Xerium Technologies, Inc. (NYSE:XRM), a leading global manufacturer of specially engineered textiles and roll covers used in the production of paper, paperboard, building products, non-wovens and specific industrial processes, announced that the results of its operations for the quarter and year ended December 31, 2012.
Net sales have been stable in 2012, averaging approximately $134.7 million per quarter, and within a range of +/- 2%. Our backlog, defined as orders expected to ship within one year, suggests that this trend will continue and currently stands at $174.0 million as of December 31, 2012. Compared to the third quarter of 2012, net sales were essentially the same at a 0.3% decline, or a 1.4% decline on a constant currency basis. Compared to the fourth quarter of 2011, net sales decreased 7.9%, or 6.2% on a constant currency basis, to $133.8 millionfrom $145.2 million. Year over year, net sales decreased 8.2%, or 4.8% on a constant currency basis, to $538.7 million from $587.0 million. See "Segment Information" and "Non-GAAP Financial Measures" below.
Gross profit has been fairly stable in 2012, averaging approximately $48.4 million per quarter and within a range of +/- 3%. The 4.5% decline from $49.2 million in the third quarter of 2012 to $47.0 million in the fourth quarter of 2012 was primarily as a result of special charges for asset impairments, lower constant currency sales volume and reduced production absorption.
Despite stable sales, Adjusted EBITDA declined 15.6% in the fourth quarter of 2012 to $20.6 million from $24.4 million in the third quarter of 2012. This decline was primarily a result of special charges of $1.5 million for items including payroll tax exposures, accounts receivables and inventory and the third quarter reversal of $0.5 million management incentive costs that did not occur in the fourth quarter of 2012. In addition to these unusual items, Adjusted EBITDA declined $1.5 million, primarily due to reduced gross profit on lower constant currency sales and lower production absorption. See "Non-GAAP Financial Measures" below.
Total debt is trending down as a result of explicit pay down actions and stands at $445.0 million at December 31, 2012. During the fourth quarter of 2012, the Company paid down $5.1 million of debt, including the repurchase of $3.6 million of its Notes in December of 2012. On a full year basis, debt was paid down $25.7 million. Net debt, as defined as total debt less cash balances, was $410.2 million at December 31, 2012.
Commenting on the quarter, Harold Bevis, Xerium's President and Chief Executive Officer stated, "The Company is fully underway with its multi-year commitment to increasing sales and EBITDA. The Company is right-sizing its cost structure around its core business. It is also repositioning its production capacity to be lower cost and better serve its customers. The Company has taken specific cost reduction actions to increase 2013 Adjusted EBITDA including the closure of four manufacturing operations and reduction of headcount. We have targeted savings net of reinstated incentive compensation of approximately $12 million in 2013 with a progressive quarterly build up of cost out actions and a carryover into 2014. Specifically, the Company took action against approximately $1.5 million of cost, net of incentive compensation reinstatement, in the first quarter of 2013, compared to the fourth quarter of 2012. The Company is funding and gating its cost reduction activities with internal cash flow. The Company has also kicked off and/or accelerated several new sales growth and new product programs in order to re-establish top-line growth opportunities. These strategic moves will be kept private by Company management for the time being, but these actions are expected to open up another ~$200 million aperture into our served markets."
FOURTH QUARTER FINANCIAL HIGHLIGHTS
Source: Xerium Technologies, Inc.