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Xerium Technologies (XRM)

Q1 2011 Earnings Call

May 05, 2011 10:00 am ET


Ted Orban -

Stephen Light - Chairman, Chief Executive Officer and President

Clifford Pietrafitta - Chief Financial Officer and Executive Vice President


Matt Sherwood - ZS Fund

Richard Hoss - Roth Capital Partners, LLC

DeForest Hinman - Paradigm Capital Management



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Great day ladies and gentlemen, and welcome to the First Quarter 2011 Xerium Technologies, Inc. Earnings Conference Call. My name is Thelma, and I will be your coordinator for today's event. [Operator Instructions] I would now like to turn today's presentation over to Mr. Ted Orban, Vice President and Treasurer.

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Ted Orban

Thank you, Thelma, and welcome to the Xerium Technologies First Quarter 2011 Financial Results Conference Call. Joining me this morning are Stephen Light, the CEO, Chairman and President of Xerium Technologies; and Cliff Pietrafitta, Executive Vice President and Chief Financial Officer. Stephen will start the discussion this morning with an update on our progress and then will provide further financial details with respect to the quarter. Subsequently, we will open the lines for questions.

Xerium Technologies results for the quarter were announced in a press release after market closed on Wednesday, May 4, 2011. Notification of this call was broadly disclosed, and this conference call is being webcast using the link on the Investor Relations homepage on our website at We have also posted a slide presentation on our website which we'll refer to during this conference call.

I’d also note that we will make comments today about our future expectations, plans and prospects of the company that constitute forward-looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those described in yesterday’s press release and in our SEC filings. The forward-looking statements represent our view as of today, May 5, 2011, and we specifically disclaim any obligation to update these forward-looking statements.

Lastly, on this call, we plan to discuss supplementary non-GAAP financial measures such as adjusted EBITDA that are key metrics for our credit facility covenants and that we use internally to assess liquidity and financial performance, and therefore, believe will assist you in better understanding our company. Reconciliations of these measures to the comparable GAAP numbers are available on our press release and in other materials which are each posted in the Investor Relations section of our website at

With that, I'll turn the call over to Stephen.

Stephen Light

Thanks, Ted. Good morning, ladies and gentlemen. Thanks for taking time this morning to join us for our first quarter 2011 investor call. Along with Ted, it is my pleasure to introduce Cliff Pietrafitta who has joined Xerium as our Chief Financial Officer in early March. Cliff comes to us after we conducted a lengthy executive search process. The search took much longer than I expected but I was looking for a person with just the right combination of experience, skills, energy and focus. In Cliff, we secured a person with an appropriate public company background who's focused on operational and cost management aligned very well with our strategy of competing globally on a product and operational basis. We're happy to have him with us today.

Today, he and I will share reporting duties on the call, with Cliff providing added insight into the financial charts we posted to our website last night. But first, I'll describe our market conditions and update you on several key initiative.

Our markets remain generally healthy throughout the first quarter, with paper production tonnage increasing approximately 2.3% based upon the latest data we have. Within that 2.3% increase, the largest segment, Graphical Paper, saw production tonnage increase 1/2 of 1%, packaging increased 3.8% and sanitary and household papers increased 0.4%. Whole production increased a healthy 3.9% over prior year period. These increases are inline with our expectations of GDP to GDP plus 1% growth.

Our order bookings as shown on Slide 3 of the posted charts, show Q1 2011 increased over Q1 2010 consolidated bookings by 2.9%. Sequentially, Q1 2011 increased over Q4 2010 by 8.8%. We need to examine the segments to get a clearer picture of the order intake. Within the segments, rolls orders shown on Slide 4, increased 16.7% over Q1 2010, but only 2% over Q4 2010. This modest sequential growth supports our belief that at year end, we pulled roll cover orders forward into the fourth quarter as the year wound down and maintenance team spent the remainder of their CapEx budget.

In the Clothing segment shown on Slide 5, we received orders in Q1 2011 of $101.4 million. Sequentially compared to the fourth quarter of 2010, we did see healthy growth in PMC orders of 12.8%. You will recall that in Q1 2010, the paper industry was busy rebuilding their Paper Machine Clothing inventory and we draw them down nearly 27% from their peak in November 2008.

These inventories remained stable at approximately 85% of that peak number -- I'm sorry, 85% of the January 2007 number.

It appears to us that as market conditions stabilize, we'll see fewer of the exaggerated swings we've seen in 2010 and the beginning of 2011. Meanwhile, our production backlogs are very healthy in most geographies and in most product areas.

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