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Xerium Technologies (XRM)

Q4 2010 Earnings Call

March 10, 2011 9:00 am ET


Stephen Light - Chairman, Chief Executive Officer and President

Kevin McDougall - Executive Vice President and General Counsel


Ross Berner - Weintraub Capital Management

Richard Hoss - Roth Capital Partners, LLC

DeForest Hinman - Paradigm Capital Management

Erin Wilson - Banc of America Securities

Robert Gould - Private Investor

Mark Fisher - Ahap

Kevin Cohen - Imperial Capital


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Ladies and gentlemen, welcome to Xerium Technologies Fourth Quarter 2010 Financial Results Conference Call on March 10, 2011. [Operator Instructions] I would now like to turn the conference over to Mr. Kevin McDougall, Xerium's Executive Vice President and General Counsel. Please go ahead, sir.

Kevin McDougall

Thank you, and welcome to the Xerium Technologies Fourth Quarter 2010 Financial Results Conference Call. Joining me this morning are Stephen Light, the CEO, Chairman and President of Xerium Technologies; and Brian Fox, Interim Chief Financial Officer. Stephen will start the discussion this morning with an update on our progress and then we'll 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 close on Wednesday, March 9, 2011. Any information in this call was probably disclosed, and this conference call is being webcast using the link in the Investor Relations home Page of our website at We have also posted a slide presentation on our website which we will 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 March 10, 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 of our company. Reconciliations of these measures to the comparable GAAP numbers are available on our press release and other materials which are each posted in the Investor Relations section of our Web site at With that, I'll turn the call over to Stephen.

Stephen Light

Thanks, Kevin. Good morning, ladies and gentlemen. Thank you for taking the time this morning to join us for Xerium Technologies Fourth Quarter and Full Year 2010 Investor Call. Our company continues to make measurable progress in the implementation of our three strategies. Managing in a fiscally responsible manner, developing and introducing new products to our customers value and maximizing the contribution of every person in the company. I look forward to describing this progress to you.

Last night, we published our earnings press release, we posted a set of PowerPoint slides in the Investor Relations sector of our Xerium website, I'll present my prepared remarks in concert with the posted slides. Investors and those considering making an investment are advised to read the disclaimer on Slide 2 at their convenience.

Consolidated booking shown on Chart 3 remained essentially constant with the prior quarter at $142.7 million, comparing this order intake rate to last year's Q4 and adjusting for the significant shift in the exchange rate between the euro and the dollar, which was $1.48 per euro in Q4 of '09 and averaged a $1.36 per euro in Q4 of '10, shows the bookings' increase of 3%. That 3% real growth is what our factories will experience in the square meters and tons of Paper Machine Clothing and the pounds in kilogram of the Roll Covering when those orders hit production.

You'll note on the chart that December bookings were just slightly lower than October and November, recognizing the end of year holiday period. We believe that the year-over-year volume growth indicated by Q4's bookings is more typical of normalized activity, and importantly is sustainable. Whereas the rapid growth in the fourth quarter of 2009 and the first half of 2010 could be attributed to our customers' replenishment of depleted Paper Machine Clothing inventories at their paper mill.

Meanwhile, our Clothing backlog remained extremely strong, and our clothing factories are operating at their practical capacity. On Chart 4, you see the Rolls bookings increased a very strong 7.4% from prior quarter, and 16.5% from the prior-year Q4. Adjusting for currency, Rolls order intake actually rose 20.6%. My Rolls team believes the end of year search of Rolls orders was likely the result of mill managers who have been very frugal throughout the year, recognizing an opportunity for end of year spending.

We were able to take advantage of this year-end opportunity provided by the market as a result of significant operational improvements in our Roll Covering plants, which have allowed us to shortened our lead time and increase our capacity without the incremental operating expenses. It is entirely likely that as a result of the strong fourth quarter volume, we pulled over this forward from Q1 2011. Nonetheless, we anticipate Q1's order intake will be about normal, which is still quite acceptable to us.

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