(Raleigh, N.C.) Xerium Technologies, Inc. (NYSE:XRM), a leading global manufacturer of industrial textiles and rolls used primarily in the paper production process, today reported results for its third quarter ended September 30, 2009. “While the global economy remains unstable, we are encouraged by some early signs of recovery in three of our four geographic operating regions, led by further reductions in customer inventory and improving prices for paper and pulp,” said Stephen R. Light, President, Chief Executive Officer and Chairman. “Our sales increased by approximately eight percent in the third quarter of 2009 as compared to the second quarter of 2009 while our gross margin as a percentage of sales remained essentially constant indicating pricing stability. While our near-term sales may not respond in the same manner as our booked future orders, an increase in such orders and discussions with many of our major customers indicate that they are feeling more positive about the future.”

“Our operational initiatives continue on plan with our new product and yield improvement programs gaining early traction, enabling us to shorten delivery lead times to our customers which we believe provides us a competitive advantage in our cash-challenged market. Having already significantly reduced our operating cost structure to better align with market realities, we remain focused on releasing additional ‘trapped cash’ from our balance sheet, shedding excess inventory and collecting aged receivables to generate cash.”

“We also continue to be fully engaged with our lenders working to resolve our debt issues.”

•Net sales for the 2009 third quarter were $130.3 million, an 18.2% decrease from net sales for the 2008 third quarter of $159.3 million. Excluding currency effects shown in the table below, third quarter 2009 net sales decreased 15.6% from the third quarter of 2008, with declines of 14.9% and 16.8% in the clothing and roll covers segments, respectively. See “Segment Information” below.
•Gross margins improved to 37.4% in the third quarter of 2009 from 33.1% in the third quarter of 2008. The improvement is primarily due to the absence in 2009 of the increased provision for slow-moving and obsolete inventory of $8 million that was recorded in the third quarter of 2008, primarily in the clothing segment.
•Operating expenses for the 2009 third quarter increased by $22.0 million to $36.9 million, a 59.6% increase from operating expenses for the 2008 third quarter of $14.9 million. The increase was principally due to the $40.0 million of curtailment/settlement gains recognized during the third quarter of 2008 (as a result of freezing certain pension benefits in the U.S. and no longer sponsoring our U.S. retiree health insurance program) that was absent in the third quarter of 2009. The increase was partially offset by decreases in the other operating costs, specifically decreases of $12.8 million in general and administrative expenses, $3.1 million in selling expenses and $1.8 million in restructuring and impairments during the third quarter of 2009, as compared with the third quarter of 2008.
•General and administrative expenses decreased by $12.8 million in the 2009 third quarter as compared with the 2008 third quarter due to the following: (i) environmental accruals of $4.1 million recorded in the third quarter of 2008 that were absent in the third quarter of 2009, (ii) decreased provisions for bad debts of approximately $9.8 million, principally due to an $8.1 million increase in 2008 that was absent in the third quarter of 2009 and (iii) decreased salaries, travel and other costs as a result of cost reduction efforts during the three months ended September 30, 2009 as compared with the three months ended September 30, 2008. These decreases were partially offset by (i) increased bank and related fees of $2.2 million related to initiatives undertaken to resolve our credit issues and (ii) gains on the sale of property and equipment of $2.4 million recorded in the third quarter of 2008 that were absent in the third quarter of 2009.
•Selling expenses decreased by $3.1 million in the 2009 third quarter as compared with the 2008 third quarter due to the following: (i) a reduction in salaried sales positions, commissions and travel expenses and (ii) favorable currency translation effects of $0.8 million.
•Net loss for the third quarter of 2009 was $7.4 million or $0.15 per diluted share, compared to a net income of $21.5 million or $0.46 per diluted share for the third quarter of 2008.
•Adjusted EBITDA (as defined by the Company’s amended credit facility) was $25.1 million for the third quarter of 2009, compared to $54.2 million for the third quarter of 2008. See “Non-GAAP Liquidity Measures” below.
•Cash on hand at September 30, 2009 was $21.8 million, compared to $20.4 million at June 30, 2009, $34.7 million at December 31, 2008 and $18.4 million at September 30, 2008.
•Total bank debt at September 30, 2009 increased to $628.6 million from $618.7 million at June 30, 2009 primarily due to unfavorable currency effects, partially offset by long-term debt principal payments of approximately $5.5 million.
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Xerium Technologies, Inc. (NYSE:XRM) is a leading global manufacturer and supplier of two types of consumable products used primarily in the production of paper: clothing and roll covers. The Company, which operates around the world under a variety of brand names, utilizes a broad portfolio of patented and proprietary technologies to provide customers with tailored solutions and products integral to production, all designed to optimize performance and reduce operational costs. With 32 manufacturing facilities in 13 countries around the world, Xerium has approximately 3,300 employees.