Furmanite Corporation (FRM)

FRM 
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Industry: Basic Industries
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Furmanite Corporation (FRM)

Q3 2008 Earnings Call

November 10, 2008 11 a.m. ET

Executives

John Barnes – CEO

Howard Wadsworth – CFO

Mike Rose – President

Joe Milliron – Chief Operating Officer

Analysts

Matt Duncan – Stevens, Inc.

Steve Ferazani - Sidoti

Craig Swan – Brazos Capital

Presentation

Operator

Good morning and thank you for joining today’s call. Before I introduce Mr. Barnes, allow me to explain the format of the call. Following the presentation today, we will invite questions from panelists and fund managers. At that time, I will explain the procedure for indicating that you wish to ask a question.

On behalf of Furmanite, we would like to say that certain statements that may be made in the call today may not be purely historical and, as such, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

There can be no assurance that any forward-looking statements made in this call will prove to be accurate and should not be regarded as representation that the objectives and plans of the company will be achieved. Any forward-looking statements made in this call are based on information presently available to management and the company assumes no obligation to update them.

I would like to introduce Mr. John Barnes, CEO of Furmanite Corporation. Mr. Barnes, you may begin.

John Barnes

Thank you, Heather. Good morning ladies and gentlemen, thank you for being with us on our third quarter earning’s release and, again, I have with me this morning Mike Rose, Joe Milliron, and Howard Wadsworth. Each of these gentlemen will be speaking with you in some detail about various aspects of the company.

Let me just make a few brief remarks before we get in to that. The third quarter performance, in my opinion, really does demonstrate the company’s strength. In spite of the impact on revenue as a result of the hurricanes, we delivered a 49% increase in our net income, and Mike and Joe will speak to you quite a bit of detail about that as we go forward.

Year-to-date, the company is on track. We’ve shown a 10% increase in revenues, an 85% increase in net income, and an 81% increase in earnings-per-share. And that’s reflecting the leverage we have been talking to you about for several quarters now with that infrastructure in place.

And as we grow revenues, add more business to this company, we can continue to leverage in, we think, for some time to come, the unusual amount of drop-through that will lead to our earnings, as well as our cash flow.

In spite of the weather we experienced in August and September, we are seeing things return to a normal business activity. Howard will discuss with you what’s going on in the currency of market that I’m sure all of you are aware of in recent weeks and how we see that impacting us in the fourth quarter. But, in spite of that, we are expecting a very good fourth quarter.

The results throughout the year have reflected the company’s ability to leverage new revenue gains in a significant operating income and netting new increases. It’s reflected our ability to manage our markets. We have been expanding within our existing customer base, we have been adding new business, we have also increased exposure in various areas, outlying areas, in where we have traditionally have been on the fringe.

We’ve opened some new frontiers through the course of this year in West Africa and the Middle East and, as you are aware, we have been making a major push into mainland China. We are making more of our services available in all of these locations.

We had indicated to you earlier that historically with all of the various service lines we have in this company, the typical office was primarily reflecting two, three, perhaps four of these services, and a large part of our strategy going forward is to help all of these services throughout all of our offices around the world.

Being close to our customers geographically is very, very important and we’ve made major strides in that this year, we will continue to do that. It’s just as important to be sure we’re staffed to meet these customers’ specific needs, and we’ve spent a lot of time and a lot of focus on that.

Overall condition of the company is very, very strong. We’re generating very strong cash flow this year. We generated plenty of cash flow to handle all of our CapEx, the increased need for working capital as we’ve expanded our business. We’ve generated additional cash flow to make significant debt pay-down and, at the same time, we’ve been building our cash.

Debt is down significantly. Late last year, early this year, $5 million of the old 8.75 debentures were eliminated, and we have actually paid down $7 million of our bank facility; $3 million of that was in the third quarter. Our debt is now down from almost $50 million a little over a year ago, to about $35 million today. Meanwhile, our cash is very strong. It’s actually grown from $31.6 million at the end of last year to $33.7 million this year.

I think this very strong financial condition that we’re finding ourselves in is going to bode very, very well for us over the next year or so as we see the economy tighten up around the world.

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