For more information, contact:
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.
2
| 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 | |||||||
8