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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-5083
 
 FURMANITE CORPORATION
  Delaware
    
    74-1191271(State or other jurisdiction of incorporation or organization)
    
    (IRS Employer Identification No.)2435 North Central ExpresswaySuite 700Richardson, Texas
    
    75080(Address of principal executive offices)
    
    (zip code)
 (972) 699-4000
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, Without Par Value
    
    New York Stock Exchange8 3/4% Convertible Subordinated
    
    New York Stock ExchangeDebentures due 2008
 None
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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FURMANITE CORPORATION AND SUBSIDIARIES
 INDEX
 Item
    
    
    
    PageNumber
    
    
    
    NumberPART I1.
    
    Business
    
    
    31A.
    
    Risk Factors
    
    
    61B.
    
    Unresolved Staff Comments
    
    
    72.
    
    Properties
    
    
    73.
    
    Legal Proceedings
    
    
    84.
    
    Submission of Matters to a Vote of Security Holders
    
    
    8PART II5.
    
    Market for the Registrants Common Equity and Related Stockholder Matters
    
    
    96.
    
    Summary Historical Financial Data
    
    
    107.
    
    Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    117a.
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    208.
    
    Financial Statements and Supplementary Data
    
    
    209.
    
    Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    209a.
    
    Controls and Procedures
    
    
    209b.
    
    Other Information
    
    
    21PART III10.
    
    Directors and Executive Officers of Registrant
    
    
    2211.
    
    Executive Compensation
    
    
    2212.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    2213.
    
    Certain Relationships and Related Transactions
    
    
    2214.
    
    Principal Accountant Fees and Services
    
    
    22PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    23List of SubsidiariesConsent of Grant Thornton LLPCertification of Chief Executive Officer, Pursuant to Section 302Certification of Chief Financial Officer, Pursuant to Section 302Certification of Chief Executive Officer, Pursuant to Section 906(a)Certification of Chief Financial Officer, Pursuant to Section 906(a)
  2




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PART I
 
 Item 1. Business
 Company Overview
        3




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Operations
  Products and Services
     4




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Customers and Markets
    Safety, Environmental and Other Regulatory Matters
   5




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Employees
  
 Item 1A. Risk Factors
  Weakness in the refining and chemical industries could adversely affect demand for our technical
services.
  Political conditions in foreign countries in which Furmanite operates could adversely affect the
financial condition, results of operations or cash flow of the Company.
  
    
    risks of economic instability;
    
    potential adverse changes in taxation policies;
    
    disruptions from labor and political disturbances;
    
    adverse changes in tariffs or import or export restrictions;
    
    war or insurrections; and
    
    other adverse changes in the laws or regulations of the host country.
 The Company may be adversely affected by fluctuations in foreign currency exchange rates and
foreign exchange restrictions.
  6




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The competitive position of Furmanite depends in part on the ability to protect its intellectual
property.
  Furmanites products and services are offered in highly competitive markets, which limit the profit
margins and the ability to increase market shares.
  The government services provided by Furmanite are affected by levels of expenditures of federal,
state and local governments.
  If the Company loses any key personnel, the ability to manage the business and continue the growth
of the Company could be negatively impacted.
  The Company is exposed to customer credit risks.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   7




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Item 3. Legal Proceedings
     
 Item 4. Submission of Matters to a Vote of Security Holders
  8




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PART II
 
 Item 5. Market for the Registrants Common Equity and Related Stockholder Matters
   TotalYears Ended December 31,
    
    High
    
    Low
    
    Volume2007:First Quarter
    
    $
    6.24
    
    
    $
    4.68
    
    
    
    3,884,000Second Quarter
    
    $
    7.99
    
    
    $
    5.36
    
    
    
    4,896,800Third Quarter
    
    $
    9.46
    
    
    $
    6.70
    
    
    
    6,064,600Fourth Quarter
    
    $
    13.00
    
    
    $
    8.45
    
    
    
    10,050,7002006:First Quarter
    
    $
    4.93
    
    
    $
    3.02
    
    
    
    6,162,200Second Quarter
    
    $
    5.89
    
    
    $
    3.85
    
    
    
    3,805,200Third Quarter
    
    $
    6.00
    
    
    $
    4.57
    
    
    
    2,803,400Fourth Quarter
    
    $
    6.29
    
    
    $
    4.68
    
    
    
    3,513,400
   9




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Item 6. Summary Historical Financial Data
  Year Ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Income Statement Data:Revenues
    
    $
    290,287
    
    
    $
    246,388
    
    
    $
    153,881
    
    
    $
    145,687
    
    
    $
    135,720Total costs and expenses
    
    
    269,640
    
    
    
    244,488
    
    
    
    154,772
    
    
    
    140,728
    
    
    
    139,087Operating income (loss)
    
    $
    20,647
    
    
    $
    1,900
    
    
    $
    (891
    )
    
    $
    4,959
    
    
    $
    (3,367
    )Interest expense, net
    
    
    (2,233
    )
    
    
    (1,941
    )
    
    
    (380
    )
    
    
    (815
    )
    
    
    (1,013
    )Income (loss) before income taxes
    
    $
    18,414
    
    
    $
    (41
    )
    
    $
    (1,271
    )
    
    $
    4,144
    
    
    $
    (4,380
    )Income tax expense
    
    
    (5,919
    )
    
    
    (3,391
    )
    
    
    (2,995
    )
    
    
    (1,748
    )
    
    
    (8,725
    ) (a)Net income (loss)
    
    $
    12,495
    
    
    $
    (3,432
    )
    
    $
    (4,266
    )
    
    $
    2,396
    
    
    $
    (13,105
    )Earnings (loss) per common share:Basic
    
    $
    0.35
    
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.07
    
    
    $
    (0.41
    )Diluted
    
    $
    0.35
    
    
    $
    (0.10
    )
    
    $
    (0.13
    )
    
    $
    0.07
    
    
    $
    (0.41
    )
 December 31,2007
    
    
    2006Balance Sheet Data:Cash and cash equivalents
    
    $
    31,570
    
    
    $
    23,937Working capital
    
    $
    76,917
    
    
    $
    69,226Total assets
    
    $
    172,053
    
    
    $
    156,500Long-term debt, less current portion
    
    $
    43,185
    
    
    $
    48,721Stockholders equity
    
    $
    78,336
    
    
    $
    60,605
 
 (a)
    
    Includes a $12.1 million non-cash deferred income tax expense resulting from a
change in the valuation allowance for deferred tax assets arising from prior year tax losses
that are available to offset future taxable income. 10




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Business Overview
       Financial Overview
  11




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Results of Operations
 Years Ended December 31,2007
    
    
    2006
    
    
    2005(in thousands, except per share data)Revenues
    
    $
    290,287
    
    
    $
    246,388
    
    
    $
    153,881Costs and expenses:Operating costs (exclusive of depreciation and amortization)
    
    
    187,055
    
    
    
    160,755
    
    
    
    100,264Depreciation and amortization
    
    
    4,772
    
    
    
    3,692
    
    
    
    3,514Selling, general and administrative
    
    
    77,813
    
    
    
    79,120
    
    
    
    51,763Write-off of goodwill
    
    
    
    
    
    
    654
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    (2,102
    )Provision for lease termination costs
    
    
    
    
    
    
    267
    
    
    
    1,333Total costs and expenses
    
    
    269,640
    
    
    
    244,488
    
    
    
    154,772Operating income (loss)
    
    
    20,647
    
    
    
    1,900
    
    
    
    (891
    )Interest and other income, net
    
    
    1,041
    
    
    
    866
    
    
    
    660Interest expense
    
    
    (3,274
    )
    
    
    (2,807
    )
    
    
    (1,040
    )Income (loss) before income taxes
    
    
    18,414
    
    
    
    (41
    )
    
    
    (1,271
    )Income tax expense
    
    
    (5,919
    )
    
    
    (3,391
    )
    
    
    (2,995
    )Net income (loss)
    
    $
    12,495
    
    
    $
    (3,432
    )
    
    $
    (4,266
    )Earnings (loss) per share:Basic
    
    $
    0.35
    
    
    $
    (0.10
    )
    
    $
    (0.13
    )Diluted
    
    $
    0.35
    
    
    $
    (0.10
    )
    
    $
    (0.13
    )
 Revenues
   Operating Costs
  12




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Selling, General and Administrative
   Depreciation and Amortization
   Interest Expense
   Income Taxes
 Accounting for Income Taxes
 13




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Liquidity and Capital Resources
        14




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15




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Contractual Obligations and Commitments
  LessThan 1
    
    
    
    
    
    
    
    
    
    
    After 5Total
    
    
    Year
    
    
    2-3 Years
    
    
    4-5 Years
    
    
    YearsDebt:$50.0 million facility
    
    $
    27,590
    
    
    $
    
    
    
    $
    27,590
    
    
    $
    
    
    
    $
    $15.0 million facility
    
    
    15,000
    
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    8.75% convertible subordinated
debentures
    
    
    2,040
    
    
    
    2,040
    
    
    
    
    
    
    
    
    
    
    
    44,630
    
    
    
    2,040
    
    
    
    42,590
    
    
    
    
    
    
    
    Capital leases
    
    
    1,124
    
    
    
    529
    
    
    
    526
    
    
    
    69
    
    
    
    Debt subtotal
    
    
    45,754
    
    
    
    2,569
    
    
    
    43,116
    
    
    
    69
    
    
    
    Interest on debt
    
    
    7,626
    
    
    
    2,569
    
    
    
    5,054
    
    
    
    3
    
    
    
    Total debt and interest
    
    
    53,380
    
    
    
    5,138
    
    
    
    48,170
    
    
    
    72
    
    
    
    Other contractual commitments:Pension plan contributions
    
    
    12,630
    
    
    
    1,263
    
    
    
    2,526
    
    
    
    2,526
    
    
    
    6,315Operating leases
    
    
    18,635
    
    
    
    5,497
    
    
    
    7,744
    
    
    
    3,425
    
    
    
    1,969Total other contractual commitments
    
    
    31,265
    
    
    
    6,760
    
    
    
    10,270
    
    
    
    5,951
    
    
    
    8,284Total
    
    $
    84,645
    
    
    $
    11,898
    
    
    $
    58,440
    
    
    $
    6,023
    
    
    $
    8,284
  Critical Accounting Policies and Estimates
   Goodwill and Intangible Assets
 Goodwill and Other Intangible Assets
 16




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Revenue Recognition
 Revenue Recognition in Financial Statements Revenue Recognition
    Revenue Arrangements with Multiple Deliverables
 Foreign Currency Translation
  17




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Comprehensive Income (Loss)
 Reporting Comprehensive Income
 Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock-Based
Compensation
 Share-Based Payment
   Income Taxes
 Accounting for Uncertainty in
Income Taxes  an interpretation of FASB Statement No. 109
  18




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Environmental Costs
   New Accounting Pronouncements
 Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements
  Fair Value Measurements
 Employers Accounting for Defined Benefit Pension
and Other Post Retirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132 (R)
 19




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The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations
 Off-Balance Sheet Transactions
  Inflation and Changing Prices
  
 Item 7a. Quantitative and Qualitative Disclosure About Market Risk
 (i.e.
   
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9a. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  20




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et seq.
 Managements Annual Report on Internal Control over Financial Reporting
   Internal Control  Integrated Framework
 Changes in Internal Controls Over Financial Reporting
  
 Item 9b. Other Information
  21




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PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
  22




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PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 BeginningPage(a) Documents filed as part of this report(1) Index to Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm Regarding Internal Controls
    
    
    F - 1Report of Independent Registered Public Accounting Firm
    
    
    F - 2Consolidated Balance Sheets at December 31, 2007 and 2006
    
    
    F - 3Consolidated Statements of Operations for the years ended December 31, 2007,
2006 and 2005
    
    
    F - 4Consolidated Statements of Changes in Stockholders Equity for the years ended
December 31, 2007, 2006 and 2005
    
    
    F - 5Consolidated Statements of Cash Flows for the years ended December 31, 2007,
2006 and 2005
    
    
    F - 6Consolidated Statements of Comprehensive Income (Loss) for the years ended
December 31, 2007, 2006 and 2005
    
    
    F - 7Notes to Consolidated Financial Statements
    
    
    F - 8
  23




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(3) List of Exhibits
 2.1
    
    
    Asset Purchase Agreement, dated December 31, 2005, among Flowserve US Inc., IPSCO
(UK) Limited, Flowserve Repair & Services B.V., Flowserve Management Company, Flowserve
Belgium N.V., Furmanite US GSG LLC, Furmanite GSG Limited, Furmanite GSG BVBA, Furmanite
Worldwide, Inc. and Furmanite GSG B.V., filed as Exhibit 2.1 of the exhibits to the
Registrants Current Report on Form 8-K filed on January 6, 2006, which exhibit is hereby
incorporated by reference.3.1
    
    
    Restated Certificate of Incorporation of the Registrant, dated September 26, 1979,
filed as Exhibit 3.1 of the exhibits to the Registrants Registration Statement on Form
S-16, which exhibit is hereby incorporated by reference.3.2
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated April 30, 1981, filed as Exhibit 3.2 of the exhibits to the Registrants
Annual Report on Form 10-K (Form 10-K) for the year ended December 31, 1981, which
exhibit is hereby incorporated by reference.3.3
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated May 28, 1985, filed as Exhibit 4.1 of the exhibits to the Registrants
Quarterly Report on Form 10-Q (Form 10-Q) for the quarter ended June 30, 1985, which
exhibit is hereby incorporated by reference.3.4
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated September 17, 1985, filed as Exhibit 4.1 of the exhibits to the
Registrants Form 10-Q for the quarter ended September 30, 1985, which exhibit is hereby
incorporated by reference.3.5
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated July 10, 1990, filed as Exhibit 3.5 of the exhibits to the Registrants
Form 10-K for the year ended December 31, 1990, which exhibit is hereby incorporated by
reference.3.6
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated September 21, 1990, filed as Exhibit 3.5 of the exhibits to the
Registrants Form 10-Q for the quarter ended September 30, 1990, which exhibit is hereby
incorporated by reference.3.7
    
    
    Certificate of Amendment to the Restated Certificate of Incorporation of the
Registrant, dated August 8, 2001, filed as Exhibit 3.1 to the Registrants Current Report
on Form 8-K filed on August 22, 2001, which exhibit is hereby incorporated by reference.3.8
    
    

By-laws
of the Registrant, as amended and restated September 14, 2006,
filed as exhibit 3.8 to the Registrants 10-K for the year then
ended December 31, 2006, which exhibit is hereby incorporated by
reference.3.9
    
    
    By-laws of the Registrant, as amended and restated June 14, 2007, filed as Exhibit
3.1 to the Registrants Current Report on From 8-K filed on June 20, 2007, which exhibit
is incorporated by reference.4.1
    
    
    Certificate of Designation, Preferences and Rights related to the Registrants Series B Junior Participating Preferred Stock, filed as Exhibit 4.2 to the Registrants 10-K for
the year ended December 31, 1998, which exhibit is incorporated herein by reference.4.2
    
    
    Indenture between Moran Energy Inc. (Moran) and First City National Bank of Houston
(First City), dated January 15, 1984, under which Moran issued the 8 3/4% Convertible
Subordinated Debentures due 2008, filed as Exhibit 4.1 to Morans Registration Statement
on Form S-3 (SEC File No. 2-81227), which exhibit is hereby incorporated by reference.4.3
    
    
    First Supplemental Indenture between the Registrant and First City, dated as of March
20, 1984, under which the Registrant assumed obligations under the Indenture listed as
Exhibit 4.2 above, filed as Exhibit 4.7 of the Registrants Form 10-K for the year ended
December 31, 1983, which exhibit is hereby incorporated by reference.10.1*
    
    
    Change in Control Agreement effective August 31, 2006, filed as Exhibit 10.1 of the
Registrants Form 10-Q for the period ended September 30, 2006, which exhibit is hereby
incorporated by reference.10.2*
    
    
    Change in Control Agreement effective August 31, 2006, filed as Exhibit 10.2 of the
Registrants Form 10-Q for the period ended September 30, 2006, which exhibit is hereby
incorporated by reference.10.3*
    
    
    Change in Control Agreement effective August 31, 2006, filed as Exhibit 10.3 of the
Registrants Form 10-Q for the period ended September 30, 2006, which exhibit is hereby
incorporated by reference.
 24




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10.4*
    
    
    Change in Control Agreement effective August 31, 2006, filed as Exhibit 10.4 of the
Registrants Form 10-Q for the period ended September 30, 2006, which exhibit is hereby
incorporated by reference.10.5*
    
    
    Change in Control Agreement effective August 31, 2006, filed as Exhibit 10.5 of the
Registrants Form 10-Q for the period ended September 30, 2006, which exhibit is hereby
incorporated by reference.10.6*
    
    
    Furmanite Corporation (formerly Xanser Corporation and formerly Kaneb Services, Inc.)
Savings Investment Plan, as amended, filed as Exhibit 4.10 of the exhibits to the
Registrants Registration Statement on Form S-8 (Form S-8) (S.E.C. File No. 033-41295) as
Exhibit 4.1 to the exhibits of the Registrants Form S-8 (S.E.C. File No. 333-14067), and
as Exhibit 4.9 to the exhibits of the Registrants Form S-8 (S.E.C. File No. 333-83968),
which exhibits are hereby incorporated by reference.10.7*
    
    
    Furmanite Corporation (formerly Xanser Corporation and formerly Kaneb Services, Inc.)
1994 Stock Incentive Plan, filed as Exhibit 4.12 to the exhibits of the Registrants Form
S-8 (S.E.C. File No. 033-54027), as Exhibit 10.1 to the Registrants Current Report on Form
8-K filed on August 22, 2001, and as Exhibit 10.1 to the exhibits of the Registrants Form
10-Q for the period ended June 30, 2003, which exhibits are hereby incorporated by
reference.10.8*
    
    
    Kaneb Services, Inc. $1.63 Director Stock Options, filed as Exhibit 4.12 to the
exhibits of the Registrants Form S-8 (S.E.C. File No. 033-58981), which exhibit is hereby
incorporated by reference.10.9*
    
    
    Kaneb Services, Inc. Directors Stock Options I, filed as Exhibit 4.6 to the exhibits
of the Registrants Form S-8 (S.E.C. File No. 333-14069), which exhibit is hereby
incorporated by reference.10.10*
    
    
    Kaneb Services, Inc. 1996 Directors Stock Incentive Plan, as amended, filed as Exhibit 4.6
to the exhibits of the Registrants Form S-8 (S.E.C. File No. 333-14071) and as Exhibit 4.1
to the exhibits of the Registrants Form S-8 (S.E.C. File No. 333-22109), and as
supplemented, filed as Exhibit 4.2 to the Exhibits of the Registrants Form S-8 (S.E.C. File
No. 333-60195), which exhibits are hereby incorporated by reference.10.11*
    
    
    Kaneb Services, Inc. 1994 Stock Option Agreements, filed as Exhibits 10.1, 10.2, 10.3 and
10.4 to the exhibits of the Registrants Form S-8 (S.E.C. File No. 333-34496), which
exhibits are hereby incorporated by reference.10.12*
    
    
    Form of Termination Agreement, filed as Exhibit 10.10 to the exhibits of the Registrants
Form 10-K for the year ended December 31, 1996, which exhibit is hereby incorporated by
reference.10.13*
    
    
    Form of Indemnification Agreement, filed as Exhibit 10.11 to the Registrants Form 10-K
for the year ended December 31, 1998, which exhibit is hereby incorporated by reference.10.14
    
    
    Amended and Restated Loan Agreement between Furmanite PLC, Bank of Scotland and
certain other Lenders, dated May 1, 1991, as amended, filed as Exhibit 10.8 of the exhibits
to the Registrants Form 10-K for the year ended December 31, 1994; Exhibit 10.12 of the
exhibits to the Registrants Form 10-K for the year ended December 31, 1996; Exhibit 10.12
of the Registrants Form 10-K for the year ended December 31, 1997; and, Exhibit 10.13 of
the Registrants Form 10-K for the year ended December 31, 1999, which exhibits are hereby
incorporated by reference.10.15
    
    
    Second Amendment, dated as of December 31, 2005, to the Amended and Restated Loan
Agreement dated as of August 13, 2002 among Furmanite Limited, Furmanite Worldwide, Inc.,
the financial institutions from time to time party thereto and Bank of Scotland, as Agent,
filed as Exhibit 10.1 of the exhibits to the Registrants Current Report on Form 8-K filed
on January 6, 2006, which exhibit is hereby incorporated by reference.21.1
    
    
    List of subsidiaries of the Registrant, filed herewith.23.1
    
    
    Consent of Grant Thornton LLP, filed herewith.31.1
    
    
    Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, dated as of March 17, 2008.31.2
    
    
    Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, dated as of March 17, 2008.32.1
    
    
    Certification of Chief Executive Officer, Pursuant to Section 906(a) of the
Sarbanes-Oxley Act of 2002, dated as of March 17, 2008.
 25




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32.2
    
    
    Certification of Chief Financial Officer, Pursuant to Section 906(a) of the
Sarbanes-Oxley Act of 2002, dated as of March 17, 2008.
 
 *
    
    Denotes management contracts. 26




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework
    ControlIntegrated
Framework
   
 F - 1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Share-Based Payment, Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans, Considering Effects of Prior Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements, Accounting for Uncertainty in Income Taxes: an interpretation of FASB
Statement No. 109.
 Internal ControlIntegrated Framework
  
 F - 2




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share data)
 December 31,2007
    
    
    2006AssetsCurrent assets:Cash and cash equivalents
    
    $
    31,570
    
    
    $
    23,937Accounts receivable, trade (net of allowance for doubtful accounts of
$4,011 in 2007 and $3,341 in 2006)
    
    
    62,552
    
    
    
    59,528Receivable from businesses distributed to common stockholders
    
    
    1,443
    
    
    
    1,443Inventories
    
    
    24,213
    
    
    
    21,411Prepaid and other current assets
    
    
    5,616
    
    
    
    5,158Total current assets
    
    
    125,394
    
    
    
    111,477Property and equipment
    
    
    57,505
    
    
    
    51,523Less accumulated depreciation and amortization
    
    
    27,663
    
    
    
    25,554Property and equipment, net
    
    
    29,842
    
    
    
    25,969Goodwill
    
    
    13,148
    
    
    
    13,148Pension asset (excess of fair value over projected obligation)
    
    
    430
    
    
    
    Other assets
    
    
    3,239
    
    
    
    5,906Total assets
    
    $
    172,053
    
    
    $
    156,500Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    16,025
    
    
    $
    14,905Accrued expenses and other current liabilities
    
    
    26,341
    
    
    
    22,425Income tax payable
    
    
    3,542
    
    
    
    2,581Bank overdraft
    
    
    
    
    
    
    1,553Current portion of long-term debt
    
    
    2,569
    
    
    
    787Total current liabilities
    
    
    48,477
    
    
    
    42,251Long-term debt, less current portion
    
    
    43,185
    
    
    
    48,721Net pension liability
    
    
    
    
    
    
    3,042Other liabilities
    
    
    2,055
    
    
    
    1,881Commitments and contingencies (Note 12)Stockholders equity:Series B Preferred Stock, unlimited shares authorized, none outstanding
    
    
    
    
    
    
    Common stock, no par value; 60,000,000 shares authorized; 39,959,792
shares issued in 2007 and 39,258,025 shares issued in 2006
    
    
    4,643
    
    
    
    4,558Additional paid-in capital
    
    
    128,363
    
    
    
    124,884Retained earnings (accumulated deficit)
    
    
    (40,943
    )
    
    
    (53,438
    )Accumulated other comprehensive income
    
    
    4,467
    
    
    
    2,921Treasury stock
    
    
    (18,194
    )
    
    
    (18,320
    )Total stockholders equity
    
    
    78,336
    
    
    
    60,605Total liabilities and stockholders equity
    
    $
    172,053
    
    
    $
    156,500
  F - 3




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (in thousands, except share and per share data)
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Revenues:Services
    
    $
    290,287
    
    
    $
    245,850
    
    
    $
    146,975Products
    
    
    
    
    
    
    538
    
    
    
    6,906Total revenues
    
    
    290,287
    
    
    
    246,388
    
    
    
    153,881Costs and expenses:Operating costs (exclusive of depreciation and amortization)
    
    
    187,055
    
    
    
    160,755
    
    
    
    100,264Depreciation and amortization
    
    
    4,772
    
    
    
    3,692
    
    
    
    3,514Selling, general and administrative
    
    
    77,813
    
    
    
    79,120
    
    
    
    51,763Write-off of goodwill
    
    
    
    
    
    
    654
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    (2,102
    )Provision for lease termination costs
    
    
    
    
    
    
    267
    
    
    
    1,333Total costs and expenses
    
    
    269,640
    
    
    
    244,488
    
    
    
    154,772Operating income (loss)
    
    
    20,647
    
    
    
    1,900
    
    
    
    (891
    )Interest and other income, net
    
    
    1,041
    
    
    
    866
    
    
    
    660Interest expense
    
    
    (3,274
    )
    
    
    (2,807
    )
    
    
    (1,040
    )Income (loss) before income taxes
    
    
    18,414
    
    
    
    (41
    )
    
    
    (1,271
    )Income tax expense
    
    
    (5,919
    )
    
    
    (3,391
    )
    
    
    (2,995
    )Net income (loss)
    
    $
    12,495
    
    
    $
    (3,432
    )
    
    $
    (4,266
    )Earnings (loss) per common share:Basic
    
    $
    0.35
    
    
    $
    (0.10
    )
    
    $
    (0.13
    )Diluted
    
    $
    0.35
    
    
    $
    (0.10
    )
    
    $
    (0.13
    )Weighted-average number of common and common equivalent
shares used in computing net income per common share:Basic
    
    
    35,514
    
    
    
    34,743
    
    
    
    32,911Diluted
    
    
    36,052
    
    
    
    34,743
    
    
    
    32,911
  F - 4




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
 (in thousands, except share data)
 Retained
    
    AccumulatedAdditional
    
    Earnings
    
    OtherCommon Shares
    
    Common
    
    Paid-In
    
    (Accumulated
    
    Comprehensive
    
    TreasuryIssued
    
    Treasury
    
    Stock
    
    Capital
    
    Deficit)
    
    Income (Loss)
    
    Stock
    
    TotalBalance at January 1, 2005
    
    
    37,353,755
    
    
    
    5,736,501
    
    
    $
    4,335
    
    
    $
    126,550
    
    
    $
    (46,299
    )
    
    $
    (2,516
    )
    
    $
    (26,180
    )
    
    $
    55,890Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,266
    )
    
    
    
    
    
    
    
    
    
    
    (4,266
    )Common stock issued
    
    
    1,451,940
    
    
    
    (657,225
    )
    
    
    172
    
    
    
    507
    
    
    
    
    
    
    
    
    
    
    
    3,050
    
    
    
    3,729Deferred stock units, vested
    
    
    
    
    
    
    (681,264
    )
    
    
    
    
    
    
    (2,576
    )
    
    
    
    
    
    
    
    
    
    
    3,102
    
    
    
    526Minimum pension liability adjustment
for subsidiary, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,183
    )
    
    
    
    
    
    
    (1,183
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,392
    )
    
    
    
    
    
    
    (3,392
    )Balance at December 31, 2005
    
    
    38,805,695
    
    
    
    4,398,012
    
    
    $
    4,507
    
    
    $
    124,481
    
    
    $
    (50,565
    )
    
    $
    (7,091
    )
    
    $
    (20,028
    )
    
    $
    51,304Staff Accounting Bulletin No. 108
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    997
    
    
    
    
    
    
    
    
    
    
    
    997Revised Balance at December
31, 2005
    
    
    38,805,695
    
    
    
    4,398,012
    
    
    
    4,507
    
    
    
    124,481
    
    
    
    (49,568
    )
    
    
    (7,091
    )
    
    
    (20,028
    )
    
    
    52,301Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,432
    )
    
    
    
    
    
    
    
    
    
    
    (3,432
    )Stock based compensation
    
    
    452,330
    
    
    
    (321,049
    )
    
    
    51
    
    
    
    403
    
    
    
    
    
    
    
    
    
    
    
    1,708
    
    
    
    2,162Minimum pension liability adjustment
for subsidiary, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,750
    
    
    
    
    
    
    
    2,750Adjustment to initially apply FASB
Statement No. 158, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,129
    
    
    
    
    
    
    
    2,129Adjustment to previously provided tax
exposures related to business
distributed to common
stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (438
    )
    
    
    
    
    
    
    
    
    
    
    (438
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,133
    
    
    
    
    
    
    
    5,133Balance at December 31, 2006
    
    
    39,258,025
    
    
    
    4,076,963
    
    
    
    4,558
    
    
    
    124,884
    
    
    
    (53,438
    )
    
    
    2,921
    
    
    
    (18,320
    )
    
    
    60,605Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,495
    
    
    
    
    
    
    
    
    
    
    
    12,495Stock-based compensation
    
    
    139,139
    
    
    
    (28,000
    )
    
    
    15
    
    
    
    589
    
    
    
    
    
    
    
    
    
    
    
    126
    
    
    
    730Conversion of convertible debentures
to common stock
    
    
    562,628
    
    
    
    
    
    
    
    70
    
    
    
    2,890
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,960Minimum pension liability adjustment
for subsidiary, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,247
    )
    
    
    
    
    
    
    (1,247
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,793
    
    
    
    
    
    
    
    2,793Balance at December 31, 2007
    
    
    39,959,792
    
    
    
    4,048,963
    
    
    $
    4,643
    
    
    $
    128,363
    
    
    $
    (40,943
    )
    
    $
    4,467
    
    
    $
    (18,194
    )
    
    $
    78,336
  F - 5




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands)
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Operating activities:Net income (loss)
    
    $
    12,495
    
    
    $
    (3,432
    )
    
    $
    (4,266
    )Reconciliation of net income (loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    4,772
    
    
    
    3,692
    
    
    
    3,514Provision for doubtful accounts
    
    
    917
    
    
    
    1,836
    
    
    
    1,050Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    (2,102
    )Provision for lease termination costs
    
    
    
    
    
    
    267
    
    
    
    1,333Deferred income taxes
    
    
    79
    
    
    
    (473
    )
    
    
    (80
    )Stock-based compensation expense
    
    
    218
    
    
    
    1,155
    
    
    
    Write-off of goodwill
    
    
    
    
    
    
    654
    
    
    
    Changes in operating assets and liabilities  net of business
acquisition:Accounts receivable
    
    
    (3,941
    )
    
    
    (5,928
    )
    
    
    309Inventories
    
    
    (2,802
    )
    
    
    (4,121
    )
    
    
    (1,513
    )Prepaid expenses and other current assets
    
    
    (570
    )
    
    
    355
    
    
    
    60Accounts payable
    
    
    1,120
    
    
    
    233
    
    
    
    1,573Accrued expenses
    
    
    3,916
    
    
    
    485
    
    
    
    1,218Income tax payable
    
    
    961
    
    
    
    (4,123
    )
    
    
    (249
    )Other, net
    
    
    (511
    )
    
    
    3,033
    
    
    
    (839
    )Net cash provided by (used in) operating activities
    
    
    16,654
    
    
    
    (6,367
    )
    
    
    8Investing activities:Capital expenditures
    
    
    (8,097
    )
    
    
    (7,205
    )
    
    
    (4,215
    )Acquisition, net of cash received
    
    
    
    
    
    
    (3,003
    )
    
    
    (18,793
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    5,400Net cash used in investing activities
    
    
    (8,097
    )
    
    
    (10,208
    )
    
    
    (17,608
    )Financing activities:Borrowings
    
    
    
    
    
    
    18,583
    
    
    
    17,056Payments on debt
    
    
    (713
    )
    
    
    (2,770
    )
    
    
    (1,948
    )Issuance of common stock
    
    
    512
    
    
    
    1,007
    
    
    
    2,770Decrease in receivable from businesses distributed to common
stockholders
    
    
    
    
    
    
    
    
    
    
    215Bank overdrafts
    
    
    (1,553
    )
    
    
    1,553
    
    
    
    Net cash provided by (used in) financing activities
    
    
    (1,754
    )
    
    
    18,373
    
    
    
    18,093Effect of exchange rate changes on cash
    
    
    830
    
    
    
    613
    
    
    
    (565
    )Increase (decrease) in cash and cash equivalents
    
    
    7,633
    
    
    
    2,411
    
    
    
    (72
    )Cash and cash equivalents at beginning of year
    
    
    23,937
    
    
    
    21,526
    
    
    
    21,598Cash and cash equivalents at end of year
    
    $
    31,570
    
    
    $
    23,937
    
    
    $
    21,526Supplemental cash flow information:Cash paid for interest
    
    $
    3,202
    
    
    $
    2,501
    
    
    $
    987Cash paid for income taxes
    
    $
    5,416
    
    
    $
    2,765
    
    
    $
    1,953
  F - 6




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 (in thousands)
 Years Ended December 31,2007
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    12,495
    
    
    $
    (3,432
    )
    
    $
    (4,266
    )Other comprehensive income (loss):Minimum pension liability adjustment, net of tax
    
    
    (1,247
    )
    
    
    2,750
    
    
    
    (1,183
    )Foreign currency translation adjustments
    
    
    2,793
    
    
    
    5,133
    
    
    
    (3,392
    )Total other comprehensive income (loss)
    
    
    1,546
    
    
    
    7,883
    
    
    
    (4,575
    )Comprehensive income (loss)
    
    $
    14,041
    
    
    $
    4,451
    
    
    $
    (8,841
    )
  F - 7




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
 1.
    
    Description of Business and Summary of Significant Accounting Policies
 Description of Business
     F - 8




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
 Cash and Cash Equivalents
  Accounts Receivable
   Allowance for doubtful accounts receivable at January 1, 2005
    
    $
    667Charged to costs and expenses
    
    
    1,050Write-offs, net of recoveries
    
    
    (224
    )Allowance for doubtful accounts receivable at December 31, 2005
    
    
    1,493Charged to costs and expenses
    
    
    1,836Charged to other accounts
    
    
    54Write-offs, net of recoveries
    
    
    (42
    )Allowance for doubtful accounts receivable at December 31, 2006
    
    
    3,341Charged to costs and expenses
    
    
    917Charged to other accounts
    
    
    55Write-offs, net of recoveries
    
    
    (302
    )Allowance for doubtful accounts receivable at December 31, 2007
    
    $
    4,011
 Inventories
  Property and Equipment
  Accounting for the Impairment or Disposal of Long-Lived Assets
 F - 9




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
 Goodwill and Intangible Assets
 Goodwill and Other Intangible Assets
 Revenue Recognition
 Revenue Recognition in Financial Statements Revenue Recognition
    Revenue Arrangements with Multiple Deliverables
 F - 10




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
  Foreign Currency Translation
  Comprehensive Income (Loss)
 Reporting Comprehensive Income
 Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock-Based
Compensation
 Share-Based Payment
   F - 11




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
 Environmental Costs
   Income Taxes
 Accounting for Income Taxes
  Reclassifications
   Derivative Instruments
  New Accounting Pronouncements
 Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements
 F - 12




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
  Fair
Value Measurements
 Employers Accounting for Defined Benefit Pension
and Other Post Retirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132 (R)
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations
 Estimates
  F - 13




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
 2. Acquisition
   Business Combinations
 Cash consideration paid to seller
    
    $
    17,247Transaction costs and other
    
    
    4,549Fair value of net assets acquired
    
    $
    21,796Accounts receivable
    
    $
    14,670Inventories
    
    
    6,243Other current assets
    
    
    464Property and equipment
    
    
    9,788Accounts payable
    
    
    (6,515
    )Accrued expenses
    
    
    (974
    )Long-term liabilities
    
    
    (1,880
    )Net assets acquired
    
    $
    21,796
   F - 14




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
 3. Earnings Per Share
  2007
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    12,495
    
    
    $
    (3,432
    )
    
    $
    (4,266
    )Basic weighted-average common shares outstanding
    
    
    35,514
    
    
    
    34,743
    
    
    
    32,911Dilutive effect of common stock equivalents
    
    
    538
    
    
    
    
    
    
    
    Diluted weighted-average common shares outstanding
    
    
    36,052
    
    
    
    34,743
    
    
    
    32,911Income (loss) per share:Basic
    
    $
    0.35
    
    
    $
    (0.10
    )
    
    $
    (0.13
    )Dilutive
    
    $
    0.35
    
    
    $
    (0.10
    )
    
    $
    (0.13
    )
  4. Inventories
  2007
    
    
    2006Raw materials and supplies
    
    $
    13,770
    
    
    $
    12,633Work-in-process
    
    
    8,100
    
    
    
    6,970Finished goods
    
    
    2,343
    
    
    
    1,808Total inventories
    
    $
    24,213
    
    
    $
    21,411
 5. Property and Equipment
  2007
    
    
    2006Land
    
    $
    1,305
    
    
    $
    1,305Buildings
    
    
    5,618
    
    
    
    5,566Machinery and equipment
    
    
    30,862
    
    
    
    23,592Furniture and fixtures
    
    
    7,567
    
    
    
    9,856Vehicles
    
    
    6,014
    
    
    
    5,940Construction in progress
    
    
    2,016
    
    
    
    1,721Other
    
    
    4,123
    
    
    
    3,543Total property and equipment
    
    
    57,505
    
    
    
    51,523Less accumulated depreciation and amortization
    
    
    27,663
    
    
    
    25,554Net property and equipment
    
    $
    29,842
    
    
    $
    25,969
 F - 15




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
  2007
    
    
    2006Vehicles
    
    $
    4,684
    
    
    $
    4,728Equipment
    
    
    362
    
    
    
    362Total capital leases
    
    
    5,046
    
    
    
    5,090Less accumulated depreciation and amortization
    
    
    3,927
    
    
    
    3,185Net equipment acquired under capital leases
    
    $
    1,119
    
    
    $
    1,905
  6. Accrued Expenses
  2007
    
    
    2006Compensation and benefits
    
    $
    9,833
    
    
    $
    7,099Employee expenses, travel and training
    
    
    564
    
    
    
    155Asset and equipment cost of sales
    
    
    2,009
    
    
    
    1,197Value added tax payable
    
    
    1,731
    
    
    
    1,563Taxes other than income
    
    
    1,619
    
    
    
    1,251Interest
    
    
    422
    
    
    
    477Professional, audit and legal fees
    
    
    3,320
    
    
    
    1,743Rent
    
    
    544
    
    
    
    232Other
    
    
    6,299
    
    
    
    8,708$
    26,341
    
    
    $
    22,425
 7. Long-Term Debt and Capital Lease Obligations
  2007
    
    
    2006Borrowings under $50,000 revolving bank facility (the $50.0 million facility)
    
    $
    27,590
    
    
    $
    27,590Borrowings under $15,000 revolving bank facility (the $15.0 million facility)
    
    
    15,000
    
    
    
    15,0008.75% convertible subordinated debentures due January 2008
    
    
    2,040
    
    
    
    5,000Capital leases
    
    
    1,124
    
    
    
    1,918Total long-term debt
    
    
    45,754
    
    
    
    49,508Less current portion
    
    
    2,569
    
    
    
    787Total long-term debt, less current portion
    
    $
    43,185
    
    
    $
    48,721
   F - 16




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
     2008
    
    $
    2,5692009
    
    
    3462010
    
    
    42,7702011
    
    
    692012
    
    
    Thereafter
    
    
    Total
    
    $
    45,754
 8. Retirement Plans
   F - 17




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2007
  2007
    
    
    2006
    
    
    2005Net periodic pension cost:Service cost
    
    $
    805
    
    
    $
    638
    
    
    $
    518Interest cost
    
    
    3,942
    
    
    
    3,828
    
    
    
    3,605Expected return on plan assets
    
    
    (5,274
    )
    
    
    (4,396
    )
    
    
    (3,896
    )Amortization of prior service cost
    
    
    (122
    )
    
    
    (113
    )
    
    
    (111
    )Recognized net loss
    
    
    
    
    
    
    815
    
    
    
    709Net periodic pension cost (benefit)
    
    $
    (649
    )
    
    $
    772
    
    
    $
    825
  2007
    
    2006Discount rate
    
    
    5.8
    %
    
    
    5.3
    %Rate of compensation increase
    
    
    3.7
    %
    
    
    3.5
    %Inflation
    
    
    3.2
    %
    
    
    2.9
    %
  2007
    
    2006Discount rate
    
    
    5.3
    %
    
    
    5.4
    %Expected long-term return on plan assets
    
    
    7.4
    %
    
    
    7.5
    %Rate of compensation increase
    
    
    3.5
    %
    
    
    3.4
    %Inflation
    
    
    3.0
    %
    
    
    3.0
    %
   F - 18




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

December 31, 2007
  2007
    
    
    2006Projected benefit obligation:Beginning of year
    
    $
    72,713
    
    
    $
    66,487Service cost
    
    
    805
    
    
    
    638Interest cost
    
    
    3,942
    
    
    
    3,828Participants contributions
    
    
    367
    
    
    
    366Actuarial loss
    
    
    (2,609
    )
    
    
    (5,698
    )Benefits paid
    
    
    (2,862
    )
    
    
    (2,490
    )Foreign currency translation adjustment and other
    
    
    1,297
    
    
    
    9,582End of year
    
    
    73,653
    
    
    
    72,713Fair value of plan assets:Beginning of year
    
    
    69,671
    
    
    
    54,983Actual gain on plan assets
    
    
    4,426
    
    
    
    8,258Employer contributions
    
    
    1,218
    
    
    
    848Participants contributions
    
    
    367
    
    
    
    366Benefits paid
    
    
    (2,862
    )
    
    
    (2,490
    )Foreign currency translation adjustment and other
    
    
    1,263
    
    
    
    7,706End of year
    
    
    74,083
    
    
    
    69,671Excess projected obligation under (over) fair value at end of year
    
    $
    430
    
    
    $
    (3,042
    )
    Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans
 Employers Accounting for Pensions
 F - 19




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
  2007
    
    2006Equity securities
    
    
    56
    %
    
    
    50
    %Debt securities
    
    
    38
    %
    
    
    41
    %Real estate
    
    
    1
    %
    
    
    1
    %Cash and other
    
    
    5
    %
    
    
    8
    %100
    %
    
    
    100
    %
   2008
    
    $
    2,9532009
    
    
    3,0472010
    
    
    3,1452011
    
    
    3,2462012
    
    
    3,350Thereafter
    
    
    18,428Total
    
    $
    34,169
 9. Stockholders Equity
  Series B Preferred Stock
  Stock Option Plans
   F - 20




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
    2007
    
    2006
    
    2005Expected volatility
    
    34.3% to 36.2%
    
    34.1% to 38.6%
    
    35.6% to 38.2%Risk-free interest rate
    
    3.6% to 4.4%
    
    4.1% to 5.1%
    
    3.9% to 4.2%Expected dividends
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected term in years
    
    
    5
    
    
    
    3.5
    
    
    
    3.5
   Net loss, as reported
    
    $
    (4,266
    )Stock-based employee compensation expense determined under the fair value based method (1)
    
    
    (506
    )Pro forma net loss
    
    $
    (4,772
    )Loss per share:Basic and diluted, as reported
    
    $
    (0.13
    )Basic and diluted, pro forma (2)
    
    $
    (0.14
    )
 
 (1)
    
    Stock-based compensation expense for periods prior to year 2006 was calculated based
on the pro forma application of SFAS No. 123.(2)
    
    Earnings per share for periods prior to year 2006 represent pro forma information
based on SFAS No. 123. F - 21




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
  Weighted-AverageWeighted-
    
    Remaining
    
    AggregateAverage
    
    Contractual
    
    IntrinsicExercise
    
    Term
    
    ValueOptions
    
    Shares
    
    Price
    
    (Years)
    
    ($000)Outstanding at January 1, 2005
    
    
    3,334,174
    
    
    $
    1.87Granted
    
    
    605,000
    
    
    $
    3.06Exercised
    
    
    (2,088,741
    )
    
    $
    1.68Forfeited
    
    
    (238,739
    )
    
    $
    1.75Outstanding at December 31, 2005
    
    
    1,611,694
    
    
    $
    2.47Granted
    
    
    125,000
    
    
    $
    4.84Exercised
    
    
    (512,019
    )
    
    $
    2.18Forfeited
    
    
    (211,000
    )
    
    $
    2.83Outstanding at December 31, 2006
    
    
    1,013,675
    
    
    $
    2.84Granted
    
    
    100,000
    
    
    $
    9.65Exercised
    
    
    (153,377
    )
    
    $
    2.37Forfeited
    
    
    (30,000
    )
    
    $
    4.65Outstanding at December 31, 2007
    
    
    930,298
    
    
    $
    3.59
    
    
    
    3.8
    
    
    $
    7,642Exercisable at December 31, 2007
    
    
    506,298
    
    
    $
    2.42
    
    
    
    3.9
    
    
    $
    4,751
   Weighted-AverageGrant-DateNonvested Options
    
    Options
    
    Fair ValueNonvested at December 31, 2006
    
    
    445,000
    
    
    $
    1.19Granted
    
    
    100,000
    
    
    $
    3.56Vested
    
    
    (101,000
    )
    
    $
    1.15Forfeited
    
    
    (20,000
    )
    
    $
    1.53Nonvested at December 31, 2007
    
    
    424,000
    
    
    $
    1.36
  F - 22




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
  Average
    
    AverageOutstanding
    
    ExercisableAverage Price per
    
    Remaining
    
    RemainingRange of Exercise
    
    Options
    
    Outstanding
    
    Exercisable
    
    Contractual
    
    ContractualPrice
    
    Outstanding
    
    Exercisable
    
    Options
    
    Options
    
    Life (Years)
    
    Life (Years)$1.15 - $2.29
    
    
    151,428
    
    
    
    151,428
    
    
    $
    1.59
    
    
    $
    1.59
    
    
    
    1.3
    
    
    
    1.3$2.30 - $3.13
    
    
    246,370
    
    
    
    246,370
    
    
    $
    2.46
    
    
    $
    2.46
    
    
    
    5.8
    
    
    
    5.8$3.14 - $11.80
    
    
    532,500
    
    
    
    108,500
    
    
    $
    4.68
    
    
    $
    3.47
    
    
    
    3.5
    
    
    
    3.4930,298
    
    
    
    506,298
    
    
    $
    3.59
    
    
    $
    2.42
    
    
    
    3.8
    
    
    
    3.9
  Restricted Stock Units
  Deferred Stock Unit Plans
    F - 23




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
  10. Other Comprehensive Income
  2007
    
    
    2006Minimum pension liability
    
    $
    (4,166
    )
    
    $
    379Adjustment to initially apply adoption of SFAS No. 158
    
    
    
    
    
    
    (3,042
    )Deferred tax asset
    
    
    1,169
    
    
    
    913Net minimum pension liability
    
    
    (2,997
    )
    
    
    (1,750
    )Foreign currency translation adjustment
    
    
    7,464
    
    
    
    4,671$
    4,467
    
    
    $
    2,921
  11. Income Taxes
 Accounting for Uncertainty in Income Taxes
  Balance at December 31, 2006
    
    $
    877Additions based on tax positions related to the current year
    
    
    385Reductions
due to lapses of statutes of limitations
    
    
    (265
    )Balance at December 31, 2007
    
    $
    997
  F - 24




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
  2007
    
    
    2006
    
    
    2005Domestic operations
    
    $
    404
    
    
    $
    (13,809
    )
    
    $
    (10,038
    )Foreign operations
    
    
    18,010
    
    
    
    13,768
    
    
    
    8,767Income (loss) before income taxes
    
    $
    18,414
    
    
    $
    (41
    )
    
    $
    (1,271
    )
  Federal
    
    
    Foreign
    
    
    State
    
    
    Total2007:Current
    
    $
    185
    
    
    $
    5,559
    
    
    $
    96
    
    
    $
    5,840Deferred
    
    
    
    
    
    
    79
    
    
    
    
    
    
    
    79$
    185
    
    
    $
    5,638
    
    
    $
    96
    
    
    $
    5,9192006:Current
    
    $
    
    
    
    $
    4,004
    
    
    $
    (140
    )
    
    $
    3,864Deferred
    
    
    
    
    
    
    (473
    )
    
    
    
    
    
    
    (473
    )$
    
    
    
    $
    3,531
    
    
    $
    (140
    )
    
    $
    3,3912005:Current
    
    $
    
    
    
    $
    3,057
    
    
    $
    18
    
    
    $
    3,075Deferred
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    (80
    )$
    
    
    
    $
    2,977
    
    
    $
    18
    
    
    $
    2,995
  2007
    
    
    2006
    
    
    2005Expected tax expense (benefit) at statutory rates
    
    $
    6,261
    
    
    $
    (14
    )
    
    $
    (432
    )Increase (decrease) in taxes resulting from:Change in valuation allowance
    
    
    (2,489
    )
    
    
    4,028
    
    
    
    4,291State income taxes, net
    
    
    516
    
    
    
    (220
    )
    
    
    (431
    )Foreign tax rate differences
    
    
    (586
    )
    
    
    (1,161
    )
    
    
    (136
    )Permanent differences
    
    
    2,572
    
    
    
    (88
    )
    
    
    (270
    )Resolution of state and foreign tax issues
    
    
    (67
    )
    
    
    49
    
    
    
    (80
    )Adjustment to net operating loss carryforwards
    
    
    (473
    )
    
    
    1,042
    
    
    
    Other
    
    
    185
    
    
    
    (245
    )
    
    
    53$
    5,919
    
    
    $
    3,391
    
    
    $
    2,995
   F - 25




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
   2007
    
    
    2006Deferred tax assets:Federal net operating loss carryforwards
    
    $
    11,836
    
    
    $
    17,001Alternative minimum tax credit carryforwards
    
    
    2,689
    
    
    
    2,504State net operating loss carryforwards
    
    
    1,184
    
    
    
    1,700Accrued liabilities
    
    
    3,481
    
    
    
    2,321Intangibles
    
    
    1,022
    
    
    
    1,259Foreign subsidiaries, primarily accrued liabilities
    
    
    3,843
    
    
    
    3,978Other
    
    
    652
    
    
    
    660Total gross deferred tax assets
    
    
    24,707
    
    
    
    29,423Deferred tax liabilities:Plant and equipment, principally due to differences in depreciation
    
    
    (618
    )
    
    
    (291
    )Foreign deferred tax liabilities
    
    
    (84
    )
    
    
    (299
    )Net deferred tax asset before valuation allowance
    
    
    24,005
    
    
    
    28,833Less valuation allowance
    
    
    (22,665
    )
    
    
    (25,154
    )Net deferred tax asset
    
    $
    1,340
    
    
    $
    3,679
   12. Commitments and Contingencies
   F - 26




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
  Capital
    
    
    OperatingLeases
    
    
    Leases2008
    
    $
    581
    
    
    $
    5,4972009
    
    
    370
    
    
    
    4,5212010
    
    
    190
    
    
    
    3,2232011
    
    
    70
    
    
    
    2,3332012
    
    
    
    
    
    
    1,092Thereafter
    
    
    
    
    
    
    1,969Total minimum lease payments
    
    $
    1,211
    
    
    $
    18,635Less amounts representing interest
    
    
    87Present value of net minimum lease payments
    
    $
    1,124
     F - 27




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
 13. Business Segment Data and Geographical Information
  United
    
    
    
    
    
    
    Asia-States
    
    
    Europe
    
    
    Pacific
    
    
    TotalYear ended December 31, 2007:Under pressure services
    
    $
    44,380
    
    
    $
    37,256
    
    
    $
    9,452
    
    
    $
    91,088Turnaround services
    
    
    61,934
    
    
    
    74,636
    
    
    
    19,531
    
    
    
    156,101Other services
    
    
    22,002
    
    
    
    18,832
    
    
    
    2,264
    
    
    
    43,098Total revenues
    
    $
    128,316
    
    
    $
    130,724
    
    
    $
    31,247
    
    
    $
    290,287Operating income (loss)
    
    $
    (5,342
    )
    
    $
    18,991
    
    
    $
    6,998
    
    
    $
    20,647Year ended December 31, 2006:Under pressure services
    
    $
    42,724
    
    
    $
    30,084
    
    
    $
    7,315
    
    
    $
    80,123Turnaround services
    
    
    39,437
    
    
    
    64,652
    
    
    
    14,663
    
    
    
    118,752Other services
    
    
    26,152
    
    
    
    18,638
    
    
    
    2,723
    
    
    
    47,513Total revenues
    
    $
    108,313
    
    
    $
    113,374
    
    
    $
    24,701
    
    
    $
    246,388Operating income (loss)
    
    $
    (18,163
    )
    
    $
    14,740
    
    
    $
    5,323
    
    
    $
    1,900Year ended December 31, 2005:Under pressure services
    
    $
    18,210
    
    
    $
    26,769
    
    
    $
    6,109
    
    
    $
    51,088Turnaround services
    
    
    9,557
    
    
    
    37,673
    
    
    
    13,176
    
    
    
    60,406Other services
    
    
    23,708
    
    
    
    15,325
    
    
    
    3,354
    
    
    
    42,387Total revenues
    
    $
    51,475
    
    
    $
    79,767
    
    
    $
    22,639
    
    
    $
    153,881Operating income (loss)
    
    $
    (13,748
    )
    
    $
    9,646
    
    
    $
    3,211
    
    
    $
    (891
    )
  2007
    
    
    2006United States
    
    $
    89,650
    
    
    $
    86,844Europe
    
    
    65,252
    
    
    
    55,187Asia-Pacific
    
    
    17,151
    
    
    
    14,469$
    172,053
    
    
    $
    156,500
   F - 28




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007
 14. Significant Customers
  15. Fair Value of Financial Instruments and Concentration of Credit Risk
   16. Quarterly Financial Data (Unaudited)
  Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 312007:Revenues
    
    $
    68,445
    
    
    $
    74,723
    
    
    $
    74,190
    
    
    $
    72,929Operating income
    
    $
    3,100
    
    
    $
    5,871
    
    
    $
    5,814
    
    
    $
    5,862Net income
    
    $
    1,606
    
    
    $
    3,852
    
    
    $
    3,629
    
    
    $
    3,408Earnings per common share:Basic
    
    $
    0.05
    
    
    $
    0.11
    
    
    $
    0.10
    
    
    $
    0.09Diluted
    
    $
    0.04
    
    
    $
    0.11
    
    
    $
    0.10
    
    
    $
    0.092006:Revenues
    
    $
    54,794
    
    
    $
    64,544
    
    
    $
    60,260
    
    
    $
    66,790Operating income (loss)
    
    $
    1,005
    
    
    $
    2,361
    
    
    $
    (1,944
    )
    
    $
    478Net income (loss)
    
    $
    (36
    )
    
    $
    756
    
    
    $
    (3,308
    )
    
    $
    (844
    )Earnings (loss) per common share:Basic
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    (0.10
    )
    
    $
    (0.02
    )Diluted
    
    $
    0.00
    
    
    $
    0.02
    
    
    $
    (0.10
    )
    
    $
    (0.02
    )
 F - 29




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##### Table of Contents



SIGNATURES
 Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 FURMANITE CORPORATIONBy:
    /s/ MICHAEL L. ROSEMICHAEL L. ROSEPresident  Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and as of
the date indicated.
 Signature
    
    Title
    
    Date/s/ JOHN R. BARNES

     JOHN R. BARNES
    
    Chief Executive Officer and Director (Principal
Executive Officer)
    
    March 17, 2008/s/ HOWARD C. WADSWORTH

     HOWARD C. WADSWORTH
    
    Senior Vice President, Treasurer and Secretary (Principal
Accounting Officer)
    
    March 17, 2008/s/ SANGWOO AHN

     SANGWOO AHN
    
    Director
    
    March 17, 2008/s/ CHARLES R. COX

     CHARLES R. COX
    
    Director
    
    March 17, 2008/s/ HANS KESSLER

     HANS KESSLER
    
    Director
    
    March 17, 2008