##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2008
 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 001-05083
 
 FURMANITE CORPORATION
  Delaware
(State or other jurisdiction of 
Incorporation or organization)
    
    74-1191271
(I.R.S. Employer Identification No.)
 2435 North Central Expressway 
Suite 700
Richardson, Texas
    
    75080(Address of principal executive offices)
    
    (Zip Code)
 (972) 699-4000
 Not Applicable
 
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



FURMANITE CORPORATION AND SUBSIDIARIES
INDEX
 PageNumberPART I. Financial Information
    
    3Item 1. Financial Statements
    
    3Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007
    
    3Consolidated Statements of Income for the three and nine months ended September 30,
2008 and 2007 (unaudited)
    
    4Consolidated Statements of Changes in Stockholders Equity for the nine months ended
September 30, 2008 (unaudited) and the year ended December 31, 2007
    
    5Consolidated Statements of Cash Flows for the nine months ended September 30, 2008
and 2007 (unaudited)
    
    6Consolidated Statements of Comprehensive Income for the three and nine months ended
September 30, 2008 and 2007 (unaudited)
    
    7Notes to Consolidated Financial Statements (unaudited)
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    17Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    24Item 4. Controls and Procedures
    
    24PART II. Other Information
    
    25Item 1. Legal Proceedings
    
    25Item 1A. Risk Factors
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    25Item 6. Exhibits
    
    26Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906(A)Certification of CFO Pursuant to Section 906(A)
  2




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements
 FURMANITE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except share data)
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    33,720
    
    
    $
    31,570Accounts receivable, trade (net of allowance for doubtful accounts of
$3,692 and $4,011 as of September 30, 2008 and December 31, 2007,
respectively)
    
    
    62,898
    
    
    
    62,552Receivable from businesses distributed to common stockholders
    
    
    1,443
    
    
    
    1,443Inventories:Raw materials and supplies
    
    
    16,884
    
    
    
    13,770Work-in-process
    
    
    9,766
    
    
    
    8,100Finished goods
    
    
    1,175
    
    
    
    2,343Prepaid expenses and other current assets
    
    
    5,308
    
    
    
    5,616Total current assets
    
    
    131,194
    
    
    
    125,394Property and equipment
    
    
    57,827
    
    
    
    57,505Less accumulated depreciation and amortization
    
    
    (27,665
    )
    
    
    (27,663
    )Property and equipment, net
    
    
    30,162
    
    
    
    29,842Goodwill
    
    
    13,148
    
    
    
    13,148Pension asset (excess of fair value over projected benefit)
    
    
    1,571
    
    
    
    430Other assets
    
    
    3,049
    
    
    
    3,239Total assets
    
    $
    179,124
    
    
    $
    172,053Liabilities and Stockholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    411
    
    
    $
    2,569Accounts payable
    
    
    12,619
    
    
    
    16,025Accrued expenses and other current liabilities
    
    
    30,124
    
    
    
    26,341Income taxes payable
    
    
    3,636
    
    
    
    3,542Total current liabilities
    
    
    46,790
    
    
    
    48,477Long-term debt, less current portion
    
    
    35,390
    
    
    
    43,185Other liabilities
    
    
    1,963
    
    
    
    2,055Commitments and contingenciesStockholders equity:Series B preferred stock, unlimited shares authorized, none outstanding
    
    
    
    
    
    
    Common stock, no par value; 60,000,000 shares authorized; 40,571,815
and 39,959,792 shares issued as of September 30, 2008 and December 31,
2007, respectively
    
    
    4,710
    
    
    
    4,643Additional paid-in capital
    
    
    131,282
    
    
    
    128,363Accumulated deficit
    
    
    (24,172
    )
    
    
    (40,943
    )Accumulated other comprehensive income
    
    
    1,355
    
    
    
    4,467Treasury stock
    
    
    (18,194
    )
    
    
    (18,194
    )Total stockholders equity
    
    
    94,981
    
    
    
    78,336Total liabilities and stockholders equity
    
    $
    179,124
    
    
    $
    172,053
  3




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FURMANITE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (in thousands, except per share data)
 (Unaudited)
 For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    75,883
    
    
    $
    74,190
    
    
    $
    239,455
    
    
    $
    217,358Costs and expenses:Operating costs (exclusive of depreciation and amortization)
    
    
    50,089
    
    
    
    47,309
    
    
    
    153,954
    
    
    
    141,995Depreciation and amortization
    
    
    1,386
    
    
    
    1,142
    
    
    
    4,405
    
    
    
    3,262Selling, general and administrative
    
    
    17,848
    
    
    
    19,925
    
    
    
    58,803
    
    
    
    57,316Total costs and expenses
    
    
    69,323
    
    
    
    68,376
    
    
    
    217,162
    
    
    
    202,573Operating income
    
    
    6,560
    
    
    
    5,814
    
    
    
    22,293
    
    
    
    14,785Other income (expense), net
    
    
    445
    
    
    
    248
    
    
    
    414
    
    
    
    624Interest expense
    
    
    (353
    )
    
    
    (872
    )
    
    
    (1,380
    )
    
    
    (2,659
    )Income before income taxes
    
    
    6,652
    
    
    
    5,190
    
    
    
    21,327
    
    
    
    12,750Income tax expense
    
    
    (1,250
    )
    
    
    (1,561
    )
    
    
    (4,556
    )
    
    
    (3,663
    )Net income
    
    $
    5,402
    
    
    $
    3,629
    
    
    $
    16,771
    
    
    $
    9,087Earnings per common share:Basic
    
    $
    0.15
    
    
    $
    0.10
    
    
    $
    0.46
    
    
    $
    0.26Diluted
    
    $
    0.15
    
    
    $
    0.10
    
    
    $
    0.45
    
    
    $
    0.25Weighted-average number of common and common equivalent shares
used in computing net income per common share:Basic
    
    
    36,495
    
    
    
    35,664
    
    
    
    36,388
    
    
    
    35,392Diluted
    
    
    37,065
    
    
    
    36,232
    
    
    
    36,965
    
    
    
    35,890
  4




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FURMANITE CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
 Nine Months Ended September 30, 2008 (Unaudited) and Year Ended December 31, 2007
 (in thousands, except share data)
 AccumulatedAdditional
    
    
    
    
    
    OtherCommon Shares
    
    Common
    
    Paid-In
    
    Accumulated
    
    Comprehensive
    
    TreasuryIssued
    
    Treasury
    
    Stock
    
    Capital
    
    Deficit
    
    Income (Loss)
    
    Stock
    
    TotalBalances at January
1, 2007
    
    
    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 and
stock option
exercises
    
    
    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
    
    
    
    
    
    
    
    2,793Balances at
December 31, 2007
    
    
    39,959,792
    
    
    
    4,048,963
    
    
    
    4,643
    
    
    
    128,363
    
    
    
    (40,943
    )
    
    
    4,467
    
    
    
    (18,194
    )
    
    
    78,336Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,771
    
    
    
    
    
    
    
    
    
    
    
    16,771Stock-based
compensation and
stock option
exercises
    
    
    253,679
    
    
    
    
    
    
    
    24
    
    
    
    1,078
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,102Conversion of
convertible
debentures to
common stock
    
    
    358,344
    
    
    
    
    
    
    
    43
    
    
    
    1,841
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,884Minimum pension
liability
adjustment for
subsidiary, net of
tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    
    
    
    
    158Foreign currency
translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,270
    )
    
    
    
    
    
    
    (3,270
    )Balances at
September 30, 2008
    
    
    40,571,815
    
    
    
    4,048,963
    
    
    $
    4,710
    
    
    $
    131,282
    
    
    $
    (24,172
    )
    
    $
    1,355
    
    
    $
    (18,194
    )
    
    $
    94,981
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FURMANITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 For the Nine MonthsEnded September 30,2008
    
    
    2007Operating activities:Net income
    
    $
    16,771
    
    
    $
    9,087Reconciliation of net income to net cash provided by operating activities:Depreciation and amortization
    
    
    4,405
    
    
    
    3,262Provision for doubtful accounts
    
    
    83
    
    
    
    716Deferred income taxes
    
    
    (47
    )
    
    
    (720
    )Stock-based compensation expense
    
    
    335
    
    
    
    160Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,282
    )
    
    
    (2,925
    )Inventories
    
    
    (3,886
    )
    
    
    (2,888
    )Prepaid expenses and other current assets
    
    
    749
    
    
    
    967Accounts payable
    
    
    (3,784
    )
    
    
    1,813Accrued expenses and other current liabilities
    
    
    3,710
    
    
    
    4,663Income tax payable
    
    
    94
    
    
    
    320Other, net
    
    
    (1,262
    )
    
    
    1,363Net cash provided by operating activities
    
    
    15,886
    
    
    
    15,818Investing activities:Capital expenditures
    
    
    (5,434
    )
    
    
    (5,740
    )Net cash used in investing activities
    
    
    (5,434
    )
    
    
    (5,740
    )Financing activities:Payments on debt
    
    
    (7,913
    )
    
    
    (589
    )Payments on 8.75% convertible subordinated debentures
    
    
    (155
    )
    
    
    Issuance of common stock
    
    
    278
    
    
    
    514Bank overdrafts
    
    
    
    
    
    
    (1,553
    )Net cash used in financing activities
    
    
    (7,790
    )
    
    
    (1,628
    )Effect of exchange rate changes on cash
    
    
    (512
    )
    
    
    737Increase in cash and cash equivalents
    
    
    2,150
    
    
    
    9,187Cash and cash equivalents at beginning of period
    
    
    31,570
    
    
    
    23,937Cash and cash equivalents at end of period
    
    $
    33,720
    
    
    $
    33,124Non-cash financing activities:Conversion of 8.75% convertible debentures to common stock
    
    $
    1,884
    
    
    $
    2,397Settlement of accrued bonuses in common stock
    
    $
    488
    
    
    $
    
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FURMANITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
 For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    5,402
    
    
    $
    3,629
    
    
    $
    16,771
    
    
    $
    9,087Other comprehensive income (loss):Minimum pension liability adjustment, net of tax
    
    
    208
    
    
    
    
    
    
    
    158
    
    
    
    Foreign currency translation adjustments
    
    
    (5,324
    )
    
    
    1,836
    
    
    
    (3,270
    )
    
    
    3,011Total other comprehensive income
    
    
    (5,116
    )
    
    
    1,836
    
    
    
    (3,112
    )
    
    
    3,011Comprehensive income
    
    $
    286
    
    
    $
    5,465
    
    
    $
    13,659
    
    
    $
    12,098
  7




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FURMANITE CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 September 30, 2008
 (Unaudited)
 1. General and Summary of Significant Accounting Policies
   Reclassifications
   8




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New Accounting Pronouncements
 Fair Value Measurement Effective Date of FASB
Statement No. 157
 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  Including an amendment of FASB Statement No. 115
 Business Combinations
 Determination of the Useful Life of Intangible
Assets Goodwill and Other Intangible Assets
 9




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Hierarchy of Generally Accepted Accounting Principles The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles
 2. Earnings Per Share
  For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    5,402
    
    
    $
    3,629
    
    
    $
    16,771
    
    
    $
    9,087Basic weighted-average common shares outstanding
    
    
    36,495
    
    
    
    35,664
    
    
    
    36,388
    
    
    
    35,392Diluted effect of common stock equivalents
    
    
    570
    
    
    
    568
    
    
    
    577
    
    
    
    498Diluted weighted-average common shares outstanding
    
    
    37,065
    
    
    
    36,232
    
    
    
    36,965
    
    
    
    35,890Earnings per share:Basic
    
    $
    0.15
    
    
    $
    0.10
    
    
    $
    0.46
    
    
    $
    0.26Dilutive
    
    $
    0.15
    
    
    $
    0.10
    
    
    $
    0.45
    
    
    $
    0.25Stock options and restricted stock grants
excluded from diluted weighted-average common
shares outstanding because their inclusion would
have an anti-dilutive effect:
    
    
    55,000
    
    
    
    35,000
    
    
    
    118,333
    
    
    
    78,333
  3. Accrued Expenses
  September 30,
    
    
    December 31,2008
    
    
    2007Compensation and benefits
    
    $
    11,848
    
    
    $
    9,833Employee expenses, travel and training
    
    
    1,401
    
    
    
    564Asset and equipment costs
    
    
    1,911
    
    
    
    2,009Value added tax payable
    
    
    2,490
    
    
    
    1,731Taxes other than income
    
    
    1,114
    
    
    
    1,619Interest
    
    
    170
    
    
    
    422Professional, audit and legal fees
    
    
    2,961
    
    
    
    3,320Rent
    
    
    536
    
    
    
    544Other
    
    
    7,693
    
    
    
    6,299$
    30,124
    
    
    $
    26,341
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4. Long-Term Debt
  September 30,
    
    
    December 31,2008
    
    
    2007Borrowings 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)
    
    
    7,500
    
    
    
    15,0008.75% convertible subordinated debentures
    
    
    
    
    
    
    2,040Capital leases
    
    
    711
    
    
    
    1,124Total long-term debt
    
    
    35,801
    
    
    
    45,754Less current portion
    
    
    (411
    )
    
    
    (2,569
    )Total long-term debt, less current portion
    
    $
    35,390
    
    
    $
    43,185
    5. Retirement Plan
  For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost
    
    $
    187
    
    
    $
    195
    
    
    $
    577
    
    
    $
    513Interest cost
    
    
    1,019
    
    
    
    1,170
    
    
    
    3,149
    
    
    
    3,084Expected return on plan assets
    
    
    (1,308
    )
    
    
    (1,342
    )
    
    
    (4,040
    )
    
    
    (3,540
    )Amortization of prior service cost
    
    
    (29
    )
    
    
    (34
    )
    
    
    (90
    )
    
    
    (90
    )Recognized net loss
    
    
    
    
    
    
    249
    
    
    
    
    
    
    
    657Net periodic pension cost (benefit)
    
    $
    (131
    )
    
    $
    238
    
    
    $
    (404
    )
    
    $
    624
  11




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6. Stock-Based Compensation
   7. Other Comprehensive Income
  September 30,
    
    
    December 31,2008
    
    
    2007Minimum pension liability:Net actuarial loss
    
    $
    (4,862
    )
    
    $
    (5,256
    )Unamortized prior service cost
    
    
    918
    
    
    
    1,090Minimum pension liability
    
    
    (3,944
    )
    
    
    (4,166
    )Deferred tax asset
    
    
    1,105
    
    
    
    1,169Net minimum pension liability
    
    
    (2,839
    )
    
    
    (2,997
    )Foreign currency translation adjustment
    
    
    4,194
    
    
    
    7,464$
    1,355
    
    
    $
    4,467
 8. Income Taxes
 Accounting for Uncertainty in Income Taxes
  Balance at December 31, 2007
    
    $
    997Additions based on tax positions related to the current year
    
    
    239Reductions for tax positions taken in prior years
    
    
    (145
    )Balance at September 30, 2008
    
    $
    1,091
 12




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9. Commitments and Contingencies
      13




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10. Business Segment Data
  United
    
    
    
    
    
    
    Asia-States
    
    
    Europe
    
    
    Pacific
    
    
    TotalThree months ended September 30, 2008:Under pressure services
    
    $
    12,172
    
    
    $
    9,224
    
    
    $
    2,953
    
    
    $
    24,349Turnaround services
    
    
    12,582
    
    
    
    20,794
    
    
    
    4,263
    
    
    
    37,639Other services
    
    
    5,924
    
    
    
    7,070
    
    
    
    901
    
    
    
    13,895Total revenues
    
    $
    30,678
    
    
    $
    37,088
    
    
    $
    8,117
    
    
    $
    75,883Three months ended September 30, 2007:Under pressure services
    
    $
    12,110
    
    
    $
    10,024
    
    
    $
    2,865
    
    
    $
    24,999Turnaround services
    
    
    11,959
    
    
    
    18,633
    
    
    
    4,931
    
    
    
    35,523Other services
    
    
    7,260
    
    
    
    5,827
    
    
    
    581
    
    
    
    13,668Total revenues
    
    $
    31,329
    
    
    $
    34,484
    
    
    $
    8,377
    
    
    $
    74,190Nine months ended September 30, 2008:Under pressure services
    
    $
    35,592
    
    
    $
    31,249
    
    
    $
    8,681
    
    
    $
    75,522Turnaround services
    
    
    54,712
    
    
    
    58,121
    
    
    
    14,333
    
    
    
    127,166Other services
    
    
    17,252
    
    
    
    16,991
    
    
    
    2,524
    
    
    
    36,767Total revenues
    
    $
    107,556
    
    
    $
    106,361
    
    
    $
    25,538
    
    
    $
    239,455Nine months ended September 30, 2007:Under pressure services
    
    $
    36,596
    
    
    $
    25,664
    
    
    $
    6,837
    
    
    $
    69,097Turnaround services
    
    
    40,571
    
    
    
    56,820
    
    
    
    14,494
    
    
    
    111,885Other services
    
    
    19,417
    
    
    
    15,325
    
    
    
    1,634
    
    
    
    36,376Total revenues
    
    $
    96,584
    
    
    $
    97,809
    
    
    $
    22,965
    
    
    $
    217,358
 14




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##### Table of Contents



United
    
    
    
    
    
    
    Asia-States
    
    
    Europe
    
    
    Pacific
    
    
    TotalThree months ended September 30, 2008:Operating income (loss)
    
    $
    (445
    )
    
    $
    5,499
    
    
    $
    1,506
    
    
    $
    6,560Allocation of headquarter costs
    
    
    1,195
    
    
    
    (977
    )
    
    
    (218
    )
    
    
    Adjusted operating income
    
    $
    750
    
    
    $
    4,522
    
    
    $
    1,288
    
    
    $
    6,560Three months ended September 30, 2007:Operating income (loss)
    
    $
    (1,451
    )
    
    $
    5,245
    
    
    $
    2,020
    
    
    $
    5,814Allocation of headquarter costs
    
    
    1,569
    
    
    
    (1,244
    )
    
    
    (325
    )
    
    
    Adjusted operating income
    
    $
    118
    
    
    $
    4,001
    
    
    $
    1,695
    
    
    $
    5,814Nine months ended September 30, 2008:Operating income
    
    $
    1,123
    
    
    $
    16,255
    
    
    $
    4,915
    
    
    $
    22,293Allocation of headquarter costs
    
    
    5,630
    
    
    
    (4,534
    )
    
    
    (1,096
    )
    
    
    Adjusted operating income
    
    $
    6,753
    
    
    $
    11,721
    
    
    $
    3,819
    
    
    $
    22,293Nine months ended September 30, 2007:Operating income (loss)
    
    $
    (2,284
    )
    
    $
    12,322
    
    
    $
    4,747
    
    
    $
    14,785Allocation of headquarter costs
    
    
    4,021
    
    
    
    (3,234
    )
    
    
    (787
    )
    
    
    Adjusted operating income
    
    $
    1,737
    
    
    $
    9,088
    
    
    $
    3,960
    
    
    $
    14,785
  September 30,
    
    
    December 31,2008
    
    
    2007United States
    
    $
    94,047
    
    
    $
    89,650Europe
    
    
    67,833
    
    
    
    65,252Asia-Pacific
    
    
    17,244
    
    
    
    17,151$
    179,124
    
    
    $
    172,053
 15




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##### Table of Contents



11. Fair Value of Financial Instruments and Credit Risk
  
    
    Level 1  Quoted prices in active markets for identical assets or liabilities. These are
typically obtained from real-time quotes for transactions in active exchange markets
involving identical assets.
    
    Level 2  Quoted prices for similar assets and liabilities in active markets; quoted
prices included for identical or similar assets and liabilities that are not active; and
model-derived valuations in which all significant inputs and significant value drivers are
observable in active markets. These are typically obtained from readily-available pricing
sources for comparable instruments.
    
    Level 3  Unobservable inputs, where there is little or no market activity for the asset
or liability. These inputs reflect the reporting entitys own assumptions about the
assumptions that market participants would use in pricing the asset or liability, based on
the best information available in the circumstances.
    16




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FURMANITE CORPORATION AND SUBSIDIARIES
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Business Overview
  Financial Overview
  17




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##### Table of Contents



Results of Operations
 For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in thousands, except per share data)(Unaudited)Revenues
    
    $
    75,883
    
    
    $
    74,190
    
    
    $
    239,455
    
    
    $
    217,358Costs and expenses:Operating costs (exclusive of depreciation and amortization)
    
    
    50,089
    
    
    
    47,309
    
    
    
    153,954
    
    
    
    141,995Depreciation and amortization
    
    
    1,386
    
    
    
    1,142
    
    
    
    4,405
    
    
    
    3,262Selling, general and administrative
    
    
    17,848
    
    
    
    19,925
    
    
    
    58,803
    
    
    
    57,316Total costs and expenses
    
    
    69,323
    
    
    
    68,376
    
    
    
    217,162
    
    
    
    202,573Operating income
    
    
    6,560
    
    
    
    5,814
    
    
    
    22,293
    
    
    
    14,785Other income (expense), net
    
    
    445
    
    
    
    248
    
    
    
    414
    
    
    
    624Interest expense
    
    
    (353
    )
    
    
    (872
    )
    
    
    (1,380
    )
    
    
    (2,659
    )Income before income taxes
    
    
    6,652
    
    
    
    5,190
    
    
    
    21,327
    
    
    
    12,750Income tax expense
    
    
    (1,250
    )
    
    
    (1,561
    )
    
    
    (4,556
    )
    
    
    (3,663
    )Net income
    
    $
    5,402
    
    
    $
    3,629
    
    
    $
    16,771
    
    
    $
    9,087Earnings per share:Basic
    
    $
    0.15
    
    
    $
    0.10
    
    
    $
    0.46
    
    
    $
    0.26Diluted
    
    $
    0.15
    
    
    $
    0.10
    
    
    $
    0.45
    
    
    $
    0.25
 Revenues
   Operating Costs
   18




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##### Table of Contents



Depreciation and Amortization
  Selling, General and Administrative
   Interest Expense
  Income Taxes
 Accounting for Income Taxes
   19




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Liquidity and Capital Resources
         20




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##### Table of Contents



Critical Accounting Policies and Estimates
   Accounting for Uncertainty in
Income Taxes  an interpretation of FASB Statement No. 109
  21




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##### Table of Contents



New Accounting Pronouncements
 Fair Value Measurement Effective Date of FASB
Statement No. 157
 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  Including an amendment of FASB Statement No. 115
 Business Combinations
 Determination of the Useful Life of Intangible
Assets Goodwill and Other Intangible Assets
 22




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##### Table of Contents



Hierarchy of Generally Accepted Accounting Principles The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles
 Off-Balance Sheet Transactions
  23




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 i.e.
   
 Item 4. Controls and Procedures
 et seq
  24




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##### Table of Contents



FURMANITE CORPORATION AND SUBSIDIARIES
 
 PART II  Other Information
 
 Item 1. Legal Proceedings
      
 Item 1A. Risk Factors
 Changes in the general economy, including the global financial crisis that accelerated in the quarter ended September 30, 2008,
may negatively impact the Companys business.
   
 Item 4. Submission of Matters to a Vote of Security Holders
  25




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##### Table of Contents



Item 6. Exhibits
 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 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 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 June 14, 2007, filed as Exhibit 3.1 to
Registrants Current Report on Form 8-K filed on June 20, 2007, which exhibit is hereby
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 1 of the exhibits to the Registrants
Current Report on Form 8-K and Registration Statement on Form 8-A, dated April 5, 1988, which
exhibit is hereby incorporated by reference.
 4.2
    
    Rights Agreement, dated as of April 15, 2008, between the Registrant and The Bank of NewYork
Trust Company, N.A., a national banking association, as Rights Agent, which includes as
exhibits, the Form of Right Certificate and the Summary of Rights to Purchase Stock, filed as
Exhibit 4.1 to the Registrants Form 8-A/A filed on April 18, 2008, which exhibit is
incorporated herein by reference.
 31.
    
    Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, dated November 10, 2008.
 31.
    
    Certification of Chief Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002, dated November 10, 2008.
 32.
    
    Certification of Chief Executive Officer, Pursuant to Section 906(a) of the Sarbanes-Oxley
Act of 2002, dated November 10, 2008.
 32.
    
    Certification of Chief Financial Officer, Pursuant to Section 906(a) of the Sarbanes-Oxley
Act of 2002, dated November 10, 2008.
 26




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Signature
  FURMANITE CORPORATION

(Registrant)/s/ HOWARD C. WADSWORTHHoward C. WadsworthSr. Vice President, Treasurer and Secretary
(Chief Financial Officer)  27