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Xerium Technologies, Inc. (NYSE: XRM), a leading global provider of industrial consumable products and services, today announced its Q3 2013 results.
* Sales continue to increase:
On a constant currency basis, Q3 2013 sales increased 0.2% from Q3 2012. See “Segment Information” and “Non-GAAP Financial Measures” below for further discussion.
Q3 2013 sales per employee were $171k, remaining at a four year high.
Backlog at September 30, 2013 was $156 million, slightly down from backlog at June 30, 2013, but consistent with seasonal expectations regarding orders.
2013 September Year-To-Date (YTD) sales were $413.2 million. Excluding foreign currency effects, YTD sales increased $9.1 million, or 2.2%, versus the comparable prior year period. This sales growth is in line with global paper market trade group estimates.
Excluding foreign currency effects, sales increased across all regions, $4.2 million or 5.5% in Asia, $2.8 million or 2.0% in Europe and $2.1 million or 1.1% in the Americas.
Constant currency sales growth was higher in rolls & mechanical services at $5.7 million, or 4.1%, than in machine clothing, which grew $3.4 million, or 1.3%.
Sales growth continues to be hampered by lack of production capacity in multiple product areas. The Company is progressively working to eliminate these bottlenecks.
For the last twelve months, sales and orders are exactly balanced on a constant currency basis at $542.2 million.
* Adjusted EBITDA continues to increase:
Q3 2013 Adjusted EBITDA was $27.2 million, or 20.2% of sales. This is an increase of $2.8 million or 11.5% versus Q3 2012. See "Non-GAAP Financial Measures" below.
September 2013 YTD Adjusted EBITDA was $83.3 million. This is an increase of $14.6 million or 21% over the comparable prior year period.
Sales growth accounts for 27% and net cost reduction accounts for 73% of the September 2013 YTD Adjusted EBITDA improvement.
SG&A continues to trend lower in both dollars and percentage. The improvement is primarily driven by cost reduction programs.
Gross profit and gross margin continue to trend higher. The improvement is primarily driven by cost reduction programs.
* Additional cost reduction programs continue to be implemented:
Compared to last year, cost reduction programs delivered an incremental $7.0 million in Q3 and an incremental $18.0 million through September 2013. This compares to $5.4 million in Q1 2013 and $5.6 in Q2 2013.
Plant efficiency programs (waste reduction, procurement programs, productivity and logistics programs) account for approximately 40% of the YTD cost reduction improvements while restructuring programs account for 60% of the YTD cost reduction improvements.
In Q3, Xerium announced plans to build a new, high-end press felt plant near Shanghai, China. This is anticipated to deliver both cost reduction and sales growth results.
In Q3, the Company identified its restructuring goals targeted for implementation in Q1 2014.
* The Company continues to reinvest the majority of its free cash flow to improve future results by:
Ordering long lead time equipment;
Making restructuring/severance payments;
Finishing 4 plant closures, while 7 plant expansions are currently underway;
Initiating the next plant closure;
Building the new greenfield plant in China;
Expanding the Company's after-market rolls and service footprint and capabilities;
Implementing 10 new product programs that open new market aperture for Xerium to grow sales in the future; and
Lowering its net debt to $394.4 million. Net debt leverage continues to improve in line with Adjusted EBITDA improvements, declining to approximately 3.8x Adjusted EBITDA.
* Q3 fully diluted earnings per share grew from a net loss of $(0.24) per diluted share to net income of $0.13 per diluted share, primarily as a result of increased gross margins and decreased operating expenses as a result of our cost reduction initiatives.