453  |  
|Other assets, net                                                                                             |  |                   | 2,137   |   |              |   | 2,296   |  
|                                                                                                              |  |                   |         |   |              |   |         |  
|Total Assets                                                                                                  |  | $                 | 260,835 |   |              | $ | 275,921 |  
|                                                                                                              |  |                   |         |   |              |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                          |  |                   |         |   |              |   |         |  
|Current Liabilities:                                                                                          |  |                   |         |   |              |   |         |  
|Current portion of long-term debt                                                                             |  | $                 | 314     |   |              | $ | 4,813   |  
|Accounts payable                                                                                              |  |                   | 12,065  |   |              |   | 14,928  |  
|Other accrued liabilities                                                                                     |  |                   | 22,475  |   |              |   | 23,102  |  
|Insurance note payable                                                                                        |  |                   | 731     |   |              |   | 3,949   |  
|                                                                                                              |  |                   |         |   |              |   |         |  
|Total Current Liabilities                                                                                     |  |                   | 35,585  |   |              |   | 46,792  |  
|Deferred income taxes                                                                                         |  |                   | 8,669   |   |              |   | 5,939   |  
|Long-term debt                                                                                                |  |                   | 57,680  |   |              |   | 76,689  |  
|                                                                                                              |  |                   |         |   |              |   |         |  
|Total Liabilities                                                                                             |  |                   | 101,934 |   |              |   | 129,420 |  
|                                                                                                              |  |                  
|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; 18,960,875 and 18,836,709 shares issued |  |                   | 5,687   |   |              |   | 5,651   |  
|Additional paid-in capital                                                                                    |  |                   | 67,847  |   |              |   | 63,125  |  
|Retained earnings                                                                                             |  |                   | 86,817  |   |              |   | 80,278  |  
|Accumulated other comprehensive loss                                                                          |  |                   | (1,450  | ) |              |   | (2,553  | )
|                                                                                                              |  |                   |         |   |              |   |         |  
|Total Stockholders Equity                                                                                    |  |                   | 158,901 |   |              |   | 146,501 |  
|                                                                                                              |  |                   |         |   |              |   |         |  
|Total Liabilities and Stockholders Equity                                                                    |  | $                 | 260,835 |   |              | $ | 275,921 |  
|                                                                                                              |  |                   |         |   |              |   |         |  

See notes to unaudited consolidated condensed financial statements.



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TEAM, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share data)



|                                             |  |                                |         |   |                               |   |         |      |  |      |         |  |   |         |  
|-------------------------------------------- |  | ------------------------------ | ------- | - | ----------------------------- | - | ------- | ---- |  | ---- | ------- |  | - | ------- | -
|                                             |  | Three Months EndedFebruary 28, |         |   | Nine Months EndedFebruary 28, |  
|                                             |  | 2010                           |         |   | 2009                          |   |         | 2010 |  | 2009 |        
|Revenues                                     |  | $                              | 104,112 |   |                               | $ | 104,266 |      |  | $    | 328,341 |  | $ | 376,356 |  
|Operating expenses                           |  |                                | 75,593  |   |                               |   | 74,312  |      |  |      | 230,940 |  |   | 257,208 |  
|                                             |  |                                |         |   |                               |   |         |      |  |      |         |  |   |         |  
|Gross margin                                 |  |                                | 28,519  |   |                               |   | 29,954  |      |  |      | 97,401  |  |   | 119,148 |  
|Selling, general and administrative expenses |  |                                | 26,456  |   |                               |   | 26,643  |      |  |      | 82,888  |  |   | 88,433  |  
|Earnings from unconsolidated affiliates      |  |                                | 29      |   |                               |   | 159     |      |  |      | 520     |  |   | 834     |  
|                                             |  |                                |         |   |                               |   |         |      |  |      |         |  |   |         |  
|Operating income                             |  |                                | 2,092   |   |                               |   | 3,470   |      |  |      | 15,033  |  |   | 31,549  |  
|Interest expense, net                        |  |                                | 667     |   |                               |   | 1,158   |      |  |      | 2,197   |  |   | 4,048   |  
|Foreign currency (gain) loss                 |  |                                | 2,075   |   |                               |   | (17     | )    |  |      | 2,047   |  |   | (82     | )
|                                             |  |                                |         |   |                               |   |         |      |  |      |         |  |   |         |  
|Earnings (loss) before income taxes          |  |                                | (650    | ) |                               |   | 2,329   |      |  |      | 10,789  |  |   | 27,583  |  
|Provision for income taxes                   |  |                                | (223    | ) |                               |   | 148     |      |  |      | 4,250   |  |   | 10,228  |  
|                                             |  |                                |         |   |                               |   |         |      |  |      |         |  |   |         |  
|Net income (loss)                            |  | $                              | (427    | ) |                               | $ | 2,181   |      |  | $    | 6,539   |  | $ | 17,355  |  
|                                             |  |                                |         |   |                               |   |         |      |  |      |         |  |   |         |  
|Net income (loss) per share: Basic           |  | $                              | (0.02   | ) |                               | $ | 0.12    |      |  | $    | 0.35    |  | $ | 0.92    |  
|Net income (loss) per share: Diluted         |  | $                              | (0.02   | ) |                               | $ | 0.11    |      |  | $    | 0.34    |  | $ | 0.88    |  
|Weighted average shares outstanding          |  |                                |         |   |                               |   |         |      |  |      |         |  |   |         |  
|Basic                                        |  |                                | 18,954  |   |                               |   | 18,833  |      |  |      | 18,913  |  |   | 18,778  |  
|Diluted                                      |  |                                | 19,621  |   |                               |   | 19,637  |      |  |      | 19,491  |  |   | 19,821  |  

See notes to
unaudited consolidated condensed financial statements.



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TEAM, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)



|                                        |  |                                |        |   |                               |   |        |      |  |   |        |   |  |   |         |  
|--------------------------------------- |  | ------------------------------ | ------ | - | ----------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------- | -
|                                        |  | Three Months EndedFebruary 28, |        |   | Nine Months EndedFebruary 28, |  
|                                        |  | 2010                           |        |   | 2009                          |   |        | 2010 |  |   | 2009   |  
|Net income (loss)                       |  | $                              | (427   | ) |                               | $ | 2,181  |      |  | $ | 6,539  |   |  | $ | 17,355  |  
|Foreign currency translation adjustment |  |                                | (2,258 | ) |                               |   | (1,708 | )    |  |   | 1,089  |   |  |   | (20,724 | )
|Interest rate swap                      |  |                                | 193    |   |                               |   | (19    | )    |  |   | 626    |   |  |   | (233    | )
|Foreign currency hedge                  |  |                                | 1,640  |   |                               |   | 218    |      |  |   | 572    |   |  |   | 3,707   |  
|Tax provision                           |  |                                | (666   | ) |                               |   | 717    |      |  |   | (1,184 | ) |  |   | 5,687   |  
|                                        |  |                                |        |   |                               |   |        |      |  |   |        |   |  |   |         |  
|Comprehensive income (loss)             |  | $                              | (1,518 | ) |                               | $ | 1,389  |      |  | $ | 7,642  |   |  | $ | 5,792   |  
|                                        |  |                                |        |   |                               |   |        |      |  |   |        |   |  |   |         |  

See notes to unaudited consolidated condensed financial statements.



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TEAM, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                  |  |                               |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Nine Months EndedFebruary 28, |        
|                                                                                  |  | 2010                          |         |   | 2009 |  
|Cash Flows From Operating Activities:                                             |  |                               |         |   |      |   |         |  
|Net income                                                                        |  | $                             | 6,539   |   |      | $ | 17,355  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                               |         |   |      |   |         |  
|Earnings from unconsolidated affiliates                                           |  |                               | (520    | ) |      |   | (834    | )
|Depreciation and amortization                                                     |  |                               | 9,224   |   |      |   | 9,037   |  
|Amortization of deferred loan costs                                               |  |                               | 233     |   |      |   | 223     |  
|Foreign currency loss (gain)                                                      |  |                               | 2,047   |   |      |   | (82     | )
|Deferred income taxes                                                             |  |                               | 1,170   |   |      |   | 1,701   |  
|Write down of fixed assets                                                        |  |                               | 85      |   |      |   |        |  
|Non-cash compensation cost                                                        |  |                               | 3,876   |   |      |   | 3,384   |  
|(Increase) decrease:                                                              |  |                               |         |   |      |   |         |  
|Receivables                                                                       |  |                               | 10,904  |   |      |   | 12,840  |  
|Inventory                                                                         |  |                               | (38     | ) |      |   | (4,103  | )
|Prepaid expenses and other current assets                                         |  |                               | 3,242   |   |      |   | 2,816   |  
|Increase (decrease):                                                              |  |                               |         |   |      |   |         |  
|Accounts payable                                                                  |  |                               | (2,700  | ) |      |   | (4,987  | )
|Other accrued liabilities                                                         |  |                               | 132     |   |      |   | 353     |  
|Income taxes                                                                      |  |                               | (80     | ) |      |   | (1,012  | )
|                                                                                  |  |                               |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                               | 34,114  |   |      |   | 36,691  |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Cash Flows From Investing Activities:                                             |  |                               |         |   |      |   |         |  
|Capital expenditures                                                              |  |                               | (5,513  | ) |      |   | (13,267 | )
|Proceeds from sale of assets                                                      |  |                               | 57      |   |      |   | 125     |  
|Distributions (contributions) from (to) joint ventures                            |  |                               | 600     |   |      |   | (500    | )
|(Increase) decrease in other assets, net                                          |  |                               | (1,091  | ) |      |   | 63      |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                               | (5,947  | ) |      |   | (13,579 | )
|                                                                                  |  |                               |         |   |      |   |         |  
|Cash Flows From Financing Activities:                                             |  |                               |         |   |      |   |         |  
|Payments under revolving credit agreement                                         |  |                               | (18,280 | ) |      |   | (7,310  | )
|Payments related to term loans                                                    |  |                               | (4,733  | ) |      |   | (4,485  | )
|Tax benefit of stock option exercises                                             |  |                               | 546     |   |      |   | 1,615   |  
|Insurance note payments                                                           |  |                               | (3,218  | ) |      |   | (2,774  | )
|Issuance of common stock                                                          |  |                               | 401     |   |      |   | 1,754   |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Net cash used in financing activities                                             |  |                               | (25,284 | ) |      |   | (11,200 | )
|Effect of exchange rate changes on cash                                           |  |                               | (1,350  | ) |      |   | (1,336  | )
|                                                                                  |  |                               |         |   |      |   |         |  
|Net increase in cash and cash equivalents                                         |  |                               | 1,533   |   |      |   | 10,576  |  
|Cash and cash equivalents at beginning of period                                  |  |                               | 12,632  |   |      |   | 6,600   |  
|                                                                                  |  |                               |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                             | 14,165  |   |      | $ | 17,176  |  
|                                                                                  |  |                               |         |   |      |   |         |  

See notes to unaudited consolidated condensed financial statements.



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TEAM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED CONDENSED

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
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 world. 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, Original Equipment Manufacturers (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.

Basis for Presentation. These interim financial statements are unaudited, but in the opinion of our management, reflect all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of results
for such periods. The consolidated condensed balance sheet at May 31, 2009 is derived from the May 31, 2009 audited consolidated financial statements. The results of operations for any interim period are not necessarily indicative of
results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in our annual report on Form 10-K for the fiscal year ended May 31, 2009.

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.



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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 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 banking 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 banking 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) Accounting Standards Codification
(ASC) 350, Intangibles-Goodwill and Other (ASC 350). Intangible assets with estimated useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for
impairment in.

Income Taxes. We follow the guidance in ASC 740, Income Taxes (ASC 740)
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



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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 ASC 450, Contingencies (ASC 450) 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 currently $500,000 per occurrence. Our historical claims
occurring before June 1, 2009 had a lower self-insured retention, typically $250,000. 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 Securities and Exchange
Commission (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 February 28, 2010 and May 31, 2009, the amount of earned but unbilled revenue included in accounts receivable was $7.5 million and $6.5 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 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



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stock to the extent that the options exercise prices are less than the average market price of common shares during the period and the assumed pro forma vesting of stock units, performance
awards and stock awards.

There were 789,000 and 695,000 options to purchase shares of common stock outstanding during the
three month periods ended February 28, 2010 and February 28, 2009, excluded from the computation of diluted earnings per share because the options exercise prices were greater than the average market price of common shares during the
periods. There were 830,000 and 635,000 options to purchase shares of common stock outstanding during the nine month periods ended February 28, 2010 and February 28, 2009, excluded from the computation of diluted earnings per share because
the options exercise prices were greater than the average market price of common shares during the periods.

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. Foreign currency transaction gains and losses are
included in our statement of operations. Effective December 1, 2009, we began to account for Venezuela as a highly-inflationary economy. Therefore, beginning on this date, the effect of all future currency fluctuations between the Bolivar and the
U.S. Dollar are recorded in our statement of operations.

Accounting Principles Not Yet Adopted

In June 2009, the FASB issued an update to ASC 810, Consolidations (ASC 810) which amends the guidance applicable to
variable interest entities. The amendments will significantly affect the overall consolidation analysis under ASC 810. The guidance 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 update on our results of operations, financial position or cash flows.

Newly Adopted Accounting Principles

In June 2009, the FASB issued ASC 105, Generally Accepted Accounting Principles (ASC 105). ASC
105 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. ASC 105 supersedes all
previously-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the ASC will become non-authoritative. ASC 105 is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The adoption of this pronouncement did not have any effect on our results of operations, financial position or cash flows.

In May 2009, the FASB issued an update to its guidance in ASC 855, Subsequent Events(ASC 855) which established
principles and requirements for subsequent events. The update details the period after the balance sheet date during which we should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements,
the circumstances under which we 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.

In March 2008, the FASB issued an update to ASC 815, Derivatives and
Hedging (ASC 815) which 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. This update 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.



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In December 2007, the FASB updated ASC 805, Business Combinations (ASC
805). ASC 805 applies to all business combinations, including combinations among mutual entities and combinations by contract alone. The update to ASC 805 requires that all business combinations will be accounted for by applying the
acquisition method. The update of ASC 805 is effective for business combinations consummated in fiscal years beginning on or after December 15, 2008. As we completed no business acquisitions in the first three months of the fiscal year, the
adoption of this update as of June 1, 2009 had no effect on our consolidated financial statements.

In September
2006, the FASB issued ASC 820, Fair Value Measurements and Disclosures (ASC 820). 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 ASC 820, however, may change current practice within an organization. ASC 820 was effective January 1, 2008 and applied prospectively. Effective June 1,
2008, we adopted the provisions of ASC 820 relating to financial assets and liabilities. The adoption of ASC 820 did not have a material financial impact on our consolidated results of operations, financial condition or cash flows.

In February 2007, the FASB issued an update to ASC 820, 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. This update was effective June 1, 2008. We did not adopt the fair value option
permitted under this statement.

In October 2008, the FASB issued an update to ASC 820. This update clarifies the
application of ASC 820 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 update was effective upon
issuance, including prior periods for which financial statements have not been issued. The adoption of this update had no effect on our results of operations, financial position or cash flows.

In April 2009, the FASB issued an update to its guidelines in ASC 820 to require disclosures about fair value of financial instruments for
interim reporting periods of publicly traded companies as well as in annual financial statements. This update requires those disclosures to be summarized financial information at interim reporting periods. This update also requires that companies
disclose in the body or in the accompanying notes of the summarized financial information for interim reporting periods and in the financial statements for annual reporting periods the fair value of all instruments for with it is practical to
estimate that fair value, whether recognized or not in the statement of financial position. Fair value information disclosed in the notes shall be presented together with the related carrying amount in a form that makes it clear the fair value and
carrying amount represents assets or liabilities and how the carrying amount relates to what is reported in the statement of financial position. This update to ASC 820 became effective for us on June 15, 2009 and did not have a material effect
on our results of operations, financial position or cash flows.

2. RECEIVABLES

A summary of accounts receivable as of February 28, 2010 and May 31, 2009 is as follows (in thousands):



|                                |  |                   |         |   |              |   |         |  
|------------------------------- |  | ----------------- | ------- | - | ------------ | - | ------- | -
|                                |  | February 28, 2010 |         |   | May 31, 2009 |  
|                                |  | (unaudited)       |         |   |              |  
|Trade accounts receivable       |  | $                 | 100,136 |   |              | $ | 111,465 |  
|Unbilled revenues               |  |                   | 7,471   |   |              |   | 6,476   |  
|Allowance for doubtful accounts |  |                   | (4,774  | ) |              |   | (3,662  | )
|                                |  |                   |         |   |              |   |         |  
|Total                           |  | $                 | 102,833 |   |              | $ | 114,279 |  
|                                |  |                   |         |   |              |   |         |  



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3. INVENTORY

A summary of inventory as of February 28, 2010 and May 31, 2009 is as follows (in thousands):



|                 |  |                   |        |              |   |       
|---------------- |  | ----------------- | ------ | ------------ | - | ------
|                 |  | February 28, 2010 |        | May 31, 2009
|                 |  | (unaudited)       |        |             
|Raw materials    |  | $                 | 2,720  |              | $ | 3,071 
|Work in progress |  |                   | 582    |              |   | 674   
|Finished goods   |  |                   | 16,296 |              |   | 15,902
|                 |  |                   |        |              |   |       
|Total            |  | $                 | 19,598 |              | $ | 19,647
|                 |  |                   |        |              |   |       

4. PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment as of February 28, 2010 and May 31, 2009 is as follows (in thousands):



|                                          |  |                   |         |   |              |   |         |  
|----------------------------------------- |  | ----------------- | ------- | - | ------------ | - | ------- | -
|                                          |  | February 28, 2010 |         |   | May 31, 2009 |  
|                                          |  | (unaudited)       |         |   |              |  
|Land                                      |  | $                 | 962     |   |              | $ | 945     |  
|Buildings and leasehold improvements      |  |                   | 8,258   |   |              |   | 7,939   |  
|Machinery and equipment                   |  |                   | 92,740  |   |              |   | 88,129  |  
|Furniture and fixtures                    |  |                   | 1,707   |   |              |   | 1,659   |  
|Computers and computer software           |  |                   | 6,063   |   |              |   | 5,942   |  
|Automobiles                               |  |                   | 2,430   |   |              |   | 2,311   |  
|Construction in progress                  |  |                   | 8,725   |   |              |   | 8,081   |  
|                                          |  |                   |         |   |              |   |         |  
|Total                                     |  |                   | 120,885 |   |              |   | 115,006 |  
|Accumulated depreciation and amortization |  |                   | (64,468 | ) |              |   | (55,424 | )
|                                          |  |                   |         |   |              |   |         |  
|Property, plant, and equipment, net       |  | $                 | 56,417  |   |              | $ | 59,582  |  
|                                          |  |                   |         |   |              |   |         |  

At February 28, 2010, there was $0.4 million of capitalized interest included in property, plant and
equipment attributable to 50 acres purchased in October 2007 to construct future facilities in Houston, Texas. At February 28, 2010, total capitalized cost of the project, inclusive of the capitalized interest, property purchase and related
development cost was $6.8 million. 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, starting in
the third quarter of fiscal year 2009, ceased to further capitalize interest until the project resumes.

5. OTHER ACCRUED LIABILITIES

A summary of other accrued liabilities as of February 28, 2010 and May 31, 2009 is as follows (in thousands):



|                                        |  |                   |        |              |   |       
|--------------------------------------- |  | ----------------- | ------ | ------------ | - | ------
|                                        |  | February 28, 2010 |        | May 31, 2009
|                                        |  | (unaudited)       |        |             
|Payroll and other compensation expenses |  | $                 | 14,338 |              | $ | 14,698
|Insurance accruals                      |  |                   | 5,140  |              |   | 5,020 
|Property, sales and other taxes         |  |                   | 918    |              |   | 1,082 
|Auto lease rebate                       |  |                   | 176    |              |   | 446   
|Other                                   |  |                   | 1,903  |              |   | 1,856 
|                                        |  |                   |        |              |   |       
|Total                                   |  | $                 | 22,475 |              | $ | 23,102
|                                        |  |                   |        |              |   |       



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6. 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 February 28, 2010) 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 February 28,
2010, 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 $7.1 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 February 28, 2010) 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 February 28, 2010 and May 31, 2009 is as follows (in thousands):



|                                              |  |                   |        |   |              |   |        |  
|--------------------------------------------- |  | ----------------- | ------ | - | ------------ | - | ------ | -
|                                              |  | February 28, 2010 |        |   | May 31, 2009 |  
|                                              |  | (unaudited)       |        |   |              |  
|Revolving loan portion of the Credit Facility |  | $                 | 53,589 |   |              | $ | 76,164 |  
|Canadian Line of Credit                       |  |                   | 3,800  |   |              |   |       |  
|Term loan portion of the Credit Facility      |  |                   |       |   |              |   | 4,500  |  
|Software Licensing Note                       |  |                   | 598    |   |              |   | 821    |  
|Auto loans                                    |  |                   | 7      |   |              |   | 17     |  
|                                              |  |                   |        |   |              |   |        |  
|                                              |  |                   | 57,994 |   |              |   | 81,502 |  
|Current maturities                            |  |                   | (314   | ) |              |   | (4,813 | )
|                                              |  |                   |        |   |              |   |        |  
|Long-term debt, excluding current maturities  |  | $                 | 57,680 |   |              | $ | 76,689 |  
|                                              |  |                   |        |   |              |   |        |  

ASC 815 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 allows 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 $0.2 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 three and nine months ended
February 28, 2010 and 2009, are as follows (in thousands):



|                   |  |                                                  |       |      |                                                           |     |                                                  |  |      |                                                           |      |   |      |  |   |       |  |      |       |   |  |   |     |  |   |    
|------------------ |  | ------------------------------------------------ | ----- | ---- | --------------------------------------------------------- | --- | ------------------------------------------------ |  | ---- | --------------------------------------------------------- | ---- | - | ---- |  | - | ----- |  | ---- | ----- | - |  | - | --- |  | - | ---
|                   |  | Gain (Loss)Recognized inOtherComprehensiveIncome |       |      | LossReclassified fromOther ComprehensiveIncome toEarnings |     | Gain (Loss)Recognized inOtherComprehensiveIncome |  |      | LossReclassified fromOther ComprehensiveIncome
toEarnings
|                   |  | Three MonthsEndedFebruary 28,                    |       |      | Three MonthsEndedFebruary 28,                             |     | Nine MonthsEndedFebruary 28,                     |  |      | Nine MonthsEndedFebruary 28,                             
|                   |  | 2010                                             |       | 2009 |                                                           |     | 2010                                             |  | 2009 |                                                           | 2010 |   | 2009 |  |   | 2010  |  | 2009
|Economic hedge     |  | $                                                | 1,640 |      | $                                                         | 218 |                                                  |  | $    |                                                          |      | $ |     |  | $ | 572   |  | $    | 3,707 |   |  | $ |    |  | $ |   
|Interest rate swap |  |                                                  | 193   |      |                                                           | (19 | )                                                |  |      | 208                                                       |      |   | 226  |  |   | 626   |  |      | (233  | ) |  |   | 670 |  |   | 499
|                   |  |                                                  |       |      |                                                           |     |                                                  |  |      |                                                           |      |   |      |  |   |       |  |      |       |   |  |   |     |  |   |    
|                   |  | $                                                | 1,833 |      | $                                                         | 199 |                                                  |  | $    | 208                                                       |      | $ | 226  |  | $ | 1,198 |  | $    | 3,474 |   |  | $ | 670 |  | $ | 499
|                   |  |                                                  |       |      |                                                           |     |                                                  |  |      |                                                           |      |   |      |  |   |       |  |      |       |   |  |   |     |  |   |    

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 ASC 815 (in thousands):



|                   |  |                   |  |                       |              |           |       |   |                |           |                       |                   |           |   |      |  
|------------------ |  | ----------------- |  | --------------------- | ------------ | --------- | ----- | - | -------------- | --------- | --------------------- | ----------------- | --------- | - | ---- | -
|                   |  | February 28, 2010 |  |                       | May 31, 2009 |          
|                   |  | Classification    |  | Balance SheetLocation |              | FairValue |       |   | Classification |           | Balance SheetLocation |                   | FairValue |  
|Economic hedge     |  | Liability         |  | Long-term debt        |              | $         | 1,176 |   |                | Liability |                       | Long-term debt    |           | $ | 604  |  
|Interest rate swap |  | Liability         |  | Other liabilities     |              |           | (190  | ) |                | Liability |                       | Other liabilities |           |   | (816 | )
|                   |  |                   |  |                       |              |           |       |   |                |           |                       |                   |           |   |      |  
|Total Derivatives  |  |                   |  |                       |              | $         | 986   |   |                |           |                       |                   |           | $ | (212 | )
|                   |  |                   |  |                       |              |           |       |   |                |           |                       |                   |           |   |      |  

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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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 February 28, 2010 and May 31, 2009, we were contingently liable for outstanding stand-by letters of credit totaling $8.8 million and $6.8 million, respectively. 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.

7. FAIR VALUE MEASUREMENTS

Effective June 1, 2008, we adopted the
provisions of ASC 820, which among other things, requires enhanced disclosures about assets and liabilities carried at fair value.

As defined in ASC 820, 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. ASC 820 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 February 28, 2010 and May 31, 2009, respectively. As required by ASC 820, 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):



|                                |  |                                                             |   |                                             |   |       |                                         |  |       |   |  |   |       |  
|------------------------------- |  | ----------------------------------------------------------- | - | ------------------------------------------- | - | ----- | --------------------------------------- |  | ----- | - |  | - | ----- | -
|                                |  | February 28, 2010                                           |  
|                                |  | Quoted Prices inActive Markets forIdentical Items (Level 1) |   | Significant OtherObservableInputs (Level 2) |   |       | SignificantUnobservableInputs (Level 3) |  | Total |  
|Liabilities:                    |  |                                                             |   |                                             |   |       |                                         |  |       |   |  |   |       |  
|Euro denominated long-term debt |  | $                                                           |  |                                             | $ | 1,176 |                                         |  | $     |  |  | $ | 1,176 |  
|Interest rate swap              |  |                                                             |  |                                             |   | (190  | )                                       |  |       |  |  |   | (190  | )
|                                |  |                                                             |   |                                             |   |       |                                         |  |       |   |  |   |       |  
|Net Assets                      |  | $                                                           |  |                                             | $ | 986   |                                         |  | $     |  |  | $ | 986   |  
|                                |  |                                                             |   |                                             |   |       |                                         |  |       |   |  |   |       |  
|                                | 
|                                |  | May 31, 2009                                                |  
|                                |  | 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  | )
|                                |  |                                                             |   |                                             |   |       |                                         |  |       |   |  |   |       |  
|Net Liability                   |  | $                                                           |  |                                             | $ | (212  | )                                       |  | $     |  |  | $ | (212  | )
|                                |  |                                                             |   |                                             |   |       |                                         |  |       |   |  |   |       |  



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8. 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 February 28, 2010, 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, common
stock 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 February 28, 2010. 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
$3.9 million and $3.4 million for the nine months ended February 28, 2010 and 2009, respectively. Tax benefits related to share-based compensation were $0.5 million and $1.6 million for the nine months ended February 28,
2010 and 2009, respectively. At February 28, 2010, $9.7 million of unrecognized compensation expense related to share-based compensation is expected to be recognized over a remaining weighted-average period of two and a half 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 specified vesting period for those options. Stock options generally have a ten year term. No stock options were granted during the nine months ended February 28,
2010 and 2009. Transactions involving our stock options during the nine months ended February 28, 2010 and 2009 are summarized below:



|                                       |  |                                    |   |                                    |                               |       |                |       |   |                               |   |      
|-------------------------------------- |  | ---------------------------------- | - | ---------------------------------- | ----------------------------- | ----- | -------------- | ----- | - | ----------------------------- | - | -----
|                                       |  | Nine Months EndedFebruary 28, 2010 |   | Nine Months EndedFebruary 28, 2009
|                                       |  | No. ofOptions                      |   |                                    | WeightedAverageExercise Price |       | No. ofOptions  |       |   | WeightedAverageExercise Price
|                                       |  | (in thousands)                     |   |                                    |                               |       | (in thousands) |       |   |                              
|Shares under option, beginning of year |  | 2,354                              |   |                                    | $                             | 16.24 |                | 2,627 |   |                               | $ | 15.37
|Changes during the year:               |  |                                    |   |                                    |                               |       |                |       |   |                               |   |      
|Granted                                |  |                                   |   |                                    | $                             |      |                |      |   |                               | $ |     
|Exercised                              |  | (79                                | ) |                                    | $                             | 6.45  |                | (253  | ) |                               | $ | 6.41 
|Canceled                               |  | (25                                | ) |                                    | $                             | 23.73 |                | (16   | ) |                               | $ | 28.60
|Expired                                |  | (8                                 | ) |                                    | $                             | 16.56 |                |      |   |                               | $ |     
|                                       |  |                                    |   |                                    |                               |       |                |       |   |                               |   |      
|Shares under option, end of year       |  | 2,242                              |   |                                    | $                             | 16.47 |                | 2,358 |   |                               | $ | 16.24
|Exercisable at end of year             |  | 1,785                              |   |                                    | $                             | 14.13 |                | 1,450 |   |                               | $ | 12.03



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##### Table of Contents

Options exercisable at February 28, 2010 had a weighted average remaining contractual
life of 5.6 years. For total options outstanding at February 28, 2010, the range of exercise prices and remaining contractual lives are as follows:



|                 |  |                |  |                               |       |                                        |    
|---------------- |  | -------------- |  | ----------------------------- | ----- | -------------------------------------- | ---
|Range of Prices  |  | No. ofOptions  |  | WeightedAverageExercise Price |       | WeightedAverageRemainingLife(in years)
|                 |  | (in thousands) |  |                               |       |                                       
|$0.00 to $3.21   |  | 150            |  | $                             | 2.54  |                                        | 1.6
|$3.22 to $6.41   |  | 88             |  | $                             | 4.19  |                                        | 3.0
|$6.42 to $9.62   |  | 519            |  | $                             | 8.46  |                                        | 4.9
|$9.63 to $12.82  |  | 189            |  | $                             | 11.24 |                                        | 5.9
|$12.83 to $16.03 |  | 622            |  | $                             | 14.98 |                                        | 6.4
|$16.04 to $32.05 |  | 674            |  | $                             | 30.18 |                                        | 7.7
|                 |  |                |  |                               |       |                                        |    
|                 |  | 2,242          |  | $                             | 16.47 |                                        | 5.9
|                 |  |                |  |                               |       |                                        |    

Performance awards are either settled with common
stock or cash upon vesting. We determine the fair value of each performance award 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. Transactions involving our performance awards during the nine months ended February 28, 2010 are summarized below:



|                                        |  |                                    |   |  |                           |      
|--------------------------------------- |  | ---------------------------------- | - |  | ------------------------- | -----
|                                        |  | Nine Months EndedFebruary 28, 2010
|                                        |  | No. of PerformanceAwards           |   |  | WeightedAverageFair Value
|                                        |  | (in thousands)                     |   |  |                          
|Performance Awards, beginning of period |  | 28                                 |   |  | $                         | 27.39
|Changes during the period:              |  |                                    |   |  |                           |      
|Granted                                 |  | 30                                 |   |  | $                         | 16.42
|Vested and settled                      |  | (7                                 | ) |  | $                         | 27.39
|Canceled                                |  |                                   |   |  | $                         |     
|                                        |  |                                    |   |  |                           |      
|Performance Awards, end of period       |  | 51                                 |   |  | $                         | 20.84
|                                        |  |                                    |   |  |                           |      

Stock units are either settled with common stock or
cash upon vesting. We determine the fair value of each stock unit based on the market price on the date of grant. Stock units generally vest over four years. We also grant stock units and common stock to our directors which vests immediately.
Transactions involving our stock units during the nine months ended February 28, 2010 are summarized below:



|                                           |  |                                    |   |  |                           |      
|------------------------------------------ |  | ---------------------------------- | - |  | ------------------------- | -----
|                                           |  | Nine Months EndedFebruary 28, 2010
|                                           |  | No. of StockUnits                  |   |  | WeightedAverageFair Value
|                                           |  | (in thousands)                     |   |  |                          
|Stock and stock units, beginning of period |  | 127                                |   |  | $                         | 27.39
|Changes during the period:                 |  |                                    |   |  |                           |      
|Granted                                    |  | 157                                |   |  | $                         | 16.43
|Vested and settled                         |  | (31                                | ) |  | $                         | 27.39
|Canceled                                   |  | (3                                 | ) |  | $                         | 25.18
|                                           |  |                                    |   |  |                           |      
|Stock and stock units, end of period       |  | 250                                |   |  | $                         | 20.54
|                                           |  |                                    |   |  |                           |      



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9. ENTITY WIDE DISCLOSURES

ASC 280,Segment Reporting(ASC 280) 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.

Revenues and total assets in the U.S. and other countries are as follows (in thousands):



|                        |  |                                     |                   |         |                                     |              |   |                                    |         |         |                                    |     |   |   |         |  |     |   |  |   |         |  |     |  
|----------------------- |  | ----------------------------------- | ----------------- | ------- | ----------------------------------- | ------------ | - | ---------------------------------- | ------- | ------- | ---------------------------------- | --- | - | - | ------- |  | --- | - |  | - | ------- |  | --- | -
|                        |  | Three Months EndedFebruary 28, 2010 |                   |         | Three Months EndedFebruary 28, 2009 |              |   | Nine Months EndedFebruary 28, 2010 |         |         | Nine Months EndedFebruary 28, 2009 |    
|                        |  | (unaudited)                         |                   |         | (unaudited)                         |              |   | (unaudited)                        |         |         | (unaudited)                        |    
|Revenues                |  |                                     |                   |         |                                     |              |   |                                    |         |         |                                    |     |   |   |         |  |     |   |  |   |         |  |     |  
|United States           |  | $                                   | 72,531            |         | 70                                  | %            |   | $                                  | 78,633  |         | 75                                 | %   |   | $ | 230,998 |  | 70  | % |  | $ | 256,428 |  | 68  | %
|Canada                  |  |                                     | 22,285            |         | 21                                  | %            |   |                                    | 19,274  |         | 19                                 | %   |   |   | 66,422  |  | 20  | % |  |   | 89,315  |  | 24  | %
|Europe                  |  |                                     | 5,898             |         | 6                                   | %            |   |                                    | 2,136   |         | 2                                  | %   |   |   | 18,231  |  | 6   | % |  |   | 16,298  |  | 4   | %
|Other foreign countries |  |                                     | 3,398             |         | 3                                   | %            |   |                                    | 4,223   |         | 4                                  | %   |   |   | 12,690  |  | 4   | % |  |   | 14,315  |  | 4   | %
|                        |  |                                     |                   |         |                                     |              |   |                                    |         |         |                                    |     |   |   |         |  |     |   |  |   |         |  |     |  
|Total                   |  | $                                   | 104,112           |         | 100                                 | %            |   | $                                  | 104,266 |         | 100                                | %   |   | $ | 328,341 |  | 100 | % |  | $ | 376,356 |  | 100 | %
|                        |  |                                     |                   |         |                                     |              |   |                                    |         |         |                                    |     |   |   |         |  |     |   |  |   |         |  |     |  
|                        |  |                                    
|                        |  |                                     | February 28, 2010 |         |                                     | May 31, 2009 |  
|                        |  |                                     | (unaudited)       |         |                                     |              |   |                                    |        
|Total Assets            |  |                                     |                   |         |                                     |              |   |                                    |         |         |                                    |     |  
|United States           |  |                                     | $                 | 175,279 |                                     | 67           | % |                                    | $       | 180,889 |                                    | 66  | %
|Canada                  |  |                                     |                   | 50,821  |                                     | 20           | % |                                    |         | 62,678  |                                    | 23  | %
|Europe                  |  |                                     |                   | 27,298  |                                     | 10           | % |                                    |         | 25,353  |                                    | 9   | %
|Other foreign countries |  |                                     |                   | 7,437   |                                     | 3            | % |                                    |         | 7,001   |                                    | 2   | %
|                        |  |                                     |                   |         |                                     |              |   |                                    |         |         |                                    |     |  
|Total                   |  |                                     | $                 | 260,835 |                                     | 100          | % |                                    | $       | 275,921 |                                    | 100 | %
|                        |  |                                     |                   |         |                                     |              |   |                                    |         |         |                                    |     |  

10. 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
$1.0 million and $1.1 million as of February 28, 2010 and May 31, 2009, respectively. Revenues from the joint venture not reflected in our consolidated revenues were $6.1 million and $10.6 million for the nine months ended
February 28, 2010 and 2009, respectively.



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11. INTERNAL INVESTIGATION

During an internal management review of our TMS branch operations in Trinidad in the Spring of 2009, we were informed of allegations of
improper payments made by local employees of our wholly-owned Trinidad subsidiary to employees of certain customers, including foreign government owned enterprises. These improper payments may constitute violations of the U.S. Foreign Corrupt
Practices Act (FCPA) or other applicable laws. Consequently, the Audit Committee of our Board of Directors (the Audit Committee) conducted an investigation of those allegations with the assistance of independent outside
counsel. We voluntarily disclosed information relating to the initial allegations, the investigation and the initial findings to the U.S. Department of Justice (DOJ) and to the SEC in the summer of 2009, and have continued to cooperate
with the DOJ and SEC in connection with their review of this matter. The Audit Committee investigation also included a review of our operations in several other foreign jurisdictions in which the Company does business.

The report of the independent investigator was delivered to the Audit Committee in March 2010. The investigation concluded that improper
payments of limited size were made to employees of foreign government owned enterprises in Trinidad, but determined that the improper payments were not made, or authorized by, employees outside the one TMS Trinidad branch. The investigation of our
other foreign operations did not result in any findings of significance and management has remediated or is undertaking remedial action on all matters identified in the investigation. Based upon the results of the investigation, we believe that the
total of the improper payments to government-owned enterprises over the past five years did not exceed $50,000. The total annual revenues from the impacted TMS Trinidad branch represent approximately one-half of one percent of our annual
consolidated revenues. While we have not yet communicated the results of the independent investigation to the DOJ and SEC, our management continues to believe that any possible violations of the FCPA are limited in size and scope. The results of the
independent investigation are expected to be communicated to the DOJ and SEC during the second calendar quarter of 2010

As of
February 28, 2010, we have expended an aggregate of approximately $2.8 million on legal and other professional services related to this investigation. The total professional costs associated with the investigation are projected to approximate $3.0
million. The FCPA and related statutes and regulations provide for potential monetary penalties, disgorgement and interest, as well as criminal and civil sanctions in connection with violations of the FCPA and other applicable laws. It is possible
that monetary penalties could be assessed against us or that we enter into a settlement with the U.S. government and other foreign governmental agencies in connection with this matter resulting in monetary payments. The nature and amount of any
monetary penalties depends on a number of factors which cannot reasonably be estimated at this time. As a result, we have not recorded any provision for monetary penalties or other costs related to potential criminal and civil sanctions.

12. VENEZUELAN CURRENCY DEVALUATION

Foreign currency transaction losses were $2.1 million and $2.0 million for the three and nine months ended February 28, 2010, respectively. Currency transaction losses are primarily due to fluctuations
between the Venezuelan Bolivar and the U.S. Dollar. Team operates a small service location in Punta Fijo, Venezuela, whose annual revenues have historically been less than one percent of Teams consolidated revenues, using the previously fixed
exchange rate of 2.15 Bolivars per U.S. Dollar. We began to account for Venezuela as a highly-inflationary economy at the beginning of our third quarter of fiscal year 2010. Accordingly, all currency fluctuations between the Bolivar and U.S. Dollar
are prospectively recorded in our statement of operations. Because of the recent devaluation of the Bolivar and the uncertain political environment in Venezuela, we use the parallel exchange rate for Bolivar denominated bonds (6.70
Bolivars per U.S. Dollar at February 28, 2010) to translate Venezuelan assets, liabilities and results of operations effective as of the beginning of our fiscal 2010 third quarter. At February 28, 2010, our Venezuelan subsidiary had $1.1
million of net assets denominated in Venezuelan Bolivars.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Overview

The following
discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Item 1 of this report, and the consolidated financial statements and Managements Discussion and
Analysis of Financial Condition and Results of Operations, including Critical Accounting Policies, included in our Annual Report on Form 10-K for the year ended May 31, 2009.

We based our forward-looking statements on 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. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in the forward-looking statements. Differences between actual results and any future performance suggested in
these forward-looking statements could result from a variety of factors, including those listed beginning on page 6 of our Annual Report on Form 10-K for the year ended May 31, 2009.

General Description of Business

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 world. 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, and steel industries as well as some of the worlds largest engineering and construction firms, shipbuilding, OEMs, distributors and end
users. Our products and services are provided across a broad geographic reach.



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##### Table of Contents

Three Months Ended February 28, 2010 Compared to Three Months Ended February 28, 2009

The following table sets forth the components of revenue and operating income from our operations for the three months ended
February 28, 2010 and February 28, 2009 (in thousands):



|                                        |  |                                     |         |                                     |   |                     |   |   |        |   |  |     |   
|--------------------------------------- |  | ----------------------------------- | ------- | ----------------------------------- | - | ------------------- | - | - | ------ | - |  | --- | --
|                                        |  | Three Months endedFebruary 28, 2010 |         | Three Months endedFebruary 28, 2009 |   | Increase/(decrease) |  
|                                        |  |                                     |         | $                                   |   |                     | % |  
|                                        |  | (unaudited)                         |         | (unaudited)                         |   |                     |   |   |        |  
|Revenues:                               |  |                                     |         |                                     |   |                     |   |   |        |   |  |     |   
|TCM division                            |  | $                                   | 60,021  |                                     | $ | 56,144              |   | $ | 3,877  |   |  | 7   | % 
|TMS division                            |  |                                     | 44,091  |                                     |   | 48,122              |   |   | (4,031 | ) |  | (8  | )%
|                                        |  |                                     |         |                                     |   |                     |   |   |        |   |  |     |   
|Total revenues                          |  |                                     | 104,112 |                                     |   | 104,266             |   |   | (154   | ) |  | 0   | % 
|Gross Margin:                           |  |                                     |         |                                     |   |                     |   |   |        |   |  |     |   
|TCM division                            |  |                                     | 16,197  |                                     |   | 14,608              |   |   | 1,589  |   |  | 11  | % 
|TMS division                            |  |                                     | 12,322  |                                     |   | 15,346              |   |   | (3,024 | ) |  | (20 | )%
|                                        |  |                                     |         |                                     |   |                     |   |   |        |   |  |     |   
|Total gross margin                      |  |                                     | 28,519  |                                     |   | 29,954              |   |   | (1,435 | ) |  | (5  | )%
|SG&A Expenses:                          |  |                                     |         |                                     |   |                     |   |   |        |   |  |     |   
|Field operations                        |  |                                     | 21,674  |                                     |   | 21,443              |   |   | 231    |   |  | 1   | % 
|Corporate costs                         |  |                                     | 4,250   |                                     |   | 5,200               |   |   | (950   | ) |  | (18 | )%
|Non-recurring investigation costs       |  |                                     | 532     |                                     |   |                    |   |   | 532    |   |  | 100 | % 
|                                        |  |                                     |         |                                     |   |                     |   |   |        |   |  |     |   
|Total SG&A                              |  |                                     | 26,456  |                                     |   | 26,643              |   |   | (187   | ) |  | (1  | )%
|Earnings from unconsolidated affiliates |  |                                     | 29      |                                     |   | 159                 |   |   | (130   | ) |  | (82 | )%
|                                        |  |                                     |         |                                     |   |                     |   |   |        |   |  |     |   
|Operating income                        |  | $                                   | 2,092   |                                     | $ | 3,470               |   | $ | (1,378 | ) |  | (40 | )%
|                                        |  |                                     |         |                                     |   |                     |   |   |        |   |  |     |   

Revenues.Our revenues for the three months ended February 28, 2010 were $104.1 million
compared to $104.3 million for the three months ended February 28, 2009, a decrease of $0.2 million. Revenues for our TCM division for the three months ended February 28, 2010 were $60.0 million compared to $56.1 million for the three
months ended February 28, 2009, an increase of $3.9 million or 7%. Revenues of unconsolidated affiliates for the three months ended February 28, 2010 and 2009 accounted for using the equity method and not included in our current period
results, and attributable to our TCM division, were $1.1 million and $1.9 million, respectively. Revenues for our TMS division for the three months ended February 28, 2010 were $44.1 million compared to $48.1 million for the three months ended
February 28, 2009, a decrease of $4.0 million or 8%. Revenue declines at TMS were partially attributable to several large projects, particularly in the Canadian Oil Sands, which wrapped up midway through the prior year quarter and have not yet
restarted. Overall, the third quarter is traditionally our slowest seasonal quarter and the effects of the recession, which began to affect us in the third quarter of the prior year, continue to result in project scopes being aggressively managed
and reduced where possible by our customers.

Gross Margin. Our gross margin for the three months ended
February 28, 2010 was $28.5 million compared to $30.0 million for the three months ended February 28, 2009, a decrease of $1.4 million or 5%. Gross margin as a percentage of revenue was 27% for the three months ended February 28, 2010
compared to 29% for the three months ended February 28, 2009. Gross margin for our TCM division for the three months ended February 28, 2010 was $16.2 million compared to $14.6 million for the three months ended February 28, 2009, an
increase of $1.6 million or 11%. Gross margin as a percentage of revenue for the TCM division was 27% for the three months ended February 28, 2010 period compared to 26% in the three months ended February 28, 2009. Gross margin for our TMS division
was $12.3 million for the three months ended February 28, 2010 compared to $15.3 million for the three months ended February 28, 2009, a decrease of $3.0 million or 20%. Gross margin as a percentage of revenue for the TMS division was 28%
for the three months ended February 28, 2010 period compared to 32% in the three months ended February 28, 2009. The decline in TMS divisional gross margin percentage is attributable to pricing pressures related to recently quoted work and less
absorption of indirect costs resulting from lower activity levels, most notably in the Canadian Oil Sands.



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Selling, General, and Administrative Expenses. Our SG&A for the three
months ended February 28, 2010 was $26.5 million compared to $26.6 million for the three months ended February 28, 2009, a decrease of $0.2 million or 1%. The decrease in SG&A was primarily due to reduced corporate costs of $1.0
million offset by a $0.5 million non-routine pre-tax charge associated with the internal investigation disclosed in Note 11 of this Form 10-Q. SG&A as a percentage of revenue was 25% for the three months ended February 28, 2010 and 26% for
the three months ended February 28, 2009. Excluding the $0.5 million pre-tax charge for the investigation, total SG&A decreased $0.7 million or 3%.

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 $0.7 million for the three months ended February 28, 2010 compared to
$1.2 million for the three months ended February 28, 2009. The reduction in interest expense is due to decreasing borrowing rates combined with decreased debt levels.

Foreign Currency Transaction Gain/Loss. Foreign currency transaction losses were $2.1 million for the three months ended
February 28, 2010. Currency transaction losses in the current quarter are primarily due to fluctuations between the Venezuelan Bolivar and the U.S. Dollar. We began to account for Venezuela as a highly-inflationary economy at the beginning of our
third quarter of fiscal year 2010. Accordingly, all currency fluctuations between the Bolivar and U.S. Dollar are prospectively recorded in our statement of operations. Team operates a small service location in Punta Fijo, Venezuela, whose annual
revenues have historically been less than one percent of Teams consolidated revenues, using the previously fixed exchange rate of 2.15 Bolivars per U.S. Dollar. Because of the recent devaluation of the Bolivar and the uncertain political
environment in Venezuela, we use the parallel exchange rate for Bolivar denominated bonds (6.70 Bolivars per U.S. Dollar at February 28, 2010) to translate Venezuelan assets, liabilities and results of operations effective as of the
beginning of our fiscal 2010 third quarter.

Taxes. The provision for income taxes was a benefit of
$0.2 million for the three months ended February 28, 2010 compared to an expense of $0.1 million for the three months ended February 28, 2009. The current period benefit is due to a pretax loss of $ 0.7 million for the three months
ended February 28, 2010. The effective tax rate for the three months ended February 28, 2010 was 34% compared to 6% for the prior year period. The unusually low prior period effective tax rate is primarily due to the inclusion of $0.6
million of tax credits recognized for research and development and human resource initiatives for the three months ended February 28, 2009.



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##### Table of Contents

Nine Months Ended February 28, 2010 Compared to Nine Months Ended February 28, 2009

The following table sets forth the components of revenue and operating income from our operations for the nine months
ended February 28, 2010 and February 28, 2009 (in thousands):



|                                        |  |                                    |         |                                    |   |                     |  |   |         |   |  |     |   
|--------------------------------------- |  | ---------------------------------- | ------- | ---------------------------------- | - | ------------------- |  | - | ------- | - |  | --- | --
|                                        |  | Nine Months endedFebruary 28, 2010 |         | Nine Months endedFebruary 28, 2009 |   | Increase/(decrease) | 
|                                        |  |                                    | $       |                                    |   | %                   | 
|                                        |  | (unaudited)                        |         | (unaudited)                        |   |                     |  |   |         |  
|Revenues:                               |  |                                    |         |                                    |   |                     |  |   |         |   |  |     |   
|TCM division                            |  | $                                  | 188,648 |                                    | $ | 197,525             |  | $ | (8,877  | ) |  | (4  | )%
|TMS division                            |  |                                    | 139,693 |                                    |   | 178,831             |  |   | (39,138 | ) |  | (22 | )%
|                                        |  |                                    |         |                                    |   |                     |  |   |         |   |  |     |   
|Total revenues                          |  |                                    | 328,341 |                                    |   | 376,356             |  |   | (48,015 | ) |  | (13 | )%
|Gross Margin:                           |  |                                    |         |                                    |   |                     |  |   |         |   |  |     |   
|TCM division                            |  |                                    | 54,997  |                                    |   | 58,141              |  |   | (3,144  | ) |  | (5  | )%
|TMS division                            |  |                                    | 42,404  |                                    |   | 61,007              |  |   | (18,603 | ) |  | (30 | )%
|                                        |  |                                    |         |                                    |   |                     |  |   |         |   |  |     |   
|Total gross margin                      |  |                                    | 97,401  |                                    |   | 119,148             |  |   | (21,747 | ) |  | (18 | )%
|SG&A Expenses:                          |  |                                    |         |                                    |   |                     |  |   |         |   |  |     |   
|Field operations                        |  |                                    | 66,068  |                                    |   | 73,070              |  |   | (7,002  | ) |  | (10 | )%
|Corporate costs                         |  |                                    | 13,982  |                                    |   | 15,363              |  |   | (1,381  | ) |  | (9  | )%
|Non-routine investigation costs         |  |                                    | 2,838   |                                    |   |                    |  |   | 2,838   |   |  | 100 | % 
|                                        |  |                                    |         |                                    |   |                     |  |   |         |   |  |     |   
|Total SG&A                              |  |                                    | 82,888  |                                    |   | 88,433              |  |   | (5,545  | ) |  | (6  | )%
|Earnings from unconsolidated affiliates |  |                                    | 520     |                                    |   | 834                 |  |   | (314    | ) |  | (38 | )%
|                                        |  |                                    |         |                                    |   |                     |  |   |         |   |  |     |   
|Operating income                        |  | $                                  | 15,033  |                                    | $ | 31,549              |  | $ | (16,516 | ) |  | (52 | )%
|                                        |  |                                    |         |                                    |   |                     |  |   |         |   |  |     |   

Revenues. Our revenues for the nine months ended February 28, 2010 were $328.3
million compared to $376.4 million for the nine months ended February 28, 2009, a decrease of $48.0 million or 13%. Revenues for our TCM division for the nine months ended February 28, 2010 were $188.6 million compared to $197.5 million
for the nine months ended February 28, 2009, a decrease of $8.9 million or 4%. Revenues of unconsolidated affiliates for the nine months ended February 28, 2010 and 2009 accounted for using the equity method and not included in our current
period results, and attributable to our TCM division, were $6.1 million and $10.6 million, respectively. Revenues for our TMS division for the nine months ended February 28, 2010 were $139.7 million compared to $178.8 million for the nine
months ended February 28, 2009, a decrease of $39.1 million or 22%. The effects of the economic recession did not dramatically affect our revenues until the second half of our prior fiscal year. Consequently, the first six months of fiscal year
2009 was a record period for Team. The current period decrease in revenues 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 became more economically distressed than others, nearly all our customers adopted more conservative near-term spending postures. As a result, we have seen 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 began to experienced revenue softness in virtually all service lines and
geographic areas with Canada representing approximately half of the overall revenue decline due to reduced activity in the Canadian Oil Sands. The effects of the recession, which began to affect us in the third quarter of the prior year, continue to
result in project scopes being aggressively managed and reduced where possible by our customers.

Gross
Margin. Our gross margin for the nine months ended February 28, 2010 was $97.4 million compared to $119.1 million for the nine months ended February 28, 2009, a decrease of $21.7 million or 18%. Gross margin as a percentage of
revenue was 30% for the nine months ended February 28, 2010 and 32% for the nine months ended February 28, 2009. Gross margin for our TCM division for the nine months ended February 28, 2010 was $55.0 million compared to $58.1 million
for the nine months ended February 28, 2009, a decrease of $3.1 million or 5%. Gross margin as a percentage of revenue for the TCM division was 29% for both periods. Gross margin for



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our TMS division was $42.4 million for the nine months ended February 28, 2010 compared to $61.0 million for the nine months ended February 28, 2009, a decrease of $18.6 million or 30%.
Gross margin as a percentage of revenue for the TMS division was 30% for the current period compared to 34% in the prior period. The decline in TMS divisional gross margin percentage is attributable to pricing pressures related to recently quoted
work and less absorption of indirect costs resulting from lower activity levels, most notably in the Canadian Oil Sands.

Selling, General, and Administrative Expenses. Our SG&A for the nine months ended February 28, 2010 was $82.9 million compared to $88.4 million for the nine months ended February 28, 2009, a decrease of
$5.5 million or 6%. The decrease in SG&A was primarily due to reduced expenditures in our field operations and corporate support costs offset by a $2.8 million non-routine pre-tax charge associated with the internal investigation disclosed
in Note 11 of this Form 10-Q. SG&A as a percentage of revenue was 25% for the nine months ended February 28, 2010 and 23% for the nine months ended February 28, 2009. Excluding the $2.8 million pre-tax charge for the investigation,
total SG&A decreased $8.4 million or 9% and SG&A as a percentage of revenues would have been 24%.

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 $2.2 million for the nine months ended February 28, 2010 compared to $4.0 million for the nine months ended February 28, 2009. The reduction in interest expense is due
to decreasing borrowing rates combined with decreased debt levels.

Foreign Currency Transaction Gain/Loss.
Foreign currency transaction losses were $2.0 million for the nine months ended February 28, 2010 compared to a gain of $0.1 million for the prior year period. Currency transaction losses in the current period are primarily due to fluctuations
between the Venezuelan Bolivar and the U.S. Dollar. We began to account for Venezuela as a highly-inflationary economy at the beginning of our third quarter of fiscal year 2010. Accordingly, all currency fluctuations between the Bolivar and U.S.
Dollar are prospectively recorded in our statement of operations. Team operates a small service location in Punta Fijo, Venezuela, whose annual revenues have historically been less than one percent of Teams consolidated revenues, using the
previously fixed exchange rate of 2.15 Bolivars per U.S. Dollar. Because of the recent devaluation of the Bolivar and the uncertain political environment in Venezuela, we use the parallel exchange rate for Bolivar denominated bonds (6.70
Bolivars per U.S. Dollar at February 28, 2010) to translate Venezuelan assets, liabilities and results of operations effective as of the beginning of our fiscal 2010 third quarter.

Taxes. The provision for income taxes was $4.3 million on pretax income of $10.8 million for the nine months ended
February 28, 2010 and $10.2 million on pretax income of $27.6 million for the nine months ended February 28, 2009. The effective tax rate for the nine months ended February 28, 2010 and 2009 was 39% and 37%, respectively. The prior
period effective tax rate was lower primarily due to the inclusion of tax credits recognized for research and development and human resource initiatives in the prior year.

Liquidity and Capital Resources

Financing for our operations consists
primarily of vendor financing and leasing arrangements, banking facilities and cash flows attributable to our operations, which we believe are sufficient to fund our capital expenditures, debt maturities and other business needs. At
February 28, 2010 we had $14.2 million of cash on hand and approximately $65.2 million of available borrowing capacity through our banking syndicate.

Cashflows Attributable to Our Operating Activities. For the nine months ended February 28, 2010, cash provided by operating activities was $34.1 million. Positive operating cash
flow was primarily attributable to net income of $6.5 million, depreciation and amortization of $9.2 million, non-cash compensation cost of $3.9 million and a decrease of $11.5 million in working capital.



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Cashflows Attributable to Our Investing Activities. For the nine months
ended February 28, 2010, cash used in investing activities was $5.9 million, consisting primarily of $5.5 million of capital expenditures. Capital expenditures can vary depending upon specific customer needs that may arise unexpectedly. We
anticipate capital expenditures for the fiscal year 2010 to be approximately $8-10 million.

Cashflows Attributable to
Our Financing Activities. For the nine months ended February 28, 2010, cash used by financing activities was $25.3 million consisting primarily of $23.0 million of cash used for repayment of debt.

Effect of Exchange Rate Changes On Cash.For the nine months ended February 28, 2010, the effect of exchange rate changes
on cash was a negative impact of $1.4 million. We have significant operations in Europe and Canada, as well as operations in Venezuela which is considered a hyper-inflationary economy, and the negative impact is primarily due to the currency
volatility between the US and these economies.

Restrictions On Cash.Included in our cash and cash equivalents
at February 28, 2010, is $4.0 million of cash in Europe and $0.9 million of cash in Venezuela. 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 indefinitely reinvested and access to cash in Europe to be limited. Similarly, the political and economic climate in
Venezuela makes it extremely difficult to repatriate the earnings of our Venezuelan subsidiary.



|ITEM 3. | 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 nine months ended February 28, 2010, the exchange rate with the Euro decreased from $1.4126 per Euro to $1.3659 per Euro, a decrease
of 3%. During the same period, the exchange rate with the Canadian Dollar increased from $0.9123 per Canadian Dollar to $0.9500 per Canadian Dollar, an increase of 4%. 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 $1.1 million of foreign currency translation gains in other comprehensive income for the nine months ended February 28, 2010.

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.

At February 28, 2010, our Venezuelan subsidiary had $1.1 million of net
assets denominated in Venezuelan Bolivars and translated into U.S. Dollars. Because of the uncertain political environment in Venezuela, we use the parallel exchange rate for Bolivar denominated bonds (6.70 Bolivars per U.S. Dollar at
February 28, 2010) to translate Venezuelan assets into dollars. Significant fluctuations in the value of the Venezuelan Bolivar could result in significant future transaction gains and losses. A 10% change in the exchange rate used to value the
net monetary assets of our Venezuelan subsidiary would have an effect on earnings of $0.1 million.

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



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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 February 28, 2010, the notional amount of our swap was $16.3
million.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Limitations on Effectiveness of Control. Our management, including the principal executive and financial officer, 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 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 February 28, 2010, 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 third
quarter of fiscal 2010.



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PART IIOTHER INFORMATION



|ITEM 1. | 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. Approximately one hundred 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 have not accrued any liability in excess of the deductible limit for the lawsuits. 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 other lawsuits and are subject to various claims and proceedings encountered in the normal
conduct of business. In our opinion, any uninsured losses that might arise from these lawsuits and proceedings will not have a materially adverse effect on our consolidated financial statements.



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

See page 6 of our Annual Report on Form 10-K for the year ended May 31, 2009 for a detailed discussion of our risk factors.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
|------- | -----------------------------------------------

NONE



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|ITEM 5. | OTHER INFORMATION
|------- | -----------------

NONE



|ITEM 6. | EXHIBITS
|------- | --------



|              |  |                                                                                                    
|------------- |  | ---------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                        
|31.1          |  | Certification for Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|              | 
|31.2          |  | Certification for Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|              | 
|32.1          |  | Certification for Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|              | 
|32.2          |  | Certification for Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereto duly authorized.



|                    |  |  |  |                                                                                                                              
|------------------- |  |  |  | -----------------------------------------------------------------------------------------------------------------------------
|                    |  |  |  | TEAM, INC. (Registrant)                                                                                                      
|                    |  | 
|Date: April 8, 2010 |  |  |  | /S/    PHILIP J.
HAWK                                                                                                        
|                    |  |  |  | Philip J. Hawk Chairman and Chief Executive Officer                                                                          
|                    |  | 
|                    |  |  |  | /S/    TED W.
OWEN                                                                                                           
|                    |  |  |  | Ted W. Owen, Senior Vice President and Chief Financial Officer (Principal Financial Officer
and Principal Accounting Officer)



29