Furmanite Corporation (FRM)

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Furmanite Corporation (FRM)

Q4 2007 Earnings Call

March 14, 2008 11:00 am ET


John Barnes – CEO

Mike Rose – President

Howard Wadsworth – CFO


Tyson Bauer – Wealth Monitors Inc.

Mike Carney – Coker & Palmer

Beth Lilly – Gabelli

Craig Swan – [Brozel] Capital



Good morning and thank you for joining the call. Before I introduce Mr. Barnes allow me to explain the format of the call. Following Mr. Barnes presentation today we will invite questions from analysts and fund managers. At that time I will explain the procedure for indicating that you wish to ask a question. The questions will be taken in order. In the interest of time and allow everyone an equal opportunity we request that you ask your primary question and limit yourself to one follow up question so that the next participants questions may be taken.

On behalf of the company 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 on this call will prove to be accurate and should not be regarded as a brief presentation that the adjusters and plans of the company will be achieved.

Any forward looking statements made on the call are based on information presently available to management. The company assumes no obligation to update them. Now I would like to introduce Mr. John Barnes, CEO of Furmanite Corporation.

John Barnes

Let me begin by welcoming everyone to our year end conference call. With me today is President, Mike Rose and CFO, Howard Wadsworth. I would like to start off saying we are very pleased with the company’s performance for 2007. You can see in the fourth quarter results that we’ve maintained the momentum that we established very early in the year. Revenues in the fourth quarter increased by over $6 million and net income increased $4.3 million. This, of course, is a significant turn around from the fourth quarter of last year.

Turning to the year overall, our revenues grew to $290.3 million an increase of $43.4 million over last year. Our net income grew to $12.5 million which represents a $15.9 million profit improvement over last year. Our strong growth this year both in revenues and operating income are on target where we had planned for them to be. We had positive increases every quarter in every region around the world. We are on course with our strategy.

This year we expanded our service offerings in key markets and very importantly we increased the number of customers using our full array of services. This is going to be a very central theme in our strategy going forward because we have very few customers around the world in any of our office that we are doing the full compliment of services for and this is a focus to roll these out every location to every customer over the next several years and there is a very very large benefit to be gained from that.

To support the substantial growth in the company we made significant investments in capital equipment and people to handle this business. These investments paid off very well as our results show. We did all of this out our cash flow from our operations. We have absolutely no debt borrowings whatsoever. This year it was all funded out of cash flow and in fact our plans call for us to begin some debt pay down in 2008.

We are very much on course for 2008 and you’ll continue to see us leverage our worldwide presence to build long term customer relationships, attract new customers, open new markets and expand our business to industry sectors. Now I’d like to turn it over to Howard Wadsworth to walk you through the financials.

Howard Wadsworth

First let me go through some highlights on the income statement. Starting with revenues our fourth quarter revenues $72.9 million include about $3.8 million in currency gain, for the year revenues of $290.3 million as John mentioned include currency gains totaling $12.8 million. Our US revenues were up $2.8 million for the quarter and $20 million or 18% for the year. In Europe, revenues were up $3.3 million for the quarter and $17.4 million for the year.

Asia/Pacific revenues were up only $59,000 for the quarter and that doesn’t sound like much but when you consider that the fourth quarter last year was extraordinarily good quarter, almost 40% of the whole year and we were able to slightly beat that again this year its not really disappointing a number. Asia/Pacific revenue for the year were up $6.5 million or about 27%.

Our total cost expenses were up $755,000 for the quarter and $25.2 million for the year which reflects the higher operating costs associated with our revenue growth as well as the effects of currency. Our operating income increased $5.4 million for the quarter and $18.7 million for the year. Our net income, as John said, was $12.5 million for the year which was a $15.9 million improvement over 2006 and that includes about $1.5 million of currency.

The tax increase of $2.5 million for the year represents foreign tax expense and that reflects the mix of the growth we experienced in countries were foreign taxes apply as well as the different tax rates in those countries. We don’t have any US taxes due to our NOL’s. On the balance sheet it taxes a lot of cash and resources to operate worldwide and we are happy to say we have solid cash and working capital positions.

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