##### 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 March 31, 2006
 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
 XANSER CORPORATION
  DELAWARE
(State or other jurisdiction of Incorporation or Organization)
    
    74-1191271
(I.R.S. Employer Identification No.)
 2435 North Central Expressway, Richardson, Texas
(Address of principal executive offices)
    
    75080
(Zip Code)
 (972) 699-4000
  þ o
  o Large accelerated filer
    
    o Accelerated filer
    
    þ Non-accelerated filer
  o þ
 
  o o
    Class of Common Stock
    
    Outstanding at April 21, 2006No Par Value
    
    34,693,133 shares




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##### 



XANSER CORPORATION AND SUBSIDIARIES
 FORM 10-Q
QUARTER ENDED MARCH 31, 2006
 Page No.Part I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Statements of Operations  Three Months
Ended March 31, 2006 and 2005
    
    
    1Condensed Consolidated Balance Sheets  March 31, 2006
and December 31, 2005
    
    
    2Condensed Consolidated Statements of Cash Flows  Three
Months Ended March 31, 2006 and 2005
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    21Item 4. Controls and Procedures
    
    
    21Part II. Other InformationItem 6. Exhibits
    
    
    22Loan AgreementThird Amendment to the Amended/Restated Loan AgreementCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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XANSER CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands  Except Per Share Amounts)
(Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005Revenues:Services
    
    $
    54,583
    
    
    $
    34,391Products
    
    
    211
    
    
    
    780Total revenues
    
    
    54,794
    
    
    
    35,171Costs and expenses:Operating costs
    
    
    51,643
    
    
    
    34,794Cost of products sold
    
    
    222
    
    
    
    572Depreciation and amortization
    
    
    885
    
    
    
    978General and administrative
    
    
    1,039
    
    
    
    791Total costs and expenses
    
    
    53,789
    
    
    
    37,135Operating income (loss)
    
    
    1,005
    
    
    
    (1,964
    )Interest income
    
    
    219
    
    
    
    96Interest expense
    
    
    (557
    )
    
    
    (282
    )Income loss before income taxes
    
    
    667
    
    
    
    (2,150
    )Income tax expense
    
    
    (703
    )
    
    
    (155
    )Net loss
    
    $
    (36
    )
    
    $
    (2,305
    )Loss per common share  Basic and diluted
    
    $
    
    
    
    $
    (0.07
    )
  1




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XANSER CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
 March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    24,069
    
    
    $
    21,526Accounts receivable, trade (net of allowance
for doubtful accounts of $1,601 in 2006 and
$1,493 in 2005)
    
    
    50,817
    
    
    
    50,396Receivable from businesses distributed to common
stockholders
    
    
    6,487
    
    
    
    6,484Inventories
    
    
    19,163
    
    
    
    17,290Prepaid expenses and other current assets
    
    
    5,560
    
    
    
    5,513Total current assets
    
    
    106,096
    
    
    
    101,209Property and equipment
    
    
    43,441
    
    
    
    41,748Less accumulated depreciation and amortization
    
    
    25,410
    
    
    
    24,628Net property and equipment
    
    
    18,031
    
    
    
    17,120Excess of cost over fair value of net assets of
acquired businesses
    
    
    13,802
    
    
    
    13,802Deferred income taxes and other assets
    
    
    4,820
    
    
    
    4,347Total assets
    
    $
    142,749
    
    
    $
    136,478LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    681
    
    
    $
    478Accounts payable
    
    
    11,797
    
    
    
    14,672Accrued expenses and other current liabilities
    
    
    23,102
    
    
    
    21,673Accrued income taxes
    
    
    7,400
    
    
    
    7,232Total current liabilities
    
    
    42,980
    
    
    
    44,055Long-term debt, less current portion:Technical services
    
    
    32,286
    
    
    
    26,561Information technology and government services
    
    
    163
    
    
    
    178Parent company
    
    
    5,000
    
    
    
    5,000Total long-term debt, less current portion
    
    
    37,449
    
    
    
    31,739Other liabilities
    
    
    9,751
    
    
    
    9,380Commitments and contingenciesStockholders equity:Common stock, without par value
    
    
    4,514
    
    
    
    4,507Additional paid-in capital
    
    
    124,417
    
    
    
    124,481Treasury stock, at cost
    
    
    (19,541
    )
    
    
    (20,028
    )Retained earnings (accumulated deficit)
    
    
    (50,601
    )
    
    
    (50,565
    )Accumulated other comprehensive income (loss)
    
    
    (6,220
    )
    
    
    (7,091
    )Total stockholders equity
    
    
    52,569
    
    
    
    51,304Total liabilities and stockholders equity
    
    $
    142,749
    
    
    $
    136,478
  2




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XANSER CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005Operating activities:Net loss
    
    $
    (36
    )
    
    $
    (2,305
    )Adjustments to reconcile net loss
to net cash used in operating activities:Depreciation and amortization
    
    
    885
    
    
    
    978Provisions for doubtful accounts
    
    
    79
    
    
    
    17Stock option expense
    
    
    58
    
    
    
    Deferred income taxes
    
    
    (221
    )
    
    
    (2
    )Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (500
    )
    
    
    19Inventories
    
    
    (1,873
    )
    
    
    (1,953
    )Prepaid expenses and other
    
    
    (47
    )
    
    
    772Accounts payable, accrued expenses and other
    
    
    812
    
    
    
    (424
    )Net cash used in operating activities
    
    
    (843
    )
    
    
    (2,898
    )Investing activities:Capital expenditures
    
    
    (1,371
    )
    
    
    (1,327
    )Other, net
    
    
    
    
    
    
    (160
    )Net cash used in investing activities
    
    
    (1,371
    )
    
    
    (1,487
    )Financing activities:Issuance of debt
    
    
    5,000
    
    
    
    115Payments on debt
    
    
    (158
    )
    
    
    (217
    )Common stock issued
    
    
    372
    
    
    
    114Receivable from businesses distributed
to common stockholders
    
    
    (3
    )
    
    
    82Net cash used in financing activities
    
    
    5,211
    
    
    
    94Effect of exchange rate changes on cash
    
    
    (454
    )
    
    
    (134
    )Increase (decrease) in cash and cash equivalents
    
    
    2,543
    
    
    
    (4,425
    )Cash and cash equivalents at beginning of period
    
    
    21,526
    
    
    
    21,598Cash and cash equivalents at end of period
    
    $
    24,069
    
    
    $
    17,173Supplemental cash flow information:Cash paid for interest
    
    $
    233
    
    
    $
    499Cash paid for income taxes
    
    $
    298
    
    
    $
    222
  3




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XANSER CORPORATION AND SUBSIDIARIES
 
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 1.
    
    GENERAL AND SIGNIFICANT ACCOUNTING POLICIESThe condensed consolidated financial statements include the accounts of Xanser Corporation (the
Company) and its subsidiaries. All significant intercompany transactions and balances are
eliminated in consolidation. The unaudited condensed consolidated financial statements of the
Company for the three month periods ended March 31, 2006 and 2005 have been prepared in
accordance with accounting principles generally accepted in the United States of America.
Significant accounting policies followed by the Company are disclosed in the notes to the
consolidated financial statements included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2005. In the opinion of the Companys management, the accompanying
condensed consolidated financial statements contain all of the adjustments, consisting of normal
recurring accruals, necessary to present fairly the consolidated financial position of the
Company and its consolidated subsidiaries at March 31, 2006, and the consolidated results of
operations and cash flows for the periods ended March 31, 2006 and 2005. Operating results for
the three months ended March 31, 2006 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2006.On November 27, 2000, the Board of Directors of the Company authorized the distribution of its
pipeline, terminaling and product marketing businesses (the Distribution) to its stockholders
in the form of a new limited liability company, Kaneb Services LLC (KSL). On June 29, 2001,
the Distribution was completed, with each shareholder of the Company receiving one common share
of KSL for each three shares of the Companys common stock held on June 20, 2001, the record
date for the Distribution, resulting in the distribution of 10.85 million KSL common shares.
Pursuant to the Distribution, the Company entered into an agreement (the Distribution
Agreement) with KSL, whereby, KSL is obligated to pay the Company amounts equal to certain
expenses and tax liabilities incurred by the Company in connection with the Distribution. In
January of 2002, KSL paid the Company $10.0 million for tax liabilities due under the terms of
the Distribution Agreement. The Distribution Agreement also requires KSL to pay the Company an
amount calculated based on any income tax liability of the Company that, in the sole judgment of
the Company, (i) is attributable to increases in income tax from past years arising out of
adjustments required by federal and state tax authorities, to the extent that such increases are
properly allocable to the businesses that became part of KSL, or (ii) is attributable to the
distribution of KSLs common shares and the operations of KSLs businesses prior to the
Distribution date. In the event of an examination of the Company by federal or state tax
authorities, the Company will have unfettered control over the examination, administrative
appeal, settlement or litigation that may be involved, notwithstanding that KSL has agreed to
pay any additional tax. KSL was purchased by Valero L.P. in July 2005 and KSLs obligations
under the Distribution Agreement were assumed by Valero L.P. At March 31, 2006, $6.5 million
was recorded as receivable from businesses distributed to common stockholders pursuant to the
provisions of the Distribution Agreement.
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XANSER CORPORATION AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 2.
    
    ACQUISITIONOn December 31, 2005, Xanser Corporations (Xanser) wholly owned subsidiary, Furmanite
Worldwide, Inc. (together with certain of its affiliates, Furmanite), entered into an Asset
Purchase Agreement (Acquisition Agreement) with Flowserve US Inc. (together with its
affiliates IPSCO (UK) Limited, Flowserve Repair & Services B.V., Flowserve Management Company
and Flowserve Belgium N.V., Flowserve), pursuant to which Furmanite acquired substantially all
of the material operating assets of Flowserves General Services Group (GSG), including
certain working capital, and agreed to assume certain GSG liabilities, including certain
environmental liabilities pertaining to GSG, for a total net consideration of approximately
$17.4 million, subject to certain adjustments (which have not been finalized) based upon a
post-closing determination of GSGs working capital that was transferred to Furmanite (the
Acquisition). GSG provides maintenance, repair and distribution services for a broad array of
valves, piping systems and other process-system components with operating locations in North
America and Europe and Furmanite will integrate the purchased assets and related business
activity with its existing technical services business. The transaction was consummated as of
the close of business on December 31, 2005.As of the period ending March 31, 2006, post
closing determination of the acquired working capital was still in process, it is anticipated
that additional procedures will be performed prior to the finalization of the process.3.
    
    STOCK-BASED COMPENSATIONPrior to January 1, 2006, the Company accounted for stock-based employee compensation under the
intrinsic value method as outlined in the provisions of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations while disclosing pro-forma net income
and net income per share as if the fair value method had been applied in accordance with
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. Under the intrinsic value method, no compensation expense was recognized if the
exercise price of the Companys employee stock options equaled or exceeded the market price of
the underlying stock on the date of grant. Since the Company had issued all stock option grants
with exercise prices equal to, or greater than, the market value of the common stock on the date
of grant, through December 31, 2005 no compensation cost was recognized in the consolidated
statements of income.Effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment. SFAS No.
123(R) replaces SFAS No. 123 and supersedes APB Opinion No.25. SFAS 123(R) requires that all
stock-based compensation be recognized as an expense in the financial statements and that such
costs be measured at the fair value of the award. This statement was adopted using the modified
prospective method, which requires the Company to recognize compensation expense on a
prospective basis. Therefore, prior period financial statements have not been restated. Under
this method, in addition to reflecting compensation expense for
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XANSER CORPORATION AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 new share-based payment awards, expense is also recognized to reflect the remaining vesting
period of awards that had been included in pro-forma disclosures in prior periods. Effective
June 3, 2005, the Company vested all outstanding options to give the option holders the
opportunity to become owners of the Companys common stock sooner than they could have under
their original grants. Shares issued upon exercise of the previously unvested portion of those
options must be held and not sold until the date on which they would have otherwise vested under
the terms of the original option grant and the plan. The impact of early vesting of the options
on net loss was not significant. Compensation expense recognized in the consolidated statements
of income for the quarter ended March 31, 2006 includes options issued after June 3, 2005.
There were no stock option grants issued during the first quarter of 2006. The Company uses
authorized but unissued shares of common stock for stock option exercises pursuant to the
Companys stock option plans and treasury stock for issuances outside of the plan. The impact of
the adoption of Statement 123(R) on the unvested options outstanding at December 31, 2005 will
result in approximately $488,000 in expense over the remaining vesting period of approximately
five years.The Company used the Black-Scholes option-pricing model (Black-Scholes) as its method of
valuation under SFAS 123(R) in fiscal year 2006 and a single option award approach. This fair
value is then amortized on a straight-line basis over the requisite service periods of the
awards, which is generally the vesting period. Black-Scholes was also previously used for the
Companys pro forma information required under SFAS 123 for periods prior to fiscal year 2006.
The fair value of share-based payment awards on the date of grant as determined by the
Black-Scholes model is affected by our stock price as well as other assumptions. These
assumptions include, but are not limited to the expected stock price volatility over the term of
the awards, and actual and projected employee stock option exercise behaviors.The weighted-average estimated value of employee stock options granted after June 3, 2005 was
estimated using the Black-Scholes model with the following weighted-average assumptions:
 After June 3, 2005Expected volatility
    
    
    38.2
    %Risk-free interest rate
    
    
    4.1
    %Expected dividends
    
    
    0
    %Expected term in years
    
    
    3.5
 6




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
  Three months ended March 31,2006 Actuals
    
    
    2005 Proforma(In thousands, except per share data)Net loss
    
    $
    (36
    )
    
    $
    (2,339
    )Stock-based employee compensation
expense determined under the fair value
based method (1)
    
    
    59
    
    
    
    34Pro forma net income (loss)
    
    $
    23
    
    
    $
    (2,305
    )Earnings (loss) per share:Basic and diluted, as reported (2)
    
    $
    (0.00
    )
    
    $
    (0.07
    )Basic and diluted, pro forma (2)
    
    $
    (0.00
    )
    
    $
    (0.07
    )
 
 (1)
    
    Stock-based compensation expense for periods prior to year 2006 was
calculated based on the pro forma application of SFAS 123.(2)
    
    Earnings per share for periods prior to year 2006 represent pro forma information
based on SFAS 123.  AveragePriceShares
    
    
    per ShareOutstanding at December 31, 2005
    
    
    1,611,694
    
    
    $
    2.47Exercised
    
    
    161,921
    
    
    $
    2.30Forfeited
    
    
    62,000
    
    
    $
    2.56Outstanding at March 31, 2006
    
    
    1,387,773
    
    
    $
    2.49Exercisable at March 31, 2006
    
    
    862,773
    
    
    $
    2.09
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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
   AverageAverage Price per
    
    
    RemainingOptions
    
    
    Outstanding
    
    
    Exercisable
    
    
    ContractualRange of Exercise Price
    
    Outstanding
    
    
    Exercisable
    
    
    Option
    
    
    Option
    
    
    Life (years)$0.82 - $1.23
    
    
    89,090
    
    
    
    89,090
    
    
    $
    0.99
    
    
    $
    0.99
    
    
    
    0.6$1.24 - $1.86
    
    
    171,749
    
    
    
    171,749
    
    
    $
    1.59
    
    
    $
    1.59
    
    
    
    3.5$1.87 - $2.81
    
    
    570,434
    
    
    
    570,434
    
    
    $
    2.36
    
    
    $
    2.36
    
    
    
    7.1$2.82 - $3.45
    
    
    556,500
    
    
    
    31,500
    
    
    $
    3.14
    
    
    $
    3.12
    
    
    
    5.01,387,773
    
    
    
    862,773
    
    
    $
    2.49
    
    
    $
    2.09
    
    
    
    5.9
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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 4.
    
    COMPREHENSIVE INCOME (LOSS)Comprehensive income (loss) for the three months ended March 31, 2006 and 2005 is as follows:
 Three Months EndedMarch 31,2006
    
    
    2005(in thousands)Net loss
    
    $
    (36
    )
    
    $
    (2,305
    )Other comprehensive income (loss)  foreign
currency translation adjustment
    
    
    871
    
    
    
    (705
    )Comprehensive income (loss)
    
    $
    835
    
    
    $
    (3,010
    )
  5.
    
    EARNINGS (LOSS) PER SHAREThe following is a reconciliation of basic and diluted earnings (loss) per share (in thousands,
except for per share amounts):
 WeightedNet
    
    
    AverageIncome
    
    
    Common
    
    
    Per Share(Loss)
    
    
    Shares
    
    
    AmountThree Months Ended March 31, 2006Basic earnings (loss) per share Net income (loss)
    
    $
    (36
    )
    
    
    34,426
    
    
    $
    Effect of dilutive securities
    
    
    
    
    
    
    Diluted earnings (loss) per share Net income (loss)
    
    $
    (36
    )
    
    
    34,426
    
    
    $
    
 9




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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 WeightedAverageNet Income
    
    
    Common
    
    
    Per Share(Loss)
    
    
    Shares
    
    
    AmountThree Months Ended March 31, 2005Basic earnings per share Net income (loss)
    
    $
    (2,305
    )
    
    
    32,358
    
    
    $
    (0.07
    )Effect of dilutive securities
    
    
    
    
    
    
    Diluted earnings (loss) per share Net income (loss)
    
    $
    (2,305
    )
    
    
    32,358
    
    
    $
    (0.07
    )
  6.
    
    RETIREMENT PLANOne of the Companys foreign subsidiaries has a defined benefit pension plan covering
substantially all of its United Kingdom employees (the U.K. Plan). Net pension cost for the
U.K. Plan included the following components:
 Three Months EndedMarch 31,2006
    
    
    2005(in thousands)Net periodic pension cost:Service cost
    
    $
    130
    
    
    $
    126Interest cost
    
    
    901
    
    
    
    942Expected return on plan assets
    
    
    (974
    )
    
    
    (1,020
    )Amortization of prior service cost
    
    
    (28
    )
    
    
    (29
    )Recognized net loss
    
    
    177
    
    
    
    140Net periodic pension cost
    
    $
    206
    
    
    $
    159
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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 7.
    
    CONTINGENCIESThe Company has contingent liabilities resulting from litigation, claims and commitments
incident to the ordinary course of business. Management believes, after consulting with
counsel, that the ultimate resolution of such contingencies will not have a materially adverse
effect on the financial position or results of operations or liquidity of the Company.8.
    
    BUSINESS SEGMENT DATAThe Company provides technical services to an international client base that includes
refineries, chemical plants, pipelines, offshore drilling and production platforms, steel mills,
food and drink processing facilities, power generation, and other process industries.
Additionally, the Companys information technology and government services segment provides
consulting services, hardware sales and other related information management and processing
services to healthcare, governmental, insurance and financial institutions.The Company measures segment profit as operating income. Segment operating results are reported
on the basis that is used internally for evaluating segment performance and deciding how to
allocate resources to segments. General corporate includes compensation and benefits paid to
corporate officers and employees, certain insurance, legal, tax, financial reporting and other
administrative costs, including costs of maintaining a public company, which are not related to
specific business segments.Segment assets are those assets, including excess of cost over fair value of net assets of
acquired businesses, controlled by each reportable segment. General corporate assets include
corporate cash balances, deferred taxes and other assets not related to specific segments.
 Three Months EndedMarch 31,2006
    
    
    2005(in thousands)Business segment revenues:Technical services
    
    $
    51,812
    
    
    $
    30,659Information technology and government services
    
    
    2,982
    
    
    
    4,512$
    54,794
    
    
    $
    35,171Technical services segment revenues:Underpressure services
    
    $
    18,500
    
    
    $
    12,942Turnaround and valve repair services
    
    
    23,260
    
    
    
    12,621Other services
    
    
    10,052
    
    
    
    5,096$
    51,812
    
    
    $
    30,659
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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005(in thousands)Business segment profit (loss):Technical services
    
    $
    2,915
    
    
    $
    1,531Information technology and government services
    
    
    (871
    )
    
    
    (2,704
    )General corporate
    
    
    (1,039
    )
    
    
    (791
    )Operating income (loss)
    
    
    1,005
    
    
    
    (1,964
    )Interest income
    
    
    219
    
    
    
    96Interest expense
    
    
    (557
    )
    
    
    (282
    )Income (loss) before income taxes
    
    $
    667
    
    
    $
    (2,150
    )
 March 31,
    
    
    December 31,2006
    
    
    2005(in thousands)Total assets:Technical services
    
    $
    108,055
    
    
    $
    100,299Information technology and government services
    
    
    13,752
    
    
    
    16,506General corporate
    
    
    20,942
    
    
    
    19,673$
    142,749
    
    
    $
    136,478
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##### Table of Contents



XANSER CORPORATION AND SUBSIDIARIES
 Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
  Consolidated Results of Operations
 Three Months EndedMarch 31,2006
    
    
    2005(in thousands except per share amounts)Revenues
    
    $
    54,794
    
    
    $
    35,171Operating income (loss)
    
    $
    1,005
    
    
    $
    (1,964
    )Income (loss) before income taxes
    
    $
    667
    
    
    $
    (2,150
    )Net income (loss)
    
    $
    (36
    )
    
    $
    (2,305
    )Earnings (loss) per common share  basic and diluted
    
    $
    
    
    
    $
    (0.07
    )Capital expenditures
    
    $
    1,371
    
    
    $
    1,327
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XANSER CORPORATION AND SUBSIDIARIES
  Technical Services
 Three Months EndedMarch 31,2006
    
    
    2005(in thousands)Revenues:United States
    
    $
    22,788
    
    
    $
    7,108Europe
    
    
    23,803
    
    
    
    18,355Asia-Pacific
    
    
    5,221
    
    
    
    5,196Total Revenues
    
    $
    51,812
    
    
    $
    30,659Operating income (loss):United States
    
    $
    899
    
    
    $
    (63
    )Europe
    
    
    2,020
    
    
    
    1,634Asia-Pacific
    
    
    829
    
    
    
    740Headquarters
    
    
    (833
    )
    
    
    (780
    )Total operating income
    
    $
    2,915
    
    
    $
    1,531Capital expenditures
    
    $
    1,350
    
    
    $
    781
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XANSER CORPORATION AND SUBSIDIARIES
  Information Technology and Government Services
 Three Months EndedMarch 31,2006
    
    
    2005(in thousands)Revenues
    
    $
    2,982
    
    
    $
    4,512Operating income (loss)
    
    $
    (871
    )
    
    $
    (2,704
    )Capital expenditures
    
    $
    21
    
    
    $
    546
   Income Taxes
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XANSER CORPORATION AND SUBSIDIARIES
  Liquidity and Capital Resources
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XANSER CORPORATION AND SUBSIDIARIES
    Less than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    5 years(in thousands)Debt:Technical services credit
facility
    
    $
    26,126
    
    
    $
    
    
    
    $
    
    
    
    $
    26,126
    
    
    $
    Parent company convertible
subordinated debentures
    
    
    5,000
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    31,126
    
    
    
    
    
    
    
    5,000
    
    
    
    26,126
    
    
    
    Capital leases
    
    
    1,091
    
    
    
    496
    
    
    
    592
    
    
    
    3
    
    
    
    Debt subtotal
    
    
    32,217
    
    
    
    496
    
    
    
    5,592
    
    
    
    26,129
    
    
    
    Interest on debt
    
    
    7,050
    
    
    
    1,955
    
    
    
    5,095
    
    
    
    
    
    
    
    Debt and interest total
    
    
    39,267
    
    
    
    2,451
    
    
    
    10,687
    
    
    
    26,129
    
    
    
    Other contractual
commitments:Pension Plan contributions
    
    
    8,690
    
    
    
    790
    
    
    
    2,370
    
    
    
    1,580
    
    
    
    3,950Operating leases
    
    
    11,957
    
    
    
    4,185
    
    
    
    5,062
    
    
    
    2,710
    
    
    
    Total
    
    $
    59,914
    
    
    $
    7,426
    
    
    $
    18,119
    
    
    $
    30,419
    
    
    $
    3,950
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XANSER CORPORATION AND SUBSIDIARIES
 Off-Balance Sheet Transactions
  Critical Accounting Policies and Estimates
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XANSER CORPORATION AND SUBSIDIARIES
 
 Item 3. Quantitative and Qualitative Disclosure About Market Risk
 i.e.,
   
 Item 4. Controls and Procedures
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XANSER CORPORATION AND SUBSIDIARIES
 
 Part II  Other Information
 Item 1 A. Risk Factors
  
 Item 6. Exhibits
 (a)
    
    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.
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XANSER CORPORATION AND SUBSIDIARIES
 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 March 10, 2005, 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 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 4.5 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
    
    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.10.2*
    
    Amendment, Freeze and Termination Agreement to the Xanser Corporation Deferred
Stock Unit Plan, filed as Exhibit 10.14 to the Registrants Form 10-K for the year
ended December 31, 2005, which exhibit is hereby incorporated by reference.
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XANSER CORPORATION AND SUBSIDIARIES
 10.3*
    
    Amendment, Freeze and Termination Agreement to the Xanser Corporation 1996
Supplemental Deferred Compensation Plan, filed as Exhibit 10.15 to the Registrants
Form 10-K for the year ended December 31, 2005, which exhibit is hereby incorporated by
reference.10.4*
    
    Amendment, Freeze and Termination Agreement to the Xanser Corporation
Non-Employee Directors Deferred Stock Unit Plan, filed as Exhibit 10.16 to the
Registrants Form 10-K for the year ended December 31, 2005, which exhibit is hereby
incorporated by reference.10.5
    
    Loan Agreement dated as of March 31, 2006, among Furmanite International
Finance Limited and BoS (USA) Inc. filed herewith.10.6
    
    Third Amendment, dated as of March 31, 2006, 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 herewith.31.1
    
    Certification of Chief Executive Officer, Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, dated as of March 30, 2006.31.2
    
    Certification of Chief Financial Officer, Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, dated as of March 30, 2006.32.1
    
    Certification of Chief Executive Officer, Pursuant to Section 906(a) of the
Sarbanes-Oxley Act of 2002, dated as of March 30, 2006.32.2
    
    Certification of Chief Financial Officer, Pursuant to Section 906(a) of the
Sarbanes-Oxley Act of 2002, dated as of March 30, 2006.
 
 *
    
    Denotes management contracts.
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XANSER CORPORATION AND SUBSIDIARIES
 
 Signature
  XANSER CORPORATION(Registrant)Date: May 15, 2006
    
    /s/ HOWARD C. WADSWORTHHoward C. WadsworthSenior Vice President, Treasurer
and Secretary(Principal Financial Officer and
Duly Authorized Officer)
 25