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Furmanite (FRM)

Q2 2013 Earnings Call

August 02, 2013 10:00 am ET


Charles R. Cox - Chairman of the Board and Chief Executive Officer

Robert S. Muff - Chief Financial Officer, Principal Accounting Officer and Controller

Joseph E. Milliron - President and Chief Operating Officer


Stephen Ragard - Stephens Inc., Research Division

Tristan Richardson - D.A. Davidson & Co., Research Division

Ross Taylor - Somerset Capital Advisers LLC



Good morning, and thank you for joining the call. Before I introduce today's speakers, please allow me to explain the format of the call. For your convenience, we have a set of slides available at our website that will closely follow the speakers' presentations this morning. Following the presentation today, we will invite questions from active analysts and fund managers. [Operator Instructions] Now I would like to introduce Mr. Charles R. Cox, CEO of Furmanite Corporation. Mr. Cox, you may begin.

Charles R. Cox

Thank you, and good morning, and welcome to the call. Thank you for joining us here today. Let me first direct your attention to the Safe Harbor Statement and the presentation, which always applies to this call. Also, please be aware that we will refer, during our comments, to the slides which may be found in our investor website under the tab labeled, Events & Presentations.

With me today are Joe Milliron, Furmanite's President; and Bob Muff, our Principal Financial Officer.

Before we hear from Bob and Joe, I like to provide a bit of perspective regarding 2013 and our first half performance. Obviously, the financial results for both this quarter and first half are well beyond our results of the year ago. The 25% revenue improvement we have seen is especially meaningful to us as we finished just 6 years -- 6 months with our full global transformation program in place, particularly so as we are frequently reminded that such positive improvement cannot ever be taken for granted.

While we are also pleased with our earnings improvement, the major strategic and restructuring expenses incurred last year make meaningful year-over-year comparisons difficult. Nonetheless, our operating income results are beginning to trend toward our more normal earnings expectations, although uneven across all units and regions. As Bob will further explain, our global effective tax rate, while much improved over last year's rate, is still taking a bigger bite out of our bottom line than we expect to see in the future.

Directionally, we continue to be pleased with our second quarterly scorecard operating as a very different Furmanite. While we left significantly less upside on the table this quarter, the numbers clearly indicate that we are still a long way from hitting on all cylinders. For us, the very positive message this quarter is that these good overall results appear to be well below our future potential as we continue to spread the Orange Way and mature our teamwork and work processes. While our numbers remain essentially on track with our annual expectations overall, we have nudged both revenue and earnings guidance up slightly this quarter.

Going forward, we will continue to aggressively expand our efforts to engage everyone in accelerated growth from both a business development and a project execution perspective. Our long-term goal is to make our transformation a global, consistent and permanent reality for every Furmanite operation around the globe. The vastly improved global teamwork, support and collaboration and the resulting confidence every team member can have in that new reality is the key to a world where we can sell and execute without constraints.

Let's now move onto our brief update regarding our longer-term strategic direction. While nothing has changed from the 5-year commitment we made back in 2010 to create substantial long-term global growth for Furmanite, we are continuing to define and target a larger market size, as well as a greater share of that larger market. We recently announced a key step in achieving that objective and will soon be adding a new, but essential dimension to the range of integrated services and roles we can provide. We look forward to combining the wide range of technical, engineering, project execution and management capabilities of ENGlobal's Gulf Coast operations with our mechanical and inspection services. We are very excited about this important step forward for Furmanite.

As we enter the second half of 2013, we are also well on our way to achieving our first year -- first 5-year vision, that of establishing world leadership in each of our legacy service lines by the end of 2014. We are most proud of our team and all they have done to make our services and projects -- our products the very best of the best and to serve our customers more responsively than anyone else. But we will not be stopping there. Before the end of this year, we will announce our next 5-year vision intended to build upon our world-leading services and on the other positive accomplishments of our first 4 years of transformation. We expect this vision to be initiated in January to overlap with completion of our current vision during 2014 and to be accomplished by 2018.

Our new vision will continue to expand our growth platform and market differentiation through internal investment, as well as synergistic M&A activity as appropriate to broaden our customer interface and expand the range of roles and services provided. Let me assure you, however, that we plan to stay focused on what we know we do extraordinarily well. We will stay firmly, though evermore broadly focused on specialty industrial services and the technical and management capabilities, which will further differentiate and add value to those service offerings.

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