FURMANITE CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - October 31, 2014

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Investor Relations
(713) 634-7775
Email: investor@furmanite.com

FURMANITE CORPORATION REPORTS
THIRD QUARTER 2014 RESULTS

HOUSTON, TEXAS (October 31, 2014) – Furmanite Corporation (NYSE: FRM) today reported results for the three and nine months ended September 30, 2014.

Third Quarter 2014 Results

Revenues for the three months ended September 30, 2014 were $124.1 million, an increase of $24.6 million, or 24.7%, over the $99.5 million reported for the three months ended September 30, 2013. Adjusted operating income for the three months ended September 30, 2014 and 2013 was $3.5 million(A) and $4.5 million,(A) respectively, excluding $1.2 million and $0.1 million, respectively, of incremental costs associated with certain retirement, management transition and integration expenses. Net income for the 2014 third quarter was $1.1 million, or $0.03 per diluted share, compared to $2.1 million, or $0.06 per diluted share, in the 2013 third quarter.

Nine Months Ended September 30, 2014 Results

Revenues for the nine months ended September 30, 2014 were $395.3 million, an increase of $98.4 million, or 33.1%, over the $296.9 million reported for the nine months ended September 30, 2013. Adjusted operating income for the nine months ended September 30, 2014 and 2013 was $14.5 million(A) and $20.2 million,(A) respectively, excluding $1.4 million of incremental costs in the current year and $0.1 million of incremental costs in the prior year, associated with certain retirement, management transition and integration expenses. Net income for the nine months ended September 30, 2014 was $6.6 million, or $0.17 per diluted share, compared to $11.4 million, or $0.30 per diluted share for the nine months ended September 30, 2013.

Foreign currency had favorable impacts on revenues of $1.3 million and $2.7 million for the three and nine months ended September 30, 2014, respectively, as well as operating income for the three and nine months ended September 30, 2014 of $0.3 million and $0.7 million, respectively.

Charles R. Cox, CEO of Furmanite Corporation said, “While we are disappointed with our third quarter financial results, we have continued to make significant progress in strengthening our key work processes and leadership team.” Mr. Cox continued, “Although we encountered unexpected softness in our Americas markets during the third quarter, we expect stronger market conditions through year-end, as well as improved cost efficiencies resulting from the companywide implementation of work process enhancements.”

Joseph Milliron, Furmanite President and COO, added, “While the market strength in the Americas region of our Technical Services segment did not rebound in the short term as expected, the long-term outlook remains strong, and our other operating regions around the world continue to experience increased performance improvements by embracing our Orange Way strategy of working together as one single team.” Mr. Milliron continued, “Asia-Pacific was the last region globally to have our Orange Way process implemented and its year-over-year third quarter results yielded an increase in revenues of 53%, or $4.1 million, as well as increased operating income, which more than doubled compared to the prior-year quarter.”








Mr. Cox concluded, “While we expect solid fourth quarter activity, we do not anticipate achieving our previously issued 2014 revenue or earnings guidance and have adjusted these estimates to reflect our current expectations.”

Financial Position

As of September 30, 2014, the Company’s cash balance was $42.3 million. The Company’s cash balance, along with the $38.7 million of availability under its credit facility, provides the Company liquidity of $81.0 million.

Earnings Guidance

The Company is revising its previously issued 2014 revenue guidance, with annual revenues now expected to be in the range of $535 million to $550 million and 2014 estimated net income available to common shareholders to be in the range of $0.27 to $0.33 per diluted share.

Conference Call Details

In conjunction with the earnings release, Furmanite Corporation will host a conference call with Charles R. Cox (CEO), Joseph E. Milliron (President and COO) and Robert S. Muff (Chief Financial Officer). The call will begin at 10:00 a.m. (Eastern) / 9:00 a.m. (Central) on Monday, November 3, 2014.

(A) These items are financial measures not calculated in accordance with generally accepted accounting principles (“GAAP”) and exclude the impact of 1) incremental compensation expenses pursuant to the provisions of a retirement agreement with a Company executive and 2) direct costs associated with management transition and integration of the Furmanite Technical Solutions division. Management believes that results excluding these charges provide more meaningful and comparable information to analysts and is useful in comparing the operational trends of Furmanite Corporation. A reconciliation to the applicable GAAP measure is included at the end of the press release.

ABOUT FURMANITE CORPORATION

Furmanite Corporation (NYSE: FRM), founded in 1920, is one of the world’s largest specialty industrial services and specialty engineering project solutions companies, providing world class solutions to customer needs through more than 80 offices on six continents. The Company delivers a wide portfolio of inspection, mechanical and engineering services which help monitor, maintain, renew and construct the global energy, industrial and municipal infrastructures. Furmanite serves a broad range of industry sectors, including refining, offshore, sub-sea, pipeline, power generation, chemical, petrochemical, pulp and paper, water utilities, automotive, mining, marine and steel manufacturing. World Headquarters and Global Support Operations are located in Houston, Texas; Rotterdam, Netherlands; Kendal, United Kingdom and Melbourne, Australia. For more information, visit www.furmanite.com

Certain of the Company’s statements in this press release are not purely historical, and as such are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements regarding management’s intentions, plans, beliefs, expectations or projections of the future. Forward-looking statements involve risks and uncertainties, including without limitation, the various risks inherent in the Company’s business, and other risks and uncertainties detailed most recently in this earnings release and the Company’s Form 10-K as of December 31, 2013 filed with the Securities and Exchange Commission. One or more of these factors could affect the Company’s business and financial results in future periods, and could cause actual results to differ materially from plans and projections. There can be no assurance that the forward-looking statements made in this document will prove to be accurate, and issuance of such forward-looking statements should not be regarded as a representation by the Company, or any other person, that the objectives and plans of the Company will be achieved. All forward-looking statements made in this press release are based on information presently available to management, and the Company assumes no obligation to update any forward-looking statements.
 

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FURMANITE CORPORATION
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
(Unaudited)
 
 
 
 
 
 
 
For the Three Months
 
For the Nine Months
 
Ended September 30,
 
Ended September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Revenues
$
124,129

 
$
99,523

 
$
395,312

 
$
296,937

Costs and expenses:
 
 
 
 
 
 
 
Operating costs
94,256

 
71,851

 
298,130

 
206,279

Depreciation and amortization expense
3,168

 
2,724

 
9,145

 
8,232

Selling, general and administrative expense
24,426

 
20,501

 
74,936

 
62,277

Total costs and expenses
121,850

 
95,076

 
382,211

 
276,788

 
 
 
 
 
 
 
 
Operating income
2,279

 
4,447

 
13,101

 
20,149

Interest income and other income (expense), net
172

 
(420
)
 
(432
)
 
(272
)
Interest expense
(468
)
 
(377
)
 
(1,362
)
 
(933
)
Income before income taxes
1,983

 
3,650

 
11,307

 
18,944

Income tax expense
(921
)
 
(1,530
)
 
(4,722
)
 
(7,499
)
Net income
$
1,062

 
$
2,120

 
$
6,585

 
$
11,445

 
 
 
 
 
 
 
 
Earnings per common share - Basic
$
0.03

 
$
0.06

 
$
0.18

 
$
0.31

Earnings per common share - Diluted
$
0.03

 
$
0.06

 
$
0.17

 
$
0.30

Adjusted diluted earnings per share1
$
0.05

 
$
0.06

 
$
0.20

 
$
0.31

 
 
 
 
 
 
 
 
Weighted-average number of common and common equivalent shares used in computing earnings per common share:
Basic
37,659

 
37,431

 
37,615

 
37,392

Diluted
37,905

 
37,715

 
37,856

 
37,586

 
 
 
 
 
 
 
 
EBITDA2
$
5,619

 
$
6,751

 
$
21,814

 
$
28,109


__________________
1 
Adjusted diluted earnings per share presented above is a non-GAAP financial measurement that excludes the impact of 1) incremental compensation expenses pursuant to the provisions of a retirement agreement with a Company executive and 2) direct costs associated with management transition and integration of the Furmanite Technical Solutions division. Management believes that results excluding these charges provide more meaningful and comparable information to analysts and is useful in comparing the operational trends of Furmanite Corporation. A reconciliation to the applicable GAAP measure is included at the end of the press release.

2 
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) presented above is a non-GAAP financial measurement. The Company believes that investors and other users of the financial statements benefit from the presentation of this non-GAAP measurement because it provides an additional metric to evaluate the Company’s core operating performance by excluding the effects of depreciation and amortization expense, interest expense and income tax expense from net income. A reconciliation of EBITDA to the most directly comparable GAAP measure is included at the end of the press release.

3



FURMANITE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
(Unaudited)
 
 
 
September 30,
 
December 31,
 
2014
 
2013
 
 
 
 
Cash
$
42,296

 
$
33,240

Trade receivables, net
105,649

 
106,853

Inventories, net
41,264

 
35,443

Other current assets
18,079

 
21,159

Total current assets
207,288


196,695

 
 
 
 
Property and equipment, net
52,802

 
55,347

Other assets
30,249

 
33,125

Total assets
$
290,339


$
285,167

 
 
 
 
Total current liabilities
$
63,767

 
$
62,523

Total long-term debt
61,990

 
63,196

Other liabilities
24,006

 
25,952

Total stockholders’ equity
140,576

 
133,496

Total liabilities and stockholders’ equity
$
290,339


$
285,167


4






FURMANITE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
 
 
 
 
For the Nine Months Ended
September 30,
 
2014
 
2013
 
 
 
 
Net income
$
6,585

 
$
11,445

 
 
 
 
Depreciation, amortization and other non-cash items
10,720

 
14,418

Working capital changes
(1,362
)
 
(14,657
)
Net cash provided by operating activities
15,943


11,206

 
 
 
 
Capital expenditures
(5,172
)
 
(13,496
)
Acquisition of businesses
(265
)
 
(16,695
)
Proceeds from sale of assets
17

 
30

Payments on debt
(916
)
 
(2,180
)
Proceeds from issuance of debt
—

 
20,000

Issuance of common stock
148

 
332

Other
(214
)
 
(61
)
Effect of exchange rate changes on cash
(485
)
 
(623
)
Increase (decrease) in cash and cash equivalents
9,056


(1,487
)
Cash and cash equivalents at beginning of period
33,240

 
33,185

Cash and cash equivalents at end of period
$
42,296


$
31,698



5



FURMANITE CORPORATION
BUSINESS SEGMENT DATA
(in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
Technical Services
 
Engineering & Project Solutions
 
Corporate1
 
Total
Three months ended September 30, 2014
 
 
 
 
 
 
 
Revenues from external customers
$
85,762

 
$
38,367

 
$
—

 
$
124,129

Operating income (loss)2
$
7,832

 
$
135

 
$
(5,688
)
 
$
2,279

 
 
 
 
 
 
 
 
Three months ended September 30, 2013
 
 
 
 
 
 
 
Revenues from external customers
$
84,915

 
$
14,608

 
$
—

 
$
99,523

Operating income (loss)2
$
8,647

 
$
(229
)
 
$
(3,971
)
 
$
4,447

 
 
 
 
 
 
 
 
Nine months ended September 30, 2014
 
 
 
 
 
 
 
Revenues from external customers
$
279,801

 
$
115,511

 
$
—

 
$
395,312

Operating income (loss)2
$
29,781

 
$
(1,212
)
 
$
(15,468
)
 
$
13,101

 
 
 
 
 
 
 
 
Nine months ended September 30, 2013
 
 
 
 
 
 
 
Revenues from external customers
$
272,622

 
$
24,315

 
$
—

 
$
296,937

Operating income (loss)2
$
34,983

 
$
(195
)
 
$
(14,639
)
 
$
20,149

 
 
 
 
 
 
 
 


















_______________________________

1 
Corporate represents certain corporate overhead costs, including executive management, strategic planning, treasury, legal, human resources, information technology, accounting and risk management, which are not allocated to reportable segments.
2
The Engineering & Project Solutions segment includes approximately $0.3 million and $0.5 million of direct costs associated with management transition and integration of the Furmanite Technical Solutions division for the three and nine months ended September 30, 2014, respectively, and approximately $0.1 million of such costs for both the three and nine months ended September 30, 2013. Corporate includes approximately $0.9 million of incremental compensation expenses pursuant to the provisions of a retirement agreement with a Company executive for both the three and nine months ended September 30, 2014.

6


FURMANITE CORPORATION
Reconciliation of Non-GAAP Financial Measures
(in thousands, except per share data)
 
 
 
 
 
 
 
For the Three Months
 
Ended September 30, 2014
 
As Reported
 
Reconciling Items 1
 
Non GAAP Basis
Selling, general and administrative expense
$
24,426

 
$
(1,184
)
 
$
23,242

Operating income
2,279

 
1,184

 
3,463

Income before income taxes
1,983

 
1,184

 
3,167

Income tax expense
(921
)
 
(474
)
 
(1,395
)
Net income
$
1,062

 
$
710

 
$
1,772

Adjusted diluted earnings per share
$
0.03

 
$
0.02

 
$
0.05

 
 
 
 
 
 
 
For the Three Months
 
Ended September 30, 2013
 
As Reported
 
Reconciling Items 1
 
Non GAAP Basis
Selling, general and administrative expense
$
20,501

 
$
(70
)
 
$
20,431

Operating income
4,447

 
70

 
4,517

Income before income taxes
3,650

 
70

 
3,720

Income tax expense
(1,530
)
 
(28
)
 
(1,558
)
Net income
$
2,120

 
$
42

 
$
2,162

Adjusted diluted earnings per share
$
0.06

 
$
—

 
$
0.06

 
 
 
 
 
 
 
For the Nine Months
 
Ended September 30, 2014
 
As Reported
 
Reconciling Items 1
 
Non GAAP Basis
Selling, general and administrative expense
$
74,936

 
$
(1,404
)
 
$
73,532

Operating income
13,101

 
1,404

 
14,505

Income before income taxes
11,307

 
1,404

 
12,711

Income tax expense
(4,722
)
 
(562
)
 
(5,284
)
Net income
$
6,585

 
$
842

 
$
7,427

Adjusted diluted earnings per share
$
0.17

 
$
0.03

 
$
0.20

 
 
 
 
 
 
 
For the Nine Months
 
Ended September 30, 2013
 
As Reported
 
Reconciling Items 1
 
Non GAAP Basis
Selling, general and administrative expense
$
62,277

 
$
(70
)
 
$
62,207

Operating income
20,149

 
70

 
20,219

Income before income taxes
18,944

 
70

 
19,014

Income tax expense
(7,499
)
 
(28
)
 
(7,527
)
Net income
$
11,445

 
$
42

 
$
11,487

Adjusted diluted earnings per share
$
0.30

 
$
0.01

 
$
0.31

______________________________
1  
Consists of 1) incremental compensation expenses pursuant to the provisions of a retirement agreement with a Company executive and 2) direct management transition and integration costs of the Furmanite Technical Solutions division, and the related income tax impacts.

7

FURMANITE CORPORATION
Reconciliation of Non-GAAP Financial Measures (continued)
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
For the Three Months
 
For the Nine Months
 
Ended September 30,
 
Ended September 30,
 
2014
 
2013
 
2014
 
2013
 
 
 
 
 
 
 
 
Reconciliation of EBITDA to Net income:
 
 
 
 
 
 
 
EBITDA
$
5,619

 
$
6,751

 
$
21,814

 
$
28,109

Less:
 
 
 
 
 
 
 
Depreciation and amortization expense
(3,168
)
 
(2,724
)
 
(9,145
)
 
(8,232
)
Interest expense
(468
)
 
(377
)
 
(1,362
)
 
(933
)
Income tax expense
(921
)
 
(1,530
)
 
(4,722
)
 
(7,499
)
Net income
$
1,062

 
$
2,120

 
$
6,585

 
$
11,445



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