Xerium Reports Q2 2016 Results

YOUNGSVILLE, NC, August 2, 2016 (BUSINESS WIRE) — Xerium Technologies, Inc. (NYSE:XRM), a leading global provider of highly engineered, industrial consumable products and integrated services today reported second quarter 2016 financial results.

Highlights

  • Q2 2016 Sales of $124.0 million compared to $123.1 in the prior-year; up 6.1% sequentially on constant currency basis. Repositioning efforts starting to take traction.
  • GAAP operating income of $14.7 million, an increase of 8.4% year-over-year.
  • Adjusted EBITDA of $27.6 million; essentially flat compared to the prior year period and up 15% sequentially due to increased sales volumes.
  • Q2 2016 free cash flow of $0.6 million, net of a $10.7 million semi-annual interest payment; a $9.7 million year-over-year improvement due to the completion of the repositioning investments.
  • Acquired JJ Plank/Spencer Johnston (“Spencer Johnston”), a maker of specialty rolls and holder of excellent positions in Xerium targeted growth markets.
  • Received pricing to refinance all existing Senior Unsecured Notes and Term Debt, extending maturities approximately to August of 2021.  The Company plans significant debt reduction during tenor of these securities.
  • Company reiterates full year EBITDA and cash flow guidance, leverage guidance increase to 4.5x on a pro-forma basis from 4.3x due to effects of refinancing.

Second quarter sales were $124.0 million compared to prior-year sales of $123.1 million. On a constant currency basis, sales were up 0.4%, compared to the second quarter of 2015.  Sequentially, sales were up $9.0 million, or 7.8% and up 6.1% on a constant currency basis.  Rolls sales are up sequentially by 11.0% due to sales of products associated with the Company’s strategic repositioning initiatives and the acquisition of Spencer Johnston and PMC sales are up 3.0%, both on a constant currency basis. .  Regionally, strength in the quarter was led by a sharp increase in North America sales, increasing 8.7% year-over-year on a constant currency basis, driven by stronger Q2 operational performance and incremental Spencer Johnston sales of $2.6 million.

GAAP operating income in the second quarter of 2016 was $14.7 million, or 11.9% of sales, an increase from $13.6 million, or 11.0% of sales in the year-ago period. Second quarter Adjusted EBITDA was $27.6 million (including a Spencer Johnston contribution of $0.5 million), up sequentially $3.6 million, or 15.2% and slightly lower than the prior-year of $28.0 million. In Q2 2016, the Company realized a $7.2 million benefit from ongoing cost reduction programs, and continued to realize incremental profit contribution from sales associated with its repositioning projects.

On July 26, 2016, the Company received pricing on $480 million aggregate principal amount of 9.5% Senior Secured Notes due 2021 (the "Notes").  The Notes will be issued at a price equal to 98.54% of their face value.  The Notes will pay interest semi-annually in arrears on February 15 and August 15 of each year beginning on February 15, 2017 and will mature on August 15, 2021, unless earlier redeemed or repurchased. 

The Company intends to use the net proceeds from the offering to repay all amounts outstanding under its existing term loan credit facility, to redeem all of its 8.875% Senior Notes due 2018 at a redemption price equal to 102.219% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of redemption, to pay fees and expenses relating to these transactions, and for working capital and other general corporate purposes.  The Company expects to close on the transaction on or about August 9, 2016.

Harold Bevis, President and Chief Executive Officer commented, “We are pleased with our results during the quarter as Xerium executed well both operationally and financially. Our repositioning efforts are taking hold as we generated our second straight quarter of positive free cash flow, and saw sequentially stronger sales and profitability. We are encouraged by improving order patterns and backlogs which will aid revenues in the second half of the year. Our strategic investments and cost reductions will continue to improve our operations in the coming quarters and benefit our operating results.  We have $50 million of growth capacity installed coupled with 49 new product introductions.” Bevis continued, “Additionally we have received pricing on $480 million of senior secured notes to refinance all of our existing Senior Unsecured Notes and Term Debt which are due in June of 2018 and May of 2019, respectively. The new Senior Secured Notes will mature in August of 2021. With maturities now extended to August 2021, the Company’s goal is to increase our credit rating with a sustained multi-year debt pay-down program, beginning this year.”

(click here to read the full Press Release on the Investor Relations page of Xerium.com)