Xerium Technologies, Inc. (NYSE:XRM), a leading global manufacturer of industrial textiles and roll covers used primarily in the paper production process, announced today the results of its operations for the quarter and six months ended June 30, 2011. For the second quarter of 2011, net sales increased by 13%, while income from operations improved 65% compared to the second quarter of 2010. For the six months ended June 30, 2011, net sales and income from operations increased 10% and 140%, respectively, compared to the six months ended June 30, 2010. In addition, net income (loss) per diluted share increased to $0.11 from $(5.38) and to $0.15 from $(14.07) for the quarter and six months ended June 30, 2011 compared to same periods in 2010.
“Our business performed as we had expected this quarter. Demand for our products gained additional strength around the globe and we saw increases in net sales volumes in both the clothing and roll covers businesses,” said Stephen Light, President, Chief Executive Officer and Chairman. “In addition, net sales from new product introductions continue to grow and now account for more than 48% of total net sales, which demonstrates very rapid customer acceptance, based on the products’ excellent performance. Net sales from new products have increased from less than 20% in 2008, when we launched our new product initiatives, and roughly 30% a year ago, as we advance toward our goal of 60% by 2012.”
SECOND QUARTER FINANCIAL HIGHLIGHTS
Net sales for the 2011 second quarter were $150.4 million, a 13.3% increase from net sales for the 2010 second quarter of $132.8 million. Excluding currency effects shown in the table below, second quarter 2011 net sales increased 6.2% from the second quarter of 2010, with increases of 4.6% and 9.3% in the clothing and roll covers business units, respectively. Both results exceeded paper tonnage growth in the same periods.
Gross margins improved 12.0% to $57.9 million for the second quarter of 2011 from $51.7 million for the second quarter of 2010, primarily as a result of increased net sales volume and favorable currency effects. As a percentage of net sales, gross margins declined to 38.5% of revenues for the second quarter of 2011 from 38.9% of revenues for the second quarter of 2010. Excluding foreign currency effects, the gross margin rate remained flat at 38.9%, as higher sales growth of lower margin product lines and increased material and freight expense related to the higher cost of rubber and petroleum were offset by reduced inventory reserve provisions caused by improved recoveries on aged inventories.
The Company’s operating expenses (selling, general and administrative, restructuring and impairments and research and development expenses) of $40.2 million for the second quarter of 2011 declined by $0.8 million, or 2.0%, from operating expenses of $41.0 million in the second quarter of 2010. The decrease in operating expenses during the second quarter of 2011 is primarily the net result of the following:
|-- A decrease in restructuring and impairment expenses of $2.2 million in the second quarter of 2011 as compared to the second quarter of 2010 as a result of reduced restructuring activity|
|-- A decrease of $1.1 million in general and administrative expense, due to the reversal of a value added tax (“VAT”) liability in South America as a result of a favorable court decision in 2011|
|-- A decrease in stock based compensation expense of $0.9 million, primarily as a result of the acceleration of certain restricted stock plans in connection with the reorganization in 2010|
|-- A decrease of $0.8 million in general and administrative expense due to savings achieved related to legal, insurance and consulting costs|
|Partially offsetting these items were:|
|-- Unfavorable foreign currency impact of $3.3 million|
|-- An increase of $1.0 million selling expenses, principally due to increased net sales volume and commissions|
|--||Interest expense decreased $6.9 million from the second quarter of 2010 to the current quarter due to $1.7 million lower net interest expense as a result of lower debt balances and interest rates from 2010 to 2011, $3.5 million lower amortization of deferred financing costs in 2011, and $2.2 million due to the interest rate swaps being fully amortized at December 31, 2010. These decreases were partially offset by unfavorable currency effects of $0.5 million.|
|--||The loss on extinguishment of debt of $2.9 million represents the write-off of deferred financing costs as a result of the debt refinancing completed on May 26, 2011.|
|--||The decrease in income tax expense in the second quarter of 2010 as compared with the second quarter of 2011 was principally due to (i) changes in the amount of income we earned in tax paying jurisdictions relative to the amount of income we earned in non-tax paying jurisdictions, and (ii) non-recurring tax expense we recorded in the quarter ended June 30, 2010 to increase our gross uncertain tax position which did not affect 2011.|
|--||Net income for the second quarter of 2011 was $1.6 million or $0.11 per diluted share, compared to a net loss of $(40.0) million or $(5.38) per diluted share for the second quarter of 2010. In addition to the items noted above, the improvement in net income is due to reorganization expenses of $29.2 million incurred in the second quarter of 2010. The disproportionate impact on diluted earnings per share was due to the increase from 7.4 million shares as of June 30, 2010 to 15.1 million shares as of June 30, 2011. This increase in shares was due to the reorganization that took place in May of 2010.|
|--||Adjusted EBITDA (as defined by the Company’s credit facility) increased 19.8%, or $5.0 million, to $30.2 million in the current quarter from $25.2 million in the second quarter of 2010. See “Non-GAAP Financial Measures” below for further discussion.|
|--||Unrestricted and restricted cash at June 30, 2011 was $34.5 million, compared to $52.4 million at December 31, 2010. The decrease in the cash balances from December 31, 2010 is primarily due to the payment of approximately $16.8 million deferred financing fees in connection with the debt refinancing in May of 2011.|
|--||Total bank debt at June 30, 2011 was $496.2 million, an increase of $14.8 million from $481.4 million at December 31, 2010 as a result of unfavorable currency effects of $14.6 million and $4.8 million of additional borrowings as a result of the debt refinancing in May of 2011. These increases were partially offset by $4.6 million of principal payments made in the six months ended June 30, 2011.|
|--||On May 26, 2011, we completed a refinancing of our long-term debt, replacing certain of our outstanding indebtedness with a private placement of $240 million of 8.875% senior unsecured notes due in 2018 and a new approximately $278 million multi-currency senior secured credit facility, comprised of approximately $248 million of senior secured term loans and a $30 million senior secured revolving credit facility. The goal of the refinancing was to extend the maturity of, and fix the interest rate on, a portion of our debt, while providing increased liquidity and flexibility. The annual savings, based on interest rates at the date of closing is estimated to be $1.7 million or $0.11 per diluted share over the previous long-term debt structure.|
|--||Capital expenditures for the second quarter of 2011 were $7.8 million, consisting of $2.2 million in growth capex and $5.6 million in maintenance capex. That compares to the second quarter of 2010 when the Company reported $6.7 million of capital spending, consisting of $4.5 million in growth capex and $2.2 million of maintenance capex. The Company currently targets total capital expenditures for 2011 of approximately $32 million, to be evenly split between growth and maintenance capex.|
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV