UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-05083

 

FURMANITE CORPORATION

(Exact name of registrant as specified in its charter)

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 (Address of principal executive offices)		75080 (Zip Code)

(972) 699-4000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former
Fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes    o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

There were 37,121,575 shares of the registrant’s common stock outstanding as of November 2, 2011.

 

 

FURMANITE CORPORATION AND SUBSIDIARIES
INDEX

		Page
		Number
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			3
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2011 (unaudited) and December 31, 2010			4
Consolidated Income Statements for the Three and Nine Months Ended September 30, 2011 and 2010 (unaudited)			5
Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2011 (unaudited) and for the Year Ended December 31, 2010			6
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010 (unaudited)			7
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2011 and 2010 (unaudited)			8
Notes to Consolidated Financial Statements (unaudited)			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosure About Market Risk			32
Item 4. Controls and Procedures			32
PART II. Other Information
Item 1. Legal Proceedings			33
Item 1A. Risk Factors			33
Item 6. Exhibits			34
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) may contain forward-looking statements within the meaning of sections 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this Report, including, but not limited to, statements regarding the Company’s future financial position, business strategy, budgets, projected costs, savings and plans, and objectives of management for future operations, are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. The Company bases its forward-looking statements on reasonable beliefs and assumptions, current expectations, estimates and projections about itself and its industry. The Company cautions that these statements are not guarantees of future performance and involve certain risks and uncertainties that cannot be predicted. In addition, the Company based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate and actual results may differ materially from those expressed or implied by the forward-looking statements. One is cautioned not to place undue reliance on such statements, which speak only as of the date of this Report. Unless otherwise required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or circumstances, or otherwise.

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

FURMANITE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

		September 30,				December 31,
		2011				2010
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	35,098			$	37,170
Accounts receivable, trade (net of allowance for doubtful accounts of $1,236 and $1,497 as of September 30, 2011 and December 31, 2010, respectively)			70,214				63,630
Inventories, net of reserve:
Raw materials and supplies			18,801				17,375
Work-in-process			7,978				6,906
Finished goods			160				85
Prepaid expenses and other current assets			4,616				5,951
Total current assets			136,867				131,117
Property and equipment			82,374				73,969
Less: accumulated depreciation and amortization			(47,825	)			(43,249	)
Property and equipment, net			34,549				30,720
Goodwill			14,324				13,148
Deferred tax assets			2,556				2,872
Intangible and other assets			7,392				4,244
Total assets		$	195,688			$	182,101
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term debt		$	2,584			$	76
Accounts payable			16,904				17,815
Accrued expenses and other current liabilities			20,886				24,488
Income taxes payable			937				557
Total current liabilities			41,311				42,936
Long-term debt, non-current			32,709				30,085
Net pension liability			8,197				8,432
Other liabilities			2,461				2,560
Commitments and contingencies (Note 11)
Stockholders’ equity:
Series B Preferred Stock, unlimited shares authorized, none outstanding			—				—
Common stock, no par value; 60,000,000 shares authorized; 41,130,538 and 40,925,619 shares issued as of September 30, 2011 and December 31, 2010, respectively			4,765				4,745
Additional paid-in capital			132,902				132,132
Retained earnings (accumulated deficit)			381				(12,373	)
Accumulated other comprehensive loss			(9,025	)			(8,403	)
Treasury stock, at cost (4,008,963 shares as of September 30, 2011 and December 31, 2010)			(18,013	)			(18,013	)
Total stockholders’ equity			111,010				98,088
Total liabilities and stockholders’ equity		$	195,688			$	182,101

The accompanying notes are an integral part of these consolidated financial statements.

FURMANITE CORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in thousands, except per share data)

(Unaudited)

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2011				2010				2011				2010
Revenues		$	78,330			$	66,935			$	234,393			$	210,883
Costs and expenses:
Operating costs (exclusive of depreciation and amortization)			53,807				45,714				160,675				143,298
Depreciation and amortization expense			2,207				1,646				6,280				4,767
Selling, general and administrative expense			16,794				16,869				51,484				54,125
Total costs and expenses			72,808				64,229				218,439				202,190
Operating income			5,522				2,706				15,954				8,693
Interest income and other income (expense), net			(341	)			438				(99	)			534
Interest expense			(263	)			(238	)			(758	)			(720	)
Income before income taxes			4,918				2,906				15,097				8,507
Income tax expense			(1,336	)			(1,095	)			(2,343	)			(2,745	)
Net income		$	3,582			$	1,811			$	12,754			$	5,762
Earnings per common share:
Basic		$	0.10			$	0.05			$	0.34			$	0.16
Diluted		$	0.10			$	0.05			$	0.34			$	0.16
Weighted-average number of common and common equivalent shares used in computing net income per common share:
Basic			37,107				36,743				37,002				36,722
Diluted			37,284				36,903				37,293				36,881

The accompanying notes are an integral part of these consolidated financial statements.

FURMANITE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2011 (Unaudited) and Year Ended December 31, 2010

(in thousands, except share data)

																						Accumulated
														Additional								Other
		Common Shares								Common				Paid-In				(Accumulated Deficit)				Comprehensive				Treasury
		Issued				Treasury				Stock				Capital				Retained Earnings				Loss				Stock				Total
Balances at January 1, 2010			40,682,815				4,008,963			$	4,723			$	132,106			$	(21,859	)		$	(11,627	)		$	(18,013	)		$	85,330
Net income			—				—				—				—				9,486				—				—				9,486
Stock-based compensation and stock option exercises			242,804				—				22				1,469				—				—				—				1,491
Change in pension net actuarial loss and prior service credit, net of tax			—				—				—				—				—				3,484				—				3,484
Other															(1,443	)															(1,443	)
Foreign currency translation adjustment			—				—				—				—				—				(260	)			—				(260	)
Balances at December 31, 2010			40,925,619				4,008,963			$	4,745			$	132,132			$	(12,373	)		$	(8,403	)		$	(18,013	)		$	98,088
Net income			—				—				—				—				12,754				—				—				12,754
Stock-based compensation and stock option exercises			204,919				—				20				770				—				—				—				790
Change in pension net actuarial loss and prior service credit, net of tax			—				—				—				—				—				304				—				304
Foreign currency translation adjustment			—				—				—				—				—				(926	)			—				(926	)
Balances at September 30, 2011			41,130,538				4,008,963			$	4,765			$	132,902			$	381			$	(9,025	)		$	(18,013	)		$	111,010

The accompanying notes are an integral part of these consolidated financial statements.

FURMANITE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

		For the Nine Months
		Ended September 30,
		2011				2010
Operating activities:
Net income		$	12,754			$	5,762
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization			6,280				4,767
Provision for doubtful accounts			277				253
Deferred income taxes			(1,270	)			(144	)
Stock-based compensation expense			519				654
Other, net			432				153
Changes in operating assets and liabilities:
Accounts receivable			(6,855	)			(6,486	)
Inventories			(3,422	)			839
Prepaid expenses and other current assets			1,437				2,151
Accounts payable			(1,053	)			(1,536	)
Accrued expenses and other current liabilities			(3,723	)			1,854
Income taxes payable			380				(272	)
Other, net			(128	)			(33	)
Net cash provided by operating activities			5,628				7,962
Investing activities:
Capital expenditures			(3,915	)			(4,484	)
Acquisition of assets and business, net of cash acquired of $1,185 in 2011			(3,815	)			(350	)
Proceeds from sale of assets			131				759
Net cash used in investing activities			(7,599	)			(4,075	)
Financing activities:
Payments on debt			(85	)			(188	)
Proceeds from issuance of debt			—				76
Issuance of common stock			271				20
Net cash provided by (used in) financing activities			186				(92	)
Effect of exchange rate changes on cash			(287	)			(130	)
(Decrease) increase in cash and cash equivalents			(2,072	)			3,665
Cash and cash equivalents at beginning of period			37,170				36,117
Cash and cash equivalents at end of period		$	35,098			$	39,782
Supplemental cash flow information:
Cash paid for interest		$	534			$	601
Cash paid for income taxes, net of refunds received		$	2,886			$	2,826
Non-cash investing and financing activities:
Issuance of notes payable to equity holders related to acquistion of business		$	5,300			$	—

The accompanying notes are an integral part of these consolidated financial statements.

FURMANITE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2011				2010				2011				2010
Net income		$	3,582			$	1,811			$	12,754			$	5,762
Other comprehensive income (loss):
Change in pension net actuarial loss and prior service credit, net of tax			416				(335	)			304				802
Foreign currency translation adjustments			(3,624	)			3,447				(926	)			(109	)
Total other comprehensive income (loss)			(3,208	)			3,112				(622	)			693
Comprehensive income		$	374			$	4,923			$	12,132			$	6,455

The accompanying notes are an integral part of these consolidated financial statements.

FURMANITE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2011
(Unaudited)

1. General and Summary of Significant Accounting Policies

General

The consolidated interim financial statements include the accounts of Furmanite Corporation (the “Parent Company”) and its subsidiaries (collectively, the “Company” or “Furmanite”). All intercompany transactions and balances have been eliminated in consolidation. These unaudited consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnote disclosures required by U.S. GAAP for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments (consisting only of normal recurring adjustments) and accruals, necessary for a fair presentation of the financial statements, have been made. Interim results of operations are not necessarily indicative of the results that may be expected for the full year.

Revenue Recognition

Revenues are recorded in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition, when realized or realizable, and earned.

Revenues are recognized using the completed-contract method, when persuasive evidence of an arrangement exists, services to customers have been rendered or products have been delivered, the selling price is fixed or determinable and collectability is reasonably assured. Revenues are recorded net of sales tax. Substantially all projects are short term in nature; however, the Company occasionally enters into contracts that are longer in duration that represent multiple element arrangements, which include a combination of services and products. The Company separates deliverables into units of accounting based on whether the deliverables have standalone value to the customer. The arrangement consideration is allocated to the separate units of accounting based on each unit’s relative selling price determined using vendor specific objective evidence. Revenues are recognized for the separate units of accounting when services to customers have been rendered or products have been delivered and risk of ownership has passed to the customer. The Company provides limited warranties to customers, depending upon the service performed. Warranty claim costs were not material during the three or nine months ended September 30, 2011 or 2010.

Inventories

Inventories are valued at the lower of cost or market. Cost is determined using the weighted average cost method. Inventory quantities on hand are reviewed regularly based on related service levels and functionality, and carrying cost is reduced to net realizable value for inventories in which their cost exceeds their utility, due to physical deterioration, obsolescence, changes in price levels or other causes. The excess and obsolete reserve was $1.7 million and $1.8 million at September 30, 2011 and December 31, 2010, respectively. The cost of inventories consumed or products sold are included in operating costs.

New Accounting Pronouncements

In January 2010, the FASB issued Accounting Standards Update 2010-06, Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 provides more robust disclosures about the transfers between Levels 1 and 2, the activity in Level 3 fair value measurements and clarifies the level of disaggregation and disclosure related to the valuation techniques and inputs used. The new disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the Level 3 activity disclosures, which are effective for fiscal years beginning after December 15, 2010. There was not a material impact from the adoption of this guidance on the Company’s consolidated financial statements.

In June 2011, the FASB issued Accounting Standards Update 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 clarifies the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. ASU 2011-04 provides further clarification on the: (1) application of the highest and best use and valuation premise concepts, (2) fair value measurement of an instrument

classified in a reporting entity’s shareholders’ equity, and (3) disclosure of unobservable inputs used in Level 3 fair value measurements. ASU 2011-04 also changes how fair value is measured for financial instruments that are managed within a portfolio and how premiums and discounts are applied in measuring fair value. In addition to the clarification of Level 3 disclosures, ASU 2011-04 requires additional disclosures for fair value measurements as it relates to the following: (1) the valuation process and sensitivity of changes in unobservable inputs, (2) a reporting entity’s use of a nonfinancial asset in a way that differs from the asset’s highest and best use, and (3) the categorization by level of the fair value hierarchy for items that are not measured at fair value but for which the fair value is required to be disclosed. ASU 2011-04 is effective for interim and annual periods beginning on or after December 15, 2011. The Company does not expect a material impact from the adoption of this guidance on the Company’s consolidated financial statements.

In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 amends existing guidance by allowing only the following two options for presenting the components of net income and other comprehensive income: (1) in a single continuous financial statement or (2) in two separate but consecutive financial statements. In addition, items that are reclassified from other comprehensive income to net income must be presented on the face of the financial statements. ASU 2011-05 does not change the items that must be reported in other comprehensive income, when an item of other comprehensive income must be reclassified to net income, a company’s option to present components of other comprehensive income either net of related tax effects or before related tax effects, nor does it affect how earnings per share is calculated or presented. ASU 2011-05 requires retrospective application, and it is effective for fiscal years and interim periods within those years, beginning after December 15, 2011. The Company anticipates the adoption of this guidance will change the presentation and provide additional detail on certain consolidated financial statements, but will not have any other material impact.

In September 2011, the FASB issued Accounting Standards Update 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”). ASU 2011-08 gives a company the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. ASU 2011-08 allows a company to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. Using the qualitative assessment in ASU 2011-08, if a company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, performing the two-step impairment test is unnecessary. If a company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it is required to perform step one of the two-step impairment test. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company does not expect a material impact from the adoption of this guidance on its consolidated financial statements.

2. Acquisition

On February 23, 2011, Furmanite Worldwide, Inc. (“FWI”), a wholly owned subsidiary of the Parent Company, entered into a Stock Purchase Agreement to acquire 100% of the outstanding stock of Self Leveling Machines, Inc. and a subsidiary of FWI entered into an Asset Purchase Agreement to acquire substantially all of the material operating and intangible assets of Self Levelling Machines Pty. Ltd. (collectively, “SLM”) for total consideration of $9.1 million, net of cash acquired of $1.2 million. SLM provides large scale on-site machining, which includes engineering, fabrication and execution of highly-specialized machining solutions for large-scale equipment or operations.

In connection with the SLM acquisition, on February 23, 2011, FWI entered into a consent and waiver agreement under its credit agreement. See Note 6, “Long-Term Debt,” to these consolidated financial statements for additional information as it relates to the credit agreement. FWI funded the cost of the acquisition with $5.0 million in cash and by issuing notes payable (the “Notes”) to the sellers’ equity holders for $5.3 million.

The final determinations of fair value for certain assets and liabilities remain subject to change based on final valuations of the assets acquired and liabilities assumed. During the third quarter of 2011, goodwill decreased by $0.2 million resulting from adjustments to the fair value measurement of acquired net assets.

The following amounts represent the preliminary determination of the fair value of the assets acquired and liabilities assumed (in thousands):

Cash		$	1,185
Accounts receivable			224
Prepaid expenses and other current assets			46
Property and equipment			5,124
Goodwill 1			1,176
Intangible and other assets 2			4,035
Accrued expenses and other current liabilities			(100	)
Deferred tax liabilities			(1,390	)
Fair value of net assets acquired		$	10,300

The SLM acquisition was not material to the Company’s financial position and results of operations, therefore, SLM’s pro forma results would not have a material impact on the Company’s results had the acquisition occurred at the beginning of the current or previous year.

3. Earnings Per Share

Basic earnings per share are calculated as net income divided by the weighted-average number of shares of common stock outstanding during the period, which includes restricted stock. Restricted shares of the Company’s common stock have full voting rights and participate equally with common stock in dividends declared and undistributed earnings. As participating securities, the restricted stock awards are included in the calculation of basic EPS using the two-class method. Diluted earnings per share assumes issuance of the net incremental shares from stock options when dilutive. The weighted-average common shares outstanding used to calculate diluted earnings per share reflect the dilutive effect of common stock equivalents including options to purchase shares of common stock, using the treasury stock method.

Basic and diluted weighted-average common shares outstanding and earnings per share include the following (in thousands, except per share data):

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2011				2010				2011				2010
Net income		$	3,582			$	1,811			$	12,754			$	5,762
Basic weighted-average common shares outstanding			37,107				36,743				37,002				36,722
Dilutive effect of common stock equivalents			177				160				291				159
Diluted weighted-average common shares outstanding			37,284				36,903				37,293				36,881
Earnings per share:
Basic		$	0.10			$	0.05			$	0.34			$	0.16
Dilutive		$	0.10			$	0.05			$	0.34			$	0.16
Stock options excluded from diluted weighted-average common shares outstanding because their inclusion would have an anti-dilutive effect:			597				810				411				643

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

		September 30,				December 31,
		2011				2010
Compensation and benefits 1		$	12,814			$	15,130
Estimated potential uninsured liability claims			1,320				1,886
Taxes other than income			1,169				1,052
Value added tax payable			1,005				1,387
Professional, audit and legal fees			918				1,088
Customer deposit			431				615
Rent			384				327
Other employee related expenses			247				550
Interest			90				20
Other2			2,508				2,433
		$	20,886			$	24,488

5. Restructuring

During the fourth quarter of 2009 and in the first half of 2010, the Company committed to cost reduction initiatives, including planned workforce reductions and restructuring of certain functions. The Company has taken these specific actions in order to more strategically align the Company’s operating, selling, general and administrative costs relative to revenues.

2009 Cost Reduction Initiative

The Company completed this cost reduction initiative during 2010 and incurred total costs of approximately $3.4 million. For the three months ended September 30, 2010, restructuring costs of $0.3 million were incurred and are included in selling, general and administrative expenses. For the nine months ended September 30, 2010, restructuring costs of $0.6 million and $1.8 million were incurred and are included in operating costs and selling, general and administrative expenses, respectively. There was minimal activity during the nine months ended September 30, 2011 related to this initiative.

2010 Cost Reduction Initiative

During the second quarter of 2010, the Company committed to an additional cost reduction initiative, primarily related to the restructuring of certain functions within the Company’s EMEA operations (which includes operations in Europe, the Middle East and Africa). The Company took specific actions in order to improve the operational and administrative efficiency of its EMEA operations, while providing a structure which will allow for future expansion of operations within the region. For the nine months ended September 30, 2011, restructuring costs of $0.1 million are included in operating costs. For the three months ended September 30, 2011 there were no restructuring costs included in operating costs. For each of the three and nine months ended September 30, 2010, restructuring costs incurred of $1.2 million are included in operating costs. For the three and nine months ended September 30, 2011, restructuring costs incurred of $25 thousand and $0.1 million, respectively, are included in selling, general and administrative expenses. For the three and nine months ended September 30, 2010, restructuring costs incurred of $0.5 million and $1.1 million, respectively, are included in selling, general and administrative expenses.

The total restructuring costs estimated to be incurred in connection with this cost reduction initiative are $4.0 million. As of September 30, 2011, the costs incurred since the inception of this cost reduction initiative totaled approximately $3.6 million, with the remaining $0.4 million expected to relate primarily to severance and benefits and lease termination costs.

In connection with these initiatives, the Company recorded estimated expenses for severance, lease cancellations, and other restructuring costs in accordance with FASB ASC 420-10, “Exit or Disposal Cost Obligations” and FASB ASC 712-10, “Nonretirement Postemployment Benefits.”

The activity related to reserves associated with the cost reduction initiatives for the nine months ended September 30, 2011, is as follows (in thousands):

		Reserve at												Foreign currency				Reserve at
		December 31, 2010				Charges				Cash payments				adjustments				September 30, 2011
2009 Initiative
Severance and benefit costs		$	107			$	—			$	(101	)		$	3			$	9
Lease termination costs			125				—				(126	)			1				—
Other restructuring costs			9				(9	)			—				—				—
2010 Initiative
Severance and benefit costs			969				228				(812	)			18				403
Lease termination costs			277				20				(31	)			2				268
Other restructuring costs			90				31				(48	)			(1	)			72
		$	1,577			$	270			$	(1,118	)		$	23			$	752

Restructuring costs associated with the cost reduction initiatives consist of the following (in thousands):

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2011				2010				2011				2010
Severance and benefit costs		$	17			$	1,709			$	228			$	3,587
Lease termination costs			1				185				20				590
Other restructuring costs			7				98				22				539
		$	25			$	1,992			$	270			$	4,716

Restructuring costs were incurred in the following geographical areas (in thousands):

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2011				2010				2011				2010
Americas		$	—			$	68			$	—			$	435
EMEA			25				1,924				270				4,281
		$	25			$	1,992			$	270			$	4,716

Total workforce reductions in which severance costs were incurred related to the cost reduction initiatives included terminations for 165 employees, which include reductions of 31 employees in the Americas, 133 employees in EMEA, and one employee in Asia-Pacific.

6. Long-Term Debt

Long-term debt consists of the following (in thousands):

		September 30,				December 31,
		2011				2010
Borrowings under the revolving credit facility (the “Credit Agreement”)		$	30,000			$	30,000
Capital leases			74				161
Notes payable (the “Notes”)			5,219				—
Total long-term debt			35,293				30,161
Less: current portion of long-term debt			(2,584	)			(76	)
Total long-term debt, non-current		$	32,709			$	30,085

On August 4, 2009, FWI and certain foreign subsidiaries of FWI (the “designated borrowers”) entered into a credit agreement dated July 31, 2009 with a banking syndicate comprising Bank of America, N.A. and Compass Bank (the “Credit Agreement”). The Credit Agreement, which matures on January 31, 2013, provides a revolving credit facility of up to $50.0 million. A portion of the amount available under the Credit Agreement (not in excess of $20.0 million) is available for the issuance of letters of credit. In addition, a portion of the amount available under the Credit Agreement (not in excess of $5.0 million in the aggregate) is available for swing line loans to FWI. The loans outstanding under the Credit Agreement may not exceed $35.0 million in the aggregate to the designated borrowers.

At each of September 30, 2011 and December 31, 2010, $30.0 million was outstanding under the Credit Agreement. Borrowings under the Credit Agreement bear interest at variable rates (based on the prime rate, federal funds rate or Eurocurrency rate, at the option of the borrower, including a margin above such rates, and subject to an adjustment based on a calculated funded debt to Adjusted EBITDA ratio (as defined in the Credit Agreement)) which was 2.2% at September 30, 2011 and 2.3% at December 31, 2010. The Credit Agreement contains a commitment fee, which ranges between 0.25% to 0.30% based on the funded debt to Adjusted EBITDA ratio, and was 0.25% at each of September 30, 2011 and December 31, 2010, based on the unused portion of the amount available under the Credit Agreement. Adjusted EBTIDA is net income plus interest, income taxes, depreciation and amortization, and other non-cash expenses minus income tax credits and non-cash items increasing net income as defined in the Credit Agreement. All obligations under the Credit Agreement are guaranteed by FWI and certain of its subsidiaries under a guaranty and collateral agreement, and are secured by a first priority lien on FWI and certain of its subsidiaries’ assets (which approximates $150.6 million of current assets and property and equipment as of September 30, 2011) and is without recourse to the Parent Company. The Credit Agreement includes requirements that the Company must maintain: (i) a funded debt to Adjusted EBITDA ratio of no more than 2.75 to 1.0 as of the last day of each fiscal quarter, measured on a trailing four-quarters basis, and (ii) a fixed charge coverage ratio (as defined in the Credit Agreement) of at least 3.0 to 1.0 for the same trailing four quarter period. FWI is also subject to certain other compliance provisions including, but not limited to, maintaining certain tangible asset concentration levels, and capital expenditure limitations as well as restrictions on indebtedness, guarantees, dividends and other contingent obligations and transactions. Events of default under the Credit Agreement include customary events, such as change of control, breach of covenants or breach of representations and warranties. At September 30, 2011, FWI was in compliance with all covenants under the Credit Agreement.

Considering the outstanding borrowings of $30.0 million, and $1.1 million related to outstanding letters of credit, the unused borrowing capacity under the Credit Agreement was $18.9 million at September 30, 2011, with a limit of $5.0 million of this capacity remaining for the designated borrowers.

In connection with the acquisition of SLM, on February 23, 2011, FWI entered into a consent and waiver agreement as it relates to the Credit Agreement. Pursuant to the consent and waiver agreement, Bank of America, N.A. and Compass Bank consented to the SLM acquisition and waived any default or event of default for certain debt covenants that would arise as a result of the SLM acquisition. FWI funded the cost of the acquisition with $5.0 million in cash and by issuing the Notes to the sellers’ equity holders for $5.3 million ($2.9 million denominated in U.S. dollar and $2.4 million denominated in Australian dollar) payable in two annual installments, which mature on February 23, 2013. All obligations under the Notes are secured by a first priority lien on the assets acquired in the acquisition. At September 30, 2011, $5.2 million was outstanding under the Notes. The Notes bear interest at a fixed rate of 2.5% per annum.

7. Retirement Plan

Two of the Company’s foreign subsidiaries have defined benefit pension plans, one plan covering certain of its United Kingdom employees (the “U.K. Plan”) and the other covering certain of its Norwegian employees (the “Norwegian Plan”). Since the Norwegian Plan represents approximately two percent of the Company’s total pension plan assets and three percent of total pension plan liabilities, only the schedule of net periodic pension cost includes combined amounts from the two plans, while assumption and narrative information relates solely to the U.K. Plan.

Net periodic pension cost for the U.K. and Norwegian Plans includes the following components (in thousands):

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2011				2010				2011				2010
Service cost		$	219			$	211			$	680			$	615
Interest cost			935				928				2,871				2,707
Expected return on plan assets			(909	)			(910	)			(2,793	)			(2,655	)
Amortization of prior service cost			(24	)			(24	)			(73	)			(70	)
Amortization of net actuarial loss			159				274				487				800
Net periodic pension cost		$	380			$	479			$	1,172			$	1,397

The expected long-term rate of return on invested assets is determined based on the weighted average of expected returns on asset investment categories as follows: 6.3% overall, 7.8% for equities and 4.7% for bonds. Estimated annual pension plan contributions are assumed to be consistent with the current expected contribution level of $0.8 million for 2011.

8. Stock-Based Compensation

The Company has stock option plans and agreements which allow for the issuance of stock options, restricted stock awards, restricted stock units and stock appreciation rights. For the three and nine months ended September 30, 2011, the total compensation cost charged against income and included in selling, general and administrative expenses for stock-based compensation arrangement was $0.2 million and $0.5 million, respectively, and $0.2 million and $0.7 million for the three and nine months ended September 30, 2010. The expense for the nine months ended September 30, 2010 included $0.2 million associated with accelerated vesting of awards in connection with the retirement of the former Chairman and Chief Executive Officer of the Company. Tax effects from stock-based compensation are insignificant due to the Company’s current domestic tax position. During the first quarter of 2011, the Company granted options to certain employees to purchase 70,000 shares of its common stock with a fair market value of $4.15 per share. During the second quarter of 2011, the Company granted $0.7 million in restricted stock units. The Company uses authorized but unissued shares of common stock for stock option exercises and restricted stock issuances pursuant to the Company’s share-based compensation plan and treasury stock for issuances outside of the plan. As of September 30, 2011, the total unrecognized compensation expense related to stock options and restricted stock was $1.5 million and $1.0 million, respectively.

9. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss in the equity section of the consolidated balance sheets includes the following (in thousands):

		September 30,				December 31,
		2011				2010
Net actuarial loss and prior service credit		$	(12,547	)		$	(12,965	)
Less: deferred tax benefit			3,424				3,538
Net of tax			(9,123	)			(9,427	)
Foreign currency translation adjustment			98				1,024
Total accumulated other comprehensive loss		$	(9,025	)		$	(8,403	)

10. Income Taxes

The Company maintains a valuation allowance to adjust the basis of net deferred tax assets in accordance with the provisions of FASB ASC 740, Income Taxes (“ASC 740”). As a result, substantially all domestic federal income taxes, as well as certain state and foreign income taxes, recorded for the three and nine months ended September 30, 2011 and 2010 were fully offset by a corresponding change in valuation allowance. Income tax expense recorded for the three and nine months ended September 30, 2011 consisted of income tax expenses in foreign and state jurisdictions in which the Company operates, with the nine months ended September 30, 2011 partially offset by a valuation allowance change resulting in a deferred tax benefit of $1.2 million related to the SLM acquisition. Income tax expense recorded for the three and nine months ended September 30, 2010 consisted primarily of income tax expenses in foreign and state jurisdictions in which the Company operates.

Income tax expense differs from the expected tax at statutory rates due primarily to the change in valuation allowance for deferred tax assets and different tax rates in the various foreign jurisdictions. Additionally, the aggregate tax expense is not always consistent when comparing periods due to the changing income before income taxes mix between domestic and foreign operations and within the foreign operations. In concluding that a full valuation allowance on domestic federal and certain state and foreign income taxes was required, the Company primarily considered such factors as the history of operating losses and the nature of the deferred tax assets. Interim period income tax expense or benefit is computed at the estimated annual effective tax rate, unless adjusted for specific discrete items as required.

Income tax expense as a percentage of income before income taxes was approximately 15.5% and 32.3% for the nine months ended September 30, 2011 and 2010, respectively. For the three months ended September 30, 2011 and 2010 income tax expense as a percentage of income before income taxes was approximately 27.2% and 37.7%, respectively. Excluding the $1.2 million acquisition related deferred tax benefit noted above, the effective income tax rate for the nine months ended September 30, 2011 was 23.6%. The remaining change in the income tax rates between periods is related to changes in the mix of income before income taxes between countries whose income taxes are offset by full valuation allowance and those that are not, and differing statutory tax rates in the countries in which the Company incurs tax liabilities.

In accordance with ASC 740, the Company recognizes the tax benefit from uncertain tax positions only if it is more-likely-than-not that the tax position will be sustained on examination by the applicable taxing authorities, based on the technical merits of the position. The tax benefit recognized is based on the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with the taxing authority.

The Company recognizes interest expense on underpayments of income taxes and accrued penalties related to unrecognized non-current tax benefits as part of the income tax provision. The Company incurred no significant interest or penalties for the three and nine months ended September 30, 2011 and 2010. Unrecognized tax benefits at September 30, 2011 and December 31, 2010 of $1.0 million and $0.8 million, respectively, for uncertain tax positions related to transfer pricing are included in other liabilities on the consolidated balance sheets and would impact the effective tax rate for certain foreign jurisdictions if recognized.

A reconciliation of the change in the unrecognized tax benefits for the nine months ended September 30, 2011 is as follows (in thousands):

Balance at December 31, 2010		$	803
Additions based on tax positions			185
Balance at September 30, 2011		$	988

11. Commitments and Contingencies

The operations of the Company are subject to federal, state and local laws and regulations in the United States and various foreign locations relating to protection of the environment. Although the Company believes its operations are in compliance with applicable environmental regulations, there can be no assurance that costs and liabilities will not be incurred by the Company. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from operations of the Company, could result in costs and liabilities to the Company. The Company has recorded, in other liabilities, an undiscounted reserve for environmental liabilities related to the remediation of site contamination for properties in the United States in the amount of $1.0 million and $1.2 million at September 30, 2011 and December 31, 2010, respectively. While there is a reasonable possibility due to the inherent

nature of environmental liabilities that a loss exceeding amounts already recognized could occur, the Company does not believe such amounts are material its financial statements.

On September 19, 2011, John Daugherty filed a derivative shareholder petition in the County Court at Law No. 3, Dallas County, Texas, on behalf of the Company against certain of the Company’s directors and executive officers and naming the Company as a nominal party. The petition alleges the named directors and officers breached their fiduciary responsibilities in regard to certain internal control matters. The petitioner requests that the defendants pay unspecified damages to the Company. On October 31, 2011, the defendants filed their answer in the lawsuit as well as motions to dismiss it. The defendants have informed the Company that they believe this lawsuit is without merit and intend to vigorously defend the lawsuit.

Furmanite America, Inc., a subsidiary of the Company, is involved in disputes with a customer, who is negotiating with a governmental regulatory agency and claims that the subsidiary failed to provide them with satisfactory services at the customer’s facilities. On April 17, 2009, a customer, INEOS USA LLC, initiated legal action against the subsidiary in the Common Pleas Court of Allen County, Ohio, alleging that the subsidiary and one of its former employees, who performed data services at one of the customer’s facilities, breached its contract with the customer and failed to provide the customer with adequate and timely information to support the subsidiary’s work at the customer’s facility from 1998 through the second quarter of 2005. The customer’s complaint seeks damages in an amount that the subsidiary believes represents the total proposed civil penalty, plus the cost of unspecified supplemental environmental projects requested by the regulatory agency to reduce air emissions at the customer’s facility, and also seeks unspecified punitive damages. The subsidiary believes that it provided the customer with adequate and timely information to support the subsidiary’s work at the customer’s facilities and will vigorously defend against the customer’s claim.

In the first quarter of 2008, a subsidiary of the Company filed an action seeking to vacate a $1.35 million arbitration award related to a sales brokerage agreement associated with a business that the subsidiary sold in 2005. The subsidiary believed that the sales broker was an affiliate of another company that in 2006 settled all of its claims, as well as all of the claims of its affiliates, against the subsidiary. The action to vacate the arbitration award terminated and, in January 2010, the subsidiary paid the full amount of the arbitration award plus accrued interest to the sales broker which was accrued as of December 31, 2009. In separate actions, the subsidiary was seeking to enforce the prior settlement agreement executed by the sales broker’s affiliate and obtain an equitable offset of the arbitration award, however, upon mutual agreement by all parties, these separate actions were dismissed by the court in July 2010.

The 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 material adverse effect on the financial position, results of operations or liquidity of the Company.

While the Company cannot make an assessment of the eventual outcome of all of these matters or determine the extent, if any, of any potential uninsured liability or damage, reserves of $1.3 million and $1.9 million, which include the Furmanite America, Inc. litigation, were recorded in accrued expenses and other current liabilities as of September 30, 2011 and December 31, 2010, respectively. While there is a reasonable possibility that a loss exceeding amounts already recognized could occur, the Company does not believe such amounts are material to its financial statements.

12. Business Segment Data and Geographical Information

An operating segment is defined as a component of an enterprise about which separate financial information is available that is evaluated regularly by the chief decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. During the third quarter of 2011, the Company expanded the number of segments as a result of enhancements in the level of financial information provided to its chief operating decision maker. The prior period information conforms to the current year presentation. For financial reporting purposes, the Company operates in three segments which comprise the Company’s three geographical areas: the Americas, EMEA and Asia-Pacific.

The Company provides specialized technical services to an international client base that includes petroleum refineries, chemical plants, pipelines, offshore drilling and production platforms, steel mills, food and beverage processing facilities, power generation, and other flow-process industries.

The Company evaluates performance based on the operating income (loss) from each segment which excludes interest income and other income (expense), interest expense, and income tax expense (benefit). The accounting policies of the reportable segments are the same as those described in Note 1. Intersegment revenues are recorded at cost plus a profit margin. All transactions and balances between segments are eliminated in consolidation.

The following is a summary of the financial information of the Company’s reportable segments as of and for the three and nine months ended September 30, 2011 and 2010 reconciled to the amounts reported in the consolidated financial statements (in thousands):

														Reconciling
														Items,
														Including
		Americas3				EMEA3				Asia-Pacific3				Corporate1				Total
Three months ended September 30, 2011:
Revenues from external customers		$	34,858			$	31,627			$	11,845			$	—			$	78,330
Intersegment revenues			325				1,505				175				(2,005	)			—
Operating income (loss)			2,100				3,959				2,646				(3,183	)			5,522
Three months ended September 30, 2010:
Revenues from external customers		$	27,408			$	28,243			$	11,284			$	—			$	66,935
Intersegment revenues			912				1,731				44				(2,687	)			—
Operating income (loss)			2,080				970				2,748				(3,092	)			2,706
Nine months ended September 30, 2011:
Revenues from external customers		$	116,028			$	88,566			$	29,799			$	—			$	234,393
Intersegment revenues			2,684				4,206				264				(7,154	)			—
Operating income (loss)			14,148				8,041				4,119				(10,354	)			15,954
Nine months ended September 30, 2010:
Revenues from external customers		$	96,525			$	82,350			$	32,008			$	—			$	210,883
Intersegment revenues			2,127				5,972				200				(8,299	)			—
Operating income (loss)			10,310				1,936				7,971				(11,524	)			8,693

The following geographical area information includes total long-lived assets (which consist of all non-current assets, other than goodwill, indefinite-lived intangible assets and deferred tax assets) based on physical location (in thousands):

		September 30,				December 31,
		2011				2010
Americas		$	21,104			$	17,311
EMEA			11,328				12,092
Asia-Pacific			6,475				3,493
		$	38,907			$	32,896

13. Fair Value of Financial Instruments and Credit Risk

Fair value is defined under FASB ASC 820-10, Fair Value Measurement (“ASC 820-10”), as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820-10 must maximize the use of the observable inputs and minimize the use of unobservable inputs. The standard established a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

•

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.

The Company currently does not have any assets or liabilities that would require valuation under ASC 820-10, except for pension assets. The Company does not have any derivatives or marketable securities. The estimated fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying amounts due to the relatively short period to maturity of these instruments. The estimated fair value of all debt as of September 30, 2011 and December 31, 2010 approximated the carrying value. These fair values were estimated based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements, when quoted market prices were not available. The estimates are not necessarily indicative of the amounts that would be realized in a current market exchange.

The Company provides services to an international client base that includes petroleum refineries, chemical plants, offshore energy production platforms, steel mills, nuclear power stations, conventional power stations, pulp and paper mills, food and beverage processing plants, other flow process facilities. The Company does not believe that it has a significant concentration of credit risk at September 30, 2011, as the Company’s accounts receivable are generated from these business industries with customers located throughout the Americas, EMEA and Asia-Pacific.

FURMANITE CORPORATION AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited consolidated financial statements and notes thereto of Furmanite Corporation included in Item 1 of this Quarterly Report on Form 10-Q.

Business Overview

Furmanite Corporation, (the “Parent Company”), together with its subsidiaries (collectively the “Company” or “Furmanite”) was incorporated in 1953 and conducts its principal business through its subsidiaries in the technical services industry. The Parent Company’s common stock, no par value, trades under the ticker symbol FRM on the New York Stock Exchange.

The Company provides specialized technical services, including on-line services, which include leak sealing, hot tapping, line stopping, line isolation, composite repair and valve testing. In addition, the Company provides off-line services, which include on-site machining, heat treatment, bolting and valve repair, and other services including heat exchanger design, manufacture and repair, smart shim services, concrete repair and valve and other product manufacturing. These products and services are provided primarily to electric power generating plants, petroleum refineries, which include refineries and offshore drilling rigs (including subsea) and other process industries in the Americas (which includes operations in North America, South America and Latin America), EMEA (which includes operations in Europe, the Middle East and Africa) and Asia-Pacific through Furmanite.

Financial Overview

For the nine months ended September 30, 2011, consolidated revenues increased by $23.5 million compared to the nine months ended September 30, 2010. During the nine months ended September 30, 2011, revenues were positively affected by increases in leak sealing, line stopping and on-site machining services. For the three months ended September 30, 2011, consolidated revenues increased by $11.4 million compared to the three months ended September 30, 2010. For the three months ended September 30, 2011, revenues were positively affected by increases in leak sealing, line stopping and bolting services. The Company’s net income for the three and nine months ended September 30, 2011 increased by $1.8 million and $7.0 million, respectively, compared to the three and nine months ended September 30, 2010. The increase in net income was a result of the increase in revenues for the current year three and nine month periods, as well as lower restructuring costs and operational improvements realized as a result of the cost reduction initiatives which began in late 2009 and continued throughout 2010.

In the fourth quarter of 2009, the Company committed to a cost reduction initiative, including planned workforce reductions and restructuring of certain functions, in order to more strategically align the Company’s operating, selling, general and administrative costs relative to revenues. The Company completed the 2009 cost reduction initiative during 2010 with total restructuring costs incurred under this initiative of approximately $3.4 million. The Company estimates the effects of this initiative have resulted in annual cost reductions at historical activity levels of approximately $11.0 million, primarily compensation expenses, which have favorably impacted selling, general and administrative expenses.

In the second quarter of 2010, the Company committed to an additional cost reduction initiative, primarily related to the restructuring of certain functions within the Company’s EMEA operations. The Company took specific actions in order to improve the operational and administrative efficiency of its EMEA operations, while providing a structure which will allow for future expansion of operations within the region. The Company expects to incur total costs of approximately $4.0 million in connection with this cost reduction initiative, which are primarily related to severance and benefit costs. As of September 30, 2011, restructuring costs of $3.6 million have been incurred since the inception of this additional cost reduction initiative, with the remaining $0.4 million expected to be incurred during 2011. The Company estimates the effects of this initiative to result in annual cost reductions at historical activity levels of approximately $5.0 million, primarily compensation expenses, of which approximately half will affect operating costs with the other half impacting selling, general and administrative expenses.

As a result of these two initiatives, total restructuring costs negatively impacted operating income by $25 thousand and $2.0 million and net income by $19 thousand and $1.9 million for the three months ended September 30, 2011 and 2010, respectively. For the nine months ended September 30, 2011 and 2010, total restructuring costs negatively impacted operating income by $0.3 million and $4.7 million and net income by $0.2 million and $4.3 million, respectively.

The Company’s diluted earnings per share for the three and nine months ended September 30, 2011 were $0.10 and $0.34, respectively, compared to $0.05 and $0.16, for the three and nine months ended September 30, 2010, respectively.

Results of Operations

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2011				2010				2011				2010
		(in thousands, except per share data)
Revenues		$	78,330			$	66,935			$	234,393			$	210,883
Costs and expenses:
Operating costs (exclusive of depreciation and amortization)			53,807				45,714				160,675				143,298
Depreciation and amortization expense			2,207				1,646				6,280				4,767
Selling, general and administrative expense			16,794				16,869				51,484				54,125
Total costs and expenses			72,808				64,229				218,439				202,190
Operating income			5,522				2,706				15,954				8,693
Interest income and other income (expense), net			(341	)			438				(99	)			534
Interest expense			(263	)			(238	)			(758	)			(720	)
Income before income taxes			4,918				2,906				15,097				8,507
Income tax expense			(1,336	)			(1,095	)			(2,343	)			(2,745	)
Net income		$	3,582			$	1,811			$	12,754			$	5,762
Earnings per share:
Basic		$	0.10			$	0.05			$	0.34			$	0.16
Diluted		$	0.10			$	0.05			$	0.34			$	0.16

Geographical Information

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2011				2010				2011				2010
		(in thousands)
Revenues:
Americas, including corporate		$	34,858			$	27,408			$	116,028			$	96,525
EMEA			31,627				28,243				88,566				82,350
Asia-Pacific			11,845				11,284				29,799				32,008
Total revenues			78,330				66,935				234,393				210,883
Costs and expenses:
Operating costs (exclusive of depreciation and amortization)
Americas, including corporate			25,135				18,465				79,761				64,489
EMEA			21,493				20,614				61,460				60,346
Asia-Pacific			7,179				6,635				19,454				18,463
Total operating costs (exclusive of depreciation and amortization)			53,807				45,714				160,675				143,298
Operating costs as a percentage of revenue			68.7	%			68.3	%			68.5	%			68.0	%
Depreciation and amortization expense
Americas, including corporate			1,175				886				3,363				2,544
EMEA			499				467				1,510				1,387
Asia-Pacific			533				293				1,407				836
Total depreciation and amortization expense			2,207				1,646				6,280				4,767
Depreciation and amortization expense as a percentage of revenue			2.8	%			2.5	%			2.7	%			2.3	%
Selling, general and administrative expense
Americas, including corporate			9,631				9,053				29,086				30,657
EMEA			5,677				6,198				17,577				18,720
Asia-Pacific			1,486				1,618				4,821				4,748
Total selling general and administrative expense			16,794				16,869				51,484				54,125
Selling, general and administrative expense as a percentage of revenue			21.4	%			25.2	%			22.0	%			25.7	%
Total costs and expenses		$	72,808			$	64,229			$	218,439			$	202,190

Geographical areas, based on physical location, are the Americas (including corporate), EMEA and Asia-Pacific. The following discussion and analysis, as it relates to geographic information, excludes any allocation of headquarter costs to EMEA or Asia-Pacific.

Revenues

For the nine months ended September 30, 2011, consolidated revenues increased by $23.5 million, or 11.1%, to $234.4 million, compared to $210.9 million for the nine months ended September 30, 2010. Changes related to foreign currency exchange rates favorably impacted revenues by $10.0 million, of which $5.7 million, $3.9 million and $0.4 million were related to favorable impacts from EMEA, Asia-Pacific and the Americas, respectively. Excluding the foreign currency exchange rate impact, revenues increased by $13.5 million, or 6.4%, for the nine months ended September 30, 2011 compared to the same period in the prior year. This $13.5 million increase in revenues consisted of $19.1 million and $0.5 million increases in the Americas and EMEA, respectively, partially offset by a $6.1 million decrease in Asia-Pacific. The increase in revenues in the Americas was related to increases in both on-line services and off-line services. The increase within the Americas’ on-line services primarily related to volume increases in leak sealing and line stopping services of approximately 29% when compared to revenues in the same period in the prior year. Revenues increased within off-line services by approximately 12% when compared to the prior year and primarily related to volume increases in bolting and on-site machining services. The increase in revenues in EMEA was primarily attributable to increases in on-line services but was partially offset by decreases in off-line services. The increase in revenues within on-line services in EMEA primarily related to volume increases in leak sealing services of approximately 8% when compared to revenues in the same period of the prior year. This increase was partially offset by decreases in off-line services in EMEA, which primarily included volume decreases in heat exchanger repair services of approximately 3% when compared to

revenues in the same period in the prior year. The decrease in revenues in Asia-Pacific was attributable to decreases in both on-line and off-line services. The decrease within on-line services in Asia-Pacific primarily related to volume decreases in hot tapping services in Singapore as a large hot tapping project concluded in late 2010, resulting in an approximate 34% decrease in hot tapping services when compared to revenue in the same period of the prior year. The decrease in off-line services in Asia-Pacific is primarily related to volume decreases in bolting services in Australia of approximately 16% due to inclement weather conditions in the first half of the current year but these decreases were partially offset by a 14% increase in on-site machining services when compared to revenues in the same period in the prior year.

For the three months ended September 30, 2011, consolidated revenues increased by $11.4 million, or 17.0%, to $78.3 million, compared to $66.9 million for the three months ended September 30, 2010. Changes related to foreign currency exchange rates favorably impacted revenues by $3.0 million, of which $1.6 million and $1.4 million were related to favorable impacts in EMEA and Asia-Pacific, respectively. Excluding the foreign currency exchange rate impact, revenues increased by $8.4 million, or 12.6%, for the three months ended September 30, 2011 compared to the same period in the prior year. This $8.4 million increase in revenues consisted of increases of $7.4 million and $1.8 million in the Americas and EMEA, respectively, but were partially offset by a decrease of $0.8 million in Asia-Pacific. The increase in revenues in the Americas was primarily due to increases in on-line services, which included volume increases in leak sealing and line stopping services of approximately 25% when compared to revenues in the same period in the prior year. The increase in revenues in EMEA was primarily attributable to increases in on-line services, which included volume increases in leak sealing services of approximately 14%, when compared to revenues in the same period in the prior year. This increase was partially offset by a decrease in offline services in EMEA primarily driven by an approximate 8% decrease in on-site machining when compared to revenues in the same period in the prior year. The decrease in revenues in Asia-Pacific was primarily related to decreases in on-line services but was substantially offset by increases in off-line services. The decrease in on-line services in Asia-Pacific was primarily related to volume decreases in hot tapping services within Singapore as a large hot tapping project which concluded in late 2010 resulted in an approximate 35% decrease in hot tapping services when compared to revenues in the same period of the prior year. The increase within off-line services in Asia-Pacific primarily related to volume increases in on-site machining services in Australia and resulted in an approximate 32% increase in these services when compared to revenues in the same period of the prior year. In addition, Asia-Pacific had volume increases of approximately 14% in bolting services when compared to revenues in the same period of the prior year.

Operating Costs (exclusive of depreciation and amortization)

For the nine months ended September 30, 2011, operating costs, increased $17.4 million, or 12.1%, to $160.7 million, compared to $143.3 million for the nine months ended September 30, 2010. Changes related to foreign currency exchange rates unfavorably impacted costs by $6.8 million, of which $4.1 million, $2.5 million and $0.2 million were related to unfavorable impacts from EMEA, Asia-Pacific and the Americas, respectively. Excluding the foreign currency exchange rate impact, operating costs increased $10.6 million, or 7.4%, for the nine months ended September 30, 2011, compared to the same period in the prior year. This change consisted of a $15.0 million increase in the Americas, partially offset by decreases of $2.9 million and $1.5 million in EMEA and Asia-Pacific, respectively. The increase in operating costs in the Americas was primarily related to higher material, labor and equipment rental costs of approximately 20% when compared to the same period in the prior year, which were attributable to the increase in revenues. The decrease in EMEA was due to decreases in labor costs of 5% associated with the cost reduction initiatives. In addition, severance related restructuring costs in EMEA decreased from $1.8 million for the nine months ended September 30, 2010 to $0.1 million for the nine months ended September 30, 2011. The decrease in operating costs in Asia-Pacific was primarily attributable to a decrease in equipment rental costs in Singapore of approximately 8% when compared to the same period in the prior year associated with the decreased revenues.

For the three months ended September 30, 2011, operating costs increased $8.1 million, or 17.7%, to $53.8 million, compared to $45.7 million for the three months ended September 30, 2010. Changes related to foreign currency exchange rates unfavorably impacted costs by $2.0 million, of which $1.2 million and $0.8 million were related to unfavorable impacts in EMEA and Asia-Pacific, respectively. Excluding the foreign currency exchange rate impact, operating costs increased by $6.1 million, or 13.3%, for the three months ended September 30, 2011, compared to the same period in the prior year. This change consisted of a $6.6 million increase in the Americas which was partially offset by a $0.3 million decrease in EMEA and a $0.2 million decrease in Asia-Pacific. The increase in operating costs in the Americas was primarily attributable to an increase in labor and material costs of approximately 30% and was associated with the increase in revenues when compared to the same period in the prior year. The decrease in operating costs in EMEA was a result of the reductions in restructuring costs partially offset by the increase in labor and materials of approximately 13% associated with the increase in revenues. Severance related restructuring costs were nil in the three month ended September 30, 2011 compared to $1.2 million in the three months ended September 30, 2010. The decrease in Asia-Pacific was due to decreases in equipment rental and material costs of 21% associated with decreases in revenues in

Singapore partially offset by increases in labor costs of 13% associated with the increase in revenues in Australia when compared to the same period in prior year.

Operating costs as a percentage of revenue were 68.7% and 68.3% for the three months ended September 30, 2011 and 2010, respectively, and 68.5% and 68.0% for the nine months ended September 30, 2011 and 2010, respectively. The percentage of operating costs to revenues for the three and nine months ended September 30, 2011 were slightly higher than the same periods in prior year due in part to certain higher margin large jobs in the prior year which did not recur in 2011.

Depreciation and Amortization

For the three and nine months ended September 30, 2011, depreciation and amortization expense increased $0.6 million, or 34.1%, and $1.5 million, or 31.7%, respectively, when compared to the same periods in the prior year. Changes related to foreign currency exchange rates unfavorably impacted depreciation and amortization expense by $0.1 million and $0.3 million for the three and nine months ended September 30, 2011, respectively. Excluding the foreign currency exchange rate impact, depreciation and amortization expense for the three and nine months ended September 30, 2011 was $0.5 million and $1.2 million higher compared to the same periods in the prior year, respectively. Depreciation and amortization expense increased as a result of the acquisition of Self Leveling Machines (the “SLM acquisition”) as well as the effects of capital expenditures of approximately $6.7 million placed in service over the twelve-month period ended September 30, 2011. Depreciation and amortization expense related to the SLM acquisition was $0.3 million and $0.9 million for the three and nine months ended September 30, 2011, respectively.

Depreciation and amortization expense as a percentage of revenue was 2.8% and 2.5% for the three months ended September 30, 2011 and 2010, respectively, and 2.7% and 2.3% for the nine months ended September 30, 2011 and 2010, respectively. When excluding depreciation and amortization expense related to the SLM acquisition, depreciation and amortization expense as a percentage of revenue was 2.4% and 2.3% for the three and nine months ended September 30, 2011, respectively.

Selling, General and Administrative

For the nine months ended September 30, 2011, selling, general and administrative expenses decreased $2.6 million, or 4.8%, to $51.5 million compared to $54.1 million for the nine months ended September 30, 2010. Changes related to foreign currency exchange rates unfavorably impacted costs by $1.7 million, of which $1.1 million and $0.6 million were related to unfavorable impacts in EMEA and Asia-Pacific, respectively. Excluding the foreign currency exchange rate impact, selling, general and administrative expenses decreased $4.3 million, or 7.9%, for the nine months ended September 30, 2011, compared to the same period in the prior year. This $4.3 million decrease in selling, general and administrative costs consisted of a $1.6 million, $2.2 million and a $0.5 million decrease in the Americas, EMEA and Asia-Pacific, respectively. The decrease in selling, general and administrative expenses in the Americas were related to reductions in salary and related costs of approximately 4% when compared to the same period in the prior year. The nine months ended September 30, 2010 included corporate charges of approximately $0.5 million incurred in connection with the retirement of the Company’s former Chairman and Chief Executive Officer and severance related restructuring charges of $0.2 million. There were no restructuring or retirement related charges incurred for the nine months ended September 30, 2011. In EMEA, decreases in selling, general and administrative costs were primarily a result of reductions in restructuring costs from $2.5 million for the nine months ended September 30, 2010 to $0.1 million for the nine months ended September 30, 2011. In Asia-Pacific, decreases in selling, general and administrative costs were primarily a result of reductions in salary and related costs of approximately 11% when compared to the same period in the prior year.

For the three months ended September 30, 2011, selling, general and administrative expenses decreased $0.1 million, or 0.6%, to $16.8 million compared to $16.9 million for the three months ended September 30, 2010. Changes related to foreign currency exchange rates unfavorably impacted costs by $0.5 million, of which $0.3 million and $0.2 million were related to unfavorable impacts in EMEA and Asia-Pacific, respectively. Excluding the foreign currency exchange rate impact, selling, general and administrative expenses decreased $0.6 million, or 3.6%, for the three months ended September 30, 2011, compared to the same period in the prior year. This $0.6 million decrease in selling, general and administrative expenses consisted of $0.8 million and $0.3 million in decreases in EMEA and Asia-Pacific, respectively, but were partially offset by a $0.5 million increase in the Americas. Decreases in selling, general and administrative expenses in EMEA were attributable to reductions in restructuring costs from $0.8 million for the three months ended September 30, 2010 to $25 thousand for the three months ended September 30, 2011. Decreases in selling, general and administrative expenses in Asia-Pacific were related to reductions in salary and related costs and reduced travel expenses of approximately 17% when compared to the same period in the prior year. The increase in selling, general and administrative expenses in the Americas was primarily related to increases in salary and related costs of approximately 3% when compared to the same period in the prior year as a result of increased activity levels.

As a result of the above factors, selling, general and administrative costs as a percentage of revenues decreased to 21.4% and 22.0% for the three and nine months ended September 30, 2011, respectively, compared to 25.2% and 25.7% for the three and nine months ended September 30, 2010, respectively.

Other Income

Interest Income and Other Income (Expense), Net

For the three and nine months ended September 30, 2011, interest income and other income (expense) decreased $0.8 million and $0.6 million, respectively, when compared to the same periods in the prior year. Interest income and other income (expense) primarily relate to exchange gains and losses on foreign currency denominated transactions.

Interest Expense

For both the three and nine months ended September 30, 2011, consolidated interest expense was comparable to the three and nine months ended September 30, 2010 as the increase in interest expense related to the SLM acquisition was partially offset by the impact of lower interest rates on outstanding borrowings under the Credit Agreement.

Income Taxes

The Company maintains a valuation allowance to adjust the basis of net deferred tax assets in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes. As a result, substantially all domestic federal income taxes, as well as certain state and foreign income taxes, recorded for the three and nine months ended September 30, 2011 and 2010 were fully reserved with changes offset by a corresponding change in valuation allowance. Income tax expense recorded for the three and nine months ended September 30, 2011 consisted of income tax expenses in foreign and state jurisdictions in which the Company operates, with the nine months ended September 30, 2011 partially offset by a valuation allowance change resulting in a deferred tax benefit of $1.2 million related to the SLM acquisition (see “Liquidity and Capital Resources” for additional information on the SLM acquisition). Income tax expense recorded for the three and nine months ended September 30, 2010 consisted primarily of income taxes due in foreign and state jurisdictions in which the Company operates.

Income tax expense differs from the expected tax at statutory rates due primarily to the change in valuation allowance for deferred tax assets and different tax rates in the various foreign jurisdictions. Additionally, the aggregate tax expense is not always consistent when comparing periods due to the changing income before income taxes mix between domestic and foreign operations and within the foreign operations. In concluding that a full valuation allowance on domestic federal and certain state and foreign income taxes was required, the Company primarily considered factors such as the history of operating losses and the nature of the deferred tax assets. Interim period income tax expense or benefit is computed at the estimated annual effective tax rate, unless adjusted for specific discrete items as required.

Income tax expense as a percentage of income before income taxes was approximately 15.5% and 32.3% for the nine months ended September 30, 2011 and 2010, respectively. For the three months ended September 30, 2011 and 2010 income tax expense as a percentage of income before income taxes was approximately 27.2% and 37.7%, respectively. Excluding the $1.2 million acquisition related deferred tax benefit noted above, the effective income tax rate for the nine months ended September 30, 2011 was 23.6%. The remaining change in the income tax rates between periods is related to changes in the mix of income before income taxes between countries whose income taxes are offset by full valuation allowance and those that are not, and differing statutory tax rates in the countries in which the Company incurs tax liabilities.

Liquidity and Capital Resources

The Company’s liquidity and capital resources requirements include the funding of working capital needs, the funding of capital investments and the financing of internal growth.

Net cash provided by operating activities was $5.6 million for the nine months ended September 30, 2011 compared to $8.0 million for the nine months ended September 30, 2010. The decrease in net cash provided by operating activities was primarily due to changes in working capital requirements, driven by changes in inventory and accrued expenses and other current liabilities, which decreased cash flows by $13.4 million for the nine months ended September 30, 2011 compared to a decrease of

approximately $3.5 million in the nine months ended September 30, 2010. Inventory increased as a result of an increase in revenues and accrued expenses and other current liabilities decreased due to timing of cash payments. These decreases in cash flows were partially offset by a $7.0 million increase in net income for the nine months ended September 30, 2011 due to higher revenues and lower restructuring costs as compared to the same period in prior year.

Net cash used in investing activities increased to $7.6 million for the nine months ended September 30, 2011 from $4.1 million for the nine months ended September 30, 2010 primarily due to $3.8 million of cash paid, net of cash acquired of $1.2 million, in connection with the SLM acquisition. The increase in cash used relating to the SLM acquisition is partially offset by a reduction in capital expenditures from $4.5 million for the nine months ended September 30, 2010 to $3.9 million for the nine months ended September 30, 2011. The decrease in capital expenditures compared to the prior year is due to the timing of capital projects placed in service in the current year as compared to the prior year.

Consolidated capital expenditures for the calendar year 2011 were initially budgeted at $11.0 million to $12.0 million, however, based on the timing of projects and the current outlook for the remainder of 2011, the Company does not expect capital expenditures to exceed $10.0 million for the year. Such expenditures, however, will depend on many factors beyond the Company’s control, including, without limitation, demand for services as well as domestic and foreign government regulations. No assurance can be given that required capital expenditures will not exceed anticipated amounts during 2011 or thereafter. Capital expenditures during the year are expected to be funded from existing cash and anticipated cash flows from operations.

Net cash provided by financing activities for the nine months ended September 30, 2011 was $0.2 million compared to net cash used in financing activities of $0.1 million for the nine months ended September 30, 2010. The increase is due to the issuance of $0.3 million in common stock related to stock option exercises. Financing activities related to long-term capital leases during the current year period was consistent with the prior year period.

While the Company’s operating results for the nine months ended September 30, 2011 have improved as compared to the same period in the prior year, the worldwide economy, including the markets in which the Company operates, continues, in varying degrees to remain sluggish, and as such, the Company believes that the risks to its business and its customers remain heightened. Lower levels of liquidity and capital adequacy affecting lenders, increases in defaults and bankruptcies by customers and suppliers, and volatility in credit and equity markets, as observed in this economic environment, could continue to have a negative impact on the Company’s business, operating results, cash flows or financial condition in a number of ways, including reductions in revenues and profits, increased bad debts, and financial instability of suppliers and insurers.

Cash held in the bank accounts of foreign subsidiaries at September 30, 2011 was $15.1 million. The Company intends to permanently reinvest undistributed earnings of its foreign subsidiaries and accordingly, no provision for U.S. federal or state income taxes has been provided thereon. If the Company were to repatriate the cash held by its foreign subsidiaries, the Company would be required to accrue and pay income taxes in the U.S.

On August 4, 2009, Furmanite Worldwide, Inc. (“FWI”), a wholly owned subsidiary of the Parent Company, and certain foreign subsidiaries of FWI (the “designated borrowers”) entered into a credit agreement dated July 31, 2009 with a banking syndicate comprising Bank of America, N.A. and Compass Bank (the “Credit Agreement”). The Credit Agreement, which matures on January 31, 2013, provides a revolving credit facility of up to $50.0 million. A portion of the amount available under the Credit Agreement (not in excess of $20.0 million) is available for the issuance of letters of credit. In addition, a portion of the amount available under the Credit Agreement (not in excess of $5.0 million in the aggregate) is available for swing line loans to FWI. The loans outstanding under the Credit Agreement may not exceed $35.0 million in the aggregate to the designated borrowers.

At each of September 30, 2011 and December 31, 2010, $30.0 million was outstanding under the Credit Agreement. Borrowings under the Credit Agreement bear interest at variable rates (based on the prime rate, federal funds rate or Eurocurrency rate at the option of the borrower, including a margin above such rates, and subject to an adjustment based on a calculated funded debt to Adjusted EBITDA ratio (as defined in the Credit Agreement)) which was 2.2% at September 30, 2011 and 2.3% at December 31, 2010. The Credit Agreement contains a commitment fee which ranges between 0.25% to 0.30% based on the funded debt to Adjusted EBITDA ratio, and was 0.25% at each of September 30, 2011 and December 31, 2010, based on the unused portion of the amount available under the Credit Agreement. Adjusted EBTIDA is net income plus interest, income taxes, depreciation and amortization, and other non-cash expenses minus income tax credits and non-cash items increasing net income as defined in the Credit Agreement. All obligations under the Credit Agreement are guaranteed by FWI and certain of its subsidiaries under a guaranty and collateral agreement, and are secured by a first priority lien on FWI and certain of its subsidiaries’ assets (which approximates $150.6 million of current assets and property and equipment as of September 30, 2011) and is without recourse to the Parent Company. The Credit Agreement includes requirements that the Company must maintain: (i) a funded debt to Adjusted

EBITDA ratio of no more than 2.75 to 1.0 as of the last day of each fiscal quarter, measured on a trailing four-quarters basis, and (ii) a fixed charge coverage ratio (as defined in the Credit Agreement) of at least 3.0 to 1.0 for the same trailing four quarter period. FWI is also subject to certain other compliance provisions including, but not limited to, maintaining certain tangible asset concentration levels, and capital expenditure limitations as well as restrictions on indebtedness, guarantees, dividends and other contingent obligations and transactions. Events of default under the Credit Agreement include customary events, such as change of control, breach of covenants or breach of representations and warranties. At September 30, 2011, FWI was in compliance with all covenants under the Credit Agreement.

Considering the outstanding borrowings of $30.0 million, and $1.1 million related to outstanding letters of credit, the unused borrowing capacity under the Credit Agreement was $18.9 million at September 30, 2011, with a limit of $5.0 million of this capacity remaining for the designated borrowers.

On February 23, 2011, FWI entered into a Stock Purchase Agreement to acquire 100% of the outstanding stock of Self Leveling Machines, Inc. and a subsidiary of FWI entered into an Asset Purchase Agreement to acquire substantially all of the material operating and intangible assets of Self Levelling Machines Pty. Ltd. for total consideration of $9.1 million, net of cash acquired of $1.2 million. SLM provides large scale on-site machining, which includes engineering, fabrication and execution of highly-specialized machining solutions for large-scale equipment or operations.

In connection with the acquisition of SLM, on February 23, 2011, FWI entered into a consent and waiver agreement as it relates to the Credit Agreement. Pursuant to the consent and waiver agreement, Bank of America, N.A. and Compass Bank consented to the SLM acquisition and waived any default or event of default for certain debt covenants that would arise as a result of the SLM acquisition. FWI funded the cost of the acquisition with $5.0 million in cash and by issuing notes payable (the “Notes”) to the sellers’ equity holders for $5.3 million ($2.9 million denominated in U.S. dollar and $2.4 million denominated in Australian dollar) payable in two annual installments, which mature February 23, 2013. All obligations under the Notes are secured by a first priority lien on the assets acquired in the acquisition. At September 30, 2011, $5.2 million was outstanding under the Notes. The Notes bear interest at a fixed rate of 2.5% per annum.

At the end of 2009 and in the first half of 2010, the Company committed to cost reduction initiatives in order to more strategically align the Company’s operating, selling, general and administrative costs relative to revenues. As of September 30, 2011, the costs incurred since the inception of these cost reduction initiatives totaled approximately $7.0 million. During the nine months ended September 30, 2011, the Company incurred restructuring charges of $0.3 million related to the 2010 initiative and made cash payments of $1.1 million related to both the 2009 and 2010 initiatives. As of September 30, 2011, the remaining reserve associated with these initiatives totaled $0.8 million with estimated additional charges to be incurred of approximately $0.4 million, all of which are expected to require cash payments. Total workforce reductions in which severance costs were incurred related to the cost reduction initiatives included terminations for 165 employees, which included reductions of 31 employees in the Americas, 133 employees in EMEA, and one employee in Asia-Pacific.

The Company does not anticipate paying any dividends as it believes investing earnings back into the Company will provide a better long-term return to stockholders in increased per share value. The Company believes that funds generated from operations, together with existing cash and available credit under the Credit Agreement, will be sufficient to finance current operations, including the Company’s remaining cost reduction initiative obligations, planned capital expenditure requirements and internal growth for the foreseeable future.

Critical Accounting Policies and Estimates

The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant policies are presented in the Notes to the Consolidated Financial Statements and under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Critical accounting policies are those that are most important to the portrayal of the Company’s financial position and results of operations. These policies require management’s most difficult, subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. The Company’s critical accounting policies and estimates, for

which no significant changes have occurred in the nine months ended September 30, 2011, include revenue recognition, allowance for doubtful accounts, goodwill, intangible and long-lived assets, stock-based compensation, income taxes, defined benefit pension plan, contingencies, and exit or disposal obligations. Critical accounting policies are discussed regularly, at least quarterly, with the Audit Committee of the Company’s Board of Directors.

Revenue Recognition

Revenues are recorded in accordance with Financial Account Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition, when realized or realizable, and earned.

Revenues are recognized using the completed-contract method, when persuasive evidence of an arrangement exists, services to customers have been rendered or products have been delivered, the selling price is fixed or determinable and collectability is reasonably assured. Revenues are recorded net of sales tax. Substantially all projects are short term in nature; however, the Company occasionally enters into contracts that are longer in duration that represent multiple element arrangements, which include a combination of services and products. The Company separates deliverables into units of accounting based on whether the deliverables have standalone value to the customer. The arrangement consideration is allocated to the separate units of accounting based on each unit’s relative selling price determined using vendor specific objective evidence. Revenues are recognized for the separate units of accounting when services to customers have been rendered or products have been delivered and risk of ownership has passed to the customer. The Company provides limited warranties to customers, depending upon the service performed. Warranty claim costs were not material during the three or nine months ended September 30, 2011 or 2010.

Allowance for Doubtful Accounts

Credit is extended to customers based on evaluation of the customer’s financial condition and generally collateral is not required. Accounts receivable outstanding longer than contractual payment terms are considered past due. The Company regularly evaluates and adjusts accounts receivable as doubtful based on a combination of write-off history, aging analysis and information available on specific accounts. The Company writes off accounts receivable when they become uncollectible. Any payments subsequently received on such receivables are credited to the allowance in the period the payment is received.

Goodwill, Intangible and Long-Lived Assets

The Company accounts for goodwill and other intangible assets in accordance with the provisions of FASB ASC 350, Intangibles — Goodwill and Other. Under FASB ASC 350, intangible assets with lives restricted by contractual, legal or other means are amortized over their useful lives. Goodwill and other intangible assets not subject to amortization are tested for impairment annually (in the fourth quarter of each calendar year), or more frequently if events or changes in circumstances indicate that the assets might be impaired. Examples of such events or circumstances include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, or a loss of key personnel.

FASB ASC 350 requires a two-step process for testing goodwill impairment. First, the fair value of each reporting unit is compared to its carrying value to determine whether an indication of impairment exists. A reporting unit is an operating segment or one level below an operating segment (referred to as a component). Two or more components of an operating segment shall be aggregated and deemed a single reporting unit if the components have similar economic characteristics. The Company has three reporting units for the purpose of testing goodwill impairment. Second, if an impairment is indicated, the implied fair value of the reporting unit’s goodwill is determined by allocating the unit’s fair value to its assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been acquired in a business combination. The amount of impairment for goodwill and other intangible assets is measured as the excess of the carrying value over the implied fair value.

The Company uses market capitalization as the basis for its measurement of fair value as management considers this approach the most meaningful measure, considering the quoted market price as providing the best evidence of fair value. In performing the analysis, the Company uses the stock price on December 31 of each year as the valuation date. On December 31, 2010, Furmanite’s fair value substantially exceeded its carrying value.

The Company accounts for long-lived assets in accordance with the provisions of FASB ASC 360, Property, Plant, and Equipment. Under FASB ASC 360, the Company reviews long-lived assets, which consist of finite-lived intangible assets and property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Factors that may affect

recoverability include changes in planned use of equipment, closing of facilities and discontinuance of service lines. Property and equipment to be held and used is reviewed at least annually for possible impairment. The Company’s impairment review is based on an estimate of the undiscounted cash flow at the lowest level for which identifiable cash flows exist. Impairment occurs when the carrying value of the assets exceeds the estimated future undiscounted cash flows generated by the asset and the impairment is viewed as other than temporary. When impairment is indicated, an impairment charge is recorded for the difference between the carrying value of the asset and its fair market value. Depending on the asset, fair market value may be determined either by use of a discounted cash flow model or by reference to estimated selling values of assets in similar condition.

Stock-Based Compensation

All stock-based compensation is recognized as an expense in the financial statements and such costs are measured at the fair value of the award at the date of grant. The fair value of stock-based payment awards on the date of grant as determined by the Black-Scholes model is affected by the Company’s stock price on the date of the grant as well as other assumptions. Assumptions utilized in the fair value calculations include the expected stock price volatility over the term of the awards (estimated using the historical volatility of the Company’s stock price), the risk free interest rate (based on the U.S. Treasury Note rate over the expected term of the option), the dividend yield (assumed to be zero, as the Company has not paid, nor anticipates paying, any cash dividends in the foreseeable future), and employee stock option exercise behavior and forfeiture assumptions (based on historical experience and other relevant factors).

Income Taxes

Deferred tax assets and liabilities result from temporary differences between the U.S. GAAP and tax treatment of certain income and expense items. The Company must assess and make estimates regarding the likelihood that the deferred tax assets will be recovered. To the extent that it is determined the deferred tax assets will not be recovered, a valuation allowance must be established for such assets. In making such a determination, the Company must take into account positive and negative evidence including projections of future taxable income and assessments of potential tax planning strategies.

The Company recognizes the tax benefit from uncertain tax positions only if it is more-likely-than-not that the tax position will be sustained on examination by the applicable taxing authorities, based on the technical merits of the position. The tax benefit recognized is based on the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with the taxing authority. Uncertain tax positions in certain foreign jurisdictions would not impact the effective foreign tax rate because unrecognized non-current tax benefits are offset by the foreign net operating loss carryforwards, which are fully reserved. The Company recognizes interest expense on underpayments of income taxes and accrued penalties related to unrecognized non-current tax benefits as part of the income tax provision.

Defined Benefit Pension Plan

Pension benefit costs and liabilities are dependent on assumptions used in calculating such amounts. The primary assumptions include factors such as discount rates, expected investment return on plan assets, mortality rates and retirement rates. These rates are reviewed annually and adjusted to reflect current conditions. These rates are determined based on reference to yields. The compensation increase rate is based on historical experience. The expected return on plan assets is derived from detailed periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks (standard deviations) and correlations of returns among the asset classes that comprise the plans’ asset mix. While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return. Mortality and retirement rates are based on actual and anticipated plan experience. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation in future periods. While the Company believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect pension and postretirement obligation and future expense.

Contingencies

Environmental

Liabilities are recorded when site restoration or environmental remediation and cleanup obligations are either known or considered probable and can be reasonably estimated. Recoveries of environmental costs through insurance, indemnification arrangements or other sources are recognized when such recoveries become certain.

The Company capitalizes environmental costs only if the costs are recoverable and the costs extend the life, increase the capacity, or improve the safety or efficiency of property owned by the Company as compared with the condition of that property when originally constructed or acquired, or if the costs mitigate or prevent environmental contamination that has yet to occur and that otherwise may result from future operations or activities and the costs improve the property compared with its condition when constructed or acquired. All other environmental costs are expensed.

Other

The Company establishes a liability for all other loss contingencies, when information indicates that it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated.

Exit or Disposal Obligations

In the fourth quarter of 2009 and in the first half of 2010, the Company committed to cost reduction initiatives, including planned workforce reductions and restructuring of certain functions. The Company has taken these specific actions in order to more strategically align its operating, selling, general and administrative costs relative to revenues. The Company has recorded expenses related to these cost reduction initiatives for severance, lease cancellations, and other restructuring costs in accordance with FASB ASC 420-10, “Exit or Disposal Cost Obligations” and FASB ASC 712-10, “Nonretirement Postemployment Benefits.”

Under FASB ASC 420-10, costs associated with restructuring activities are generally recognized when they are incurred. In the case of leases, the expense is estimated and accrued when the property is vacated. In addition, post-employment benefits accrued for workforce reductions related to restructuring activities are accounted for under FASB ASC 712-10. A liability for post-employment benefits is generally recorded when payment is probable, the amount is reasonably estimable, and the obligation relates to rights that have vested or accumulated. The Company continually evaluates the adequacy of the remaining liabilities under its restructuring initiatives. Although the Company believes that these estimates accurately reflect the costs of its restructuring plans, actual results may differ, thereby requiring the Company to record additional provisions or reverse a portion of such provisions.

New Accounting Pronouncements

In January 2010, the FASB issued Accounting Standards Update 2010-06, Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). ASU 2010-06 provides more robust disclosures about the transfers between Levels 1 and 2, the activity in Level 3 fair value measurements and clarifies the level of disaggregation and disclosure related to the valuation techniques and inputs used. The new disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the Level 3 activity disclosures, which are effective for fiscal years beginning after December 15, 2010. There was not a material impact from the adoption of this guidance on the Company’s consolidated financial statements.

In June 2011, the FASB issued Accounting Standards Update 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-04”). ASU 2011-04 clarifies the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. ASU 2011-04 provides further clarification on the: (1) application of the highest and best use and valuation premise concepts, (2) fair value measurement of an instrument classified in a reporting entity’s shareholders’ equity, and (3) disclosure of unobservable inputs used in Level 3 fair value measurements. ASU 2011-04 also changes how fair value is measured for financial instruments that are managed within a portfolio and how premiums and discounts are applied in measuring fair value. In addition to the clarification of Level 3 disclosures, ASU 2011-04 requires additional disclosures for fair value measurements as it relates to the following: (1) the valuation process and sensitivity of changes in unobservable inputs, (2) a reporting entity’s use of a nonfinancial asset in a way that differs from the asset’s highest and best use, and (3) the categorization by level of the fair value hierarchy for items that are not measured at fair value but for which the fair value is required to be disclosed. ASU 2011-04 is effective for interim and annual periods beginning on or after December 15, 2011. The Company does not expect a material impact from the adoption of this guidance on the Company’s consolidated financial statements.

In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 amends existing guidance by allowing only the following two options for presenting the components of net income and other comprehensive income: (1) in a single continuous financial statement or (2) in two separate but consecutive financial statements. In addition, items that are reclassified from other comprehensive income to net income must be presented on the face

of the financial statements. ASU 2011-05 does not change the items that must be reported in other comprehensive income, when an item of other comprehensive income must be reclassified to net income, a company’s option to present components of other comprehensive income either net of related tax effects or before related tax effects, nor does it affect how earnings per share is calculated or presented. ASU 2011-05 requires retrospective application, and it is effective for fiscal years and interim periods within those years, beginning after December 15, 2011. The Company anticipates the adoption of this guidance will change the presentation and provide additional detail on certain consolidated financial statements, but will not have any other material impact.

In September 2011, the FASB issued Accounting Standards Update 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”). ASU 2011-08 gives a company the option to assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. ASU 2011-08 allows a company to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. Using the qualitative assessment in ASU 2011-08, if a company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, performing the two-step impairment test is unnecessary. If a company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, it is required to perform step one of the two-step impairment test. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company does not expect a material impact from the adoption of this guidance on its consolidated financial statements.

Off-Balance Sheet Transactions

The Company was not a party to any off-balance sheet transactions at September 30, 2011 or December 31, 2010, or for the nine months ended September 30, 2011.

Inflation and Changing Prices

The Company does not operate or conduct business in hyper-inflationary countries nor enter into long-term supply contracts that may impact margins due to inflation. Changes in prices of goods and services are reflected on proposals, bids or quotes submitted to customers.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s principal market risk exposures (i.e., the risk of loss arising from the adverse changes in market rates and prices) are to changes in interest rates on the Company’s debt and investment portfolios and fluctuations in foreign currency.

The Company centrally manages its debt, considering investment opportunities and risks, tax consequences and overall financing strategies. Based on the amount of variable rate debt, $30.0 million at September 30, 2011, an increase in interest rates by one hundred basis points would increase annual interest expense by approximately $0.3 million.

A significant portion of the Company’s business is exposed to fluctuations in the value of the U.S. dollar as compared to foreign currencies as a result of the foreign operations of the Company in Australia, Bahrain, Belgium, Canada, China, Denmark, France, Germany, Malaysia, The Netherlands, New Zealand, Nigeria, Norway, Singapore, Sweden and the United Kingdom. Overall volatility in currency exchange rates has increased over the past several years. During 2011, currencies have strengthened, as foreign currencies exchange rate changes, primarily the Euro, the Australian Dollar and the British Pound, relative to the U.S. dollar resulted in a favorable impact on the Company’s U.S. dollar reported revenues for the three and nine months ended September 30, 2011 when compared to the three and nine months ended September 30, 2010. The revenue impact was somewhat mitigated with similar exchange effects on operating costs thereby reducing the exchange rate effect on operating income. The Company does not use interest rate or foreign currency rate hedges.

Based on the nine months ended September 30, 2011, foreign currency-based revenues and operating income of $124.5 million and $13.8 million, respectively, a ten percent decline in all applicable foreign currencies would result in a decrease in revenues and operating income of $11.3 million and $1.3 million, respectively.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company’s principal executive officer and principal financial officer have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2011. Based on that evaluation, the principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2011, the most recently completed fiscal quarter, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

FURMANITE CORPORATION AND SUBSIDIARIES

PART II — Other Information

Item 1. Legal Proceedings

The operations of the Company are subject to federal, state and local laws and regulations in the United States and various foreign locations relating to protection of the environment. Although the Company believes its operations are in compliance with applicable environmental regulations, there can be no assurance that costs and liabilities will not be incurred by the Company. Moreover, it is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from operations of the Company, could result in costs and liabilities to the Company. The Company has recorded, in other liabilities, an undiscounted reserve for environmental liabilities related to the remediation of site contamination for properties in the United States in the amount of $1.0 million and $1.2 million at September 30, 2011 and December 31, 2010, respectively. While there is a reasonable possibility due to the inherent nature of environmental liabilities that a loss exceeding amounts already recognized could occur, the Company does not believe such amounts are material to its financial statements.

On September 19, 2011, John Daugherty filed a derivative shareholder petition in the County Court at Law No. 3, Dallas County, Texas, on behalf of the Company against certain of the Company’s directors and executive officers and naming the Company as a nominal party. The petition alleges the named directors and officers breached their fiduciary responsibilities in regard to certain internal control matters. The petitioner requests that the defendants pay unspecified damages to the Company. On October 31, 2011, the defendants filed their answer in the lawsuit as well as motions to dismiss it. The defendants have informed the Company that they believe this lawsuit is without merit and intend to vigorously defend the lawsuit.

Furmanite America, Inc., a subsidiary of the Company, is involved in disputes with a customer, who is negotiating with a governmental regulatory agency and claims that the subsidiary failed to provide them with satisfactory services at the customer’s facilities. On April 17, 2009, a customer, INEOS USA LLC, initiated legal action against the subsidiary in the Common Pleas Court of Allen County, Ohio, alleging that the subsidiary and one of its former employees, who performed data services at one of the customer’s facilities, breached its contract with the customer and failed to provide the customer with adequate and timely information to support the subsidiary’s work at the customer’s facility from 1998 through the second quarter of 2005. The customer’s complaint seeks damages in an amount that the subsidiary believes represents the total proposed civil penalty, plus the cost of unspecified supplemental environmental projects requested by the regulatory agency to reduce air emissions at the customer’s facility, and also seeks unspecified punitive damages. The subsidiary believes that it provided the customer with adequate and timely information to support the subsidiary’s work at the customer’s facilities and will vigorously defend against the customer’s claim.

In the first quarter of 2008, a subsidiary of the Company filed an action seeking to vacate a $1.35 million arbitration award related to a sales brokerage agreement associated with a business that the subsidiary sold in 2005. The subsidiary believed that the sales broker was an affiliate of another company that in 2006 settled all of its claims, as well as all of the claims of its affiliates, against the subsidiary. The action to vacate the arbitration award terminated and, in January 2010, the subsidiary paid the full amount of the arbitration award plus accrued interest to the sales broker which was accrued as of December 31, 2009. In separate actions, the subsidiary was seeking to enforce the prior settlement agreement executed by the sales broker’s affiliate and obtain an equitable offset of the arbitration award, however, upon mutual agreement by all parties, these separate actions were dismissed by the court in July 2010.

The 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 material adverse effect on the financial position, results of operations or liquidity of the Company.

While the Company cannot make an assessment of the eventual outcome of all of these matters or determine the extent, if any, of any potential uninsured liability or damage, reserves of $1.3 million and $1.9 million, which include the Furmanite America, Inc. litigation, were recorded in accrued expenses and other current liabilities as of September 30, 2011 and December 31, 2010, respectively. While there is a reasonable possibility that a loss exceeding amounts already recognized could occur, the Company does not believe such amounts are material to its financial statements.

Item 1A. Risk Factors

During the quarter ended September 30, 2011, there were no material changes to the risk factors reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Item 6. Exhibits

3.1		Restated Certificate of Incorporation of the Registrant, dated September 26, 1979, incorporated by reference herein to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-16.
3.2		Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant, dated April 30, 1981, incorporated by reference herein to Exhibit 3.2 to the Registrant’s Form 10-K for the year ended December 31, 1981.
3.3		Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant, dated May 28, 1985, incorporated by reference herein to Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended June 30, 1985.
3.4		Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant, dated September 17, 1985, incorporated by reference herein to Exhibit 4.1 to the Registrant’s Form 10-Q for the quarter ended September 30, 1985.
3.5		Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant, dated July 10, 1990, incorporated by reference herein to Exhibit 3.5 to the Registrant’s Form 10-K for the year ended December 31, 1990.
3.6		Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant, dated September 21, 1990, incorporated by reference herein to Exhibit 3.5 to the Registrant’s Form 10-Q for the quarter ended September 30, 1990.
3.7		Certificate of Amendment to the Restated Certificate of Incorporation of the Registrant, dated August 8, 2001, incorporated by reference herein to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on August 22, 2001.
3.8		By-laws of the Registrant, as amended and restated June 14, 2007, filed as Exhibit 3.1 to the 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 4.2 to the Registrant’s 10-K for the year ended December 31, 2008, which exhibit is incorporated herein by reference.
4.2		Rights Agreement, dated as of April 15, 2008, between the Registrant and The Bank of New York Trust Company, N.A., a national banking association, as Rights Agent, which includes as exhibits, the Form of Rights 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.
4.3		Letters to stockholders of the Registrant, dated April 19, 2008 (incorporated by reference herein to Exhibit 4.2 to the Registrant’s Form 8-A/A filed on April 18, 2008).
31.1*		Certification of Chief Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated as of November 7, 2011.
31.2*		Certification of Principal Financial Officer, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated as of November 7, 2011.
32.1*		Certification of Chief Executive Officer, Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002, dated as of November 7, 2011.
32.2*		Certification of Principal Financial Officer, Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002, dated as of November 7, 2011.
101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema Document
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document
101.DEF**		XBRL Taxonomy Definition Linkbase Document
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document

Signature

Pursuant to the requirements 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.

Date: November 7, 2011