Xerium Technologies, Inc. Q1 2010 Earnings Call Transcript

Xerium Technologies, Inc. Q1 2010 Earnings Call Transcript
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Xerium Technologies, Inc. (XRM)

Q1 2010 Earnings Call

May 14, 2010 9:00 am ET

Executives

Kevin McDougall – Executive Vice President, General Counsel

Stephen Light – CEO, Chairman, President

David Maffucci – Executive Vice President, Chief Financial Officer

Analysts

DeForest Hinman - Walthausen & Company

Adam Ritzer - CRT Capital

[Chris Sansoon – Sansoon Partners]

[Mark Fisher – Ahap]

Bryan Verona - Vanadium

Robert Gould - American Securities

[Steven Colter – Ronaker]

Presentation

Operator

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Previous Statements by XRM
» Xerium Technologies, Inc. Q4 2009 Earnings Call Transcript
» Xerium Technologies, Inc. Q3 2009 Earnings Call Transcript
» Xerium Technologies Q2 2009 Earnings Transcript

Ladies and gentlemen, welcome to Xerium Technologies first quarter 2010 financial results conference call on May 14, 2010. (Operator Instructions) I will now hand the conference over to Kevin McDougall, Xerium Technologies Executive Vice President and General Counsel. Please go ahead sir.

Kevin McDougall

Thank you and welcome to the Xerium Technologies first quarter 2010 financial results conference call. Joining me this morning are Stephen Light, the CEO, Chairman and President of Xerium Technologies, and Dave Maffucci, Executive Vice President and 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 financial results for the quarter were announced in a press release after the market closed on Thursday, May 13, 2010. 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

www.xerium.com

. We have also posted a Slide presentation on our website, which we’ll refer to during this conference call.

I also note that we will make comments today about future expectations, plans and prospects for the company that constitute forward-looking statements for the purpose of the Safe Harbor provisions 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 14, 2010, 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. Reconciliation to these measures to the comparable GAAP numbers are available in our press release and in the Slide presentation, which are each posted in the Investor Relations section of our website at

www.xerium.com

.

With that, I’ll turn our call over to Stephen.

Stephen Light

Thanks Kevin. Good morning ladies and gentlemen. This is a day many of us at Xerium have worked toward for quite some time. Today I have the pleasure of sharing with you that on Wednesday, the judge in federal court in Delaware confirmed our prepackaged plan of reorganization, filed with the Delaware Bankruptcy Court on March 30. He also granted a waiver of the 14 day state period prior to consummation.

Now, we are only a few steps away from completing our financial reorganization. The major remaining steps are the execution of the numerous loan, security and stock transaction documents that we and the lenders committed to in the plan. This work is already underway, so presently we expect to have these tasks completed not later than the end of May and potentially sooner with the continued excellent collaboration of our lenders.

On the date of our consummation, our debt will have been reduced to approximately $480 million, and our shares will have been recalled and new shares, along with warrants for existing equity holders, will have been issued. These new shares will reflect the 20 to 1 reverse split, executed as part of the plan of reorganization. The four year warrant, described in the plan of reorganization to be issued to shareholders of record immediately prior to the consummation date, will be valued at approximately $19.64 in the new price or 98.2 cents per warrant in current pricing, subject to final minor adjustments.

While our total debt shown in constant currency with the preceding quarter on Chart 3 of the materials we posted to the Investors section of our website last night does not show any material adjustment at the end of Q1, I want to remind listeners that the posted amount was determined on March 31, 2010, and does not reflect the post petition levels we expect to have and to report at the end of the second quarter. As a reminder, the upward movement of the debt at Q4 2009 resulted from the conversion of our interest rate hedges into debt.

While we expect you may have questions regarding the entire prepackaged bankruptcy, or the emergence transactions involved in the consummation process, rather than provide those details now we’ll address them during the Q&A session following these prepared remarks.

Now let’s talk about our operational performance in the first quarter of 2010. I’m pleased to tell you that our first quarter continued the recent trend of quarter over quarter improvements in revenue which began in Q2 2009. As shown on Chart 4, revenue continued its gradual recovery, increasing 1.9% versus the prior quarter and 15.9% versus the first quarter of 2009. And we experienced growth in most of our geographic regions.

Our Roll Cover segment showed a very strong 19.9% increase in revenue in Q1 2010 over Q1 2009. It should be noted that the impact of currency, particularly swings in the value of the euro, increased this year-over-year gain in revenue by 3.9 percentage points. Net of currency, the year-over-year increase in Roll Cover segment revenue would have been 16%. The Clothing segment’s revenue grew a strong 13.9% versus the prior year period, and when adjusted for currency it grew a still very healthy 9%. However, it is worth recalling just how dismal the first quarter of 2009 really was. By comparison, Q1 2010 revenue is still 15% below Q1 2008, so these quarter over quarter gains, while very good, are compared to a really weak starting point.

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