Xerium Clothing segment earnings up for Q2
Xerium Technologies Inc, a leading global manufacturer of clothing and roll covers used primarily in the paper production process, reported results for its second quarter ended June 30, 2008.
"The transformation that we began in early 2008 is starting to show results," said Stephen Light, President, Chief Executive Officer and Chairman. "While the market continues to remain challenging, we believe we have improved our ability to compete effectively. We anticipate that most of the hard work to restructure certain operations and execute an amended credit agreement is now largely behind us. We've begun to reduce working capital as Xerium's employees remain focused on delivering the results we expect in our new business plan and paying down our debt."
SECOND QUARTER FINANCIAL HIGHLIGHTS:
For the second quarter 2008, compared to the second quarter 2007:
• Net sales for the 2008 quarter were $170.4 million, a 10.9% increase from net sales for the 2007 quarter of $153.7 million. Excluding the currency effects shown in the table below, second quarter 2008 net sales increased 2.8% from the second quarter of 2007, with a decline of 1.8% and an increase of 12.2% in the clothing and roll covers segments, respectively.
• Gross margins were $68.8 million or 40.4% of net sales for the 2008 quarter, compared to $64.2 million or 41.8% of net sales for the 2007 quarter. Meanwhile, the Company believes it is now beginning to get initial traction on its cost reduction initiatives to offset the negative effects of pricing, currency, and cost inflation.
• Income from operations declined by 25.9% to $17.7 million for the 2008 quarter from $23.9 million for the 2007 quarter. During the second quarter of 2008, the Company expensed approximately $5.2 million to general and administrative expenses in connection with the amendments to its credit facility. In addition, for the second quarter of 2008, restructuring and impairment expenses increased by $1.5 million to $2.7 million from $1.2 million in the second quarter of 2007.
• Net income increased 83.1% to $14.1 million or $0.31 per diluted share for the 2008 quarter, compared to net income of $7.7 million or $0.17 per diluted share for the 2007 quarter. The increase in net income was largely due to a $13.7 million pre-tax, non-cash credit to interest expense reflecting the mark-to-market increase in the fair value of the Company's interest rate swaps (compared to a $0.1 million such credit in the second quarter of 2007). Net income was negatively affected by the $5.2 million pre-tax expense previously noted in connection with amendments to the credit facility.
• Net cash generated by operating activities was $11.2 million for the 2008 quarter, which compares to $14.8 million for the 2007 quarter. Cash provided by operating activities was decreased by approximately $4.4 million related to amendment costs in the second quarter of 2008. The Company has reduced working capital from 30% of revenues in the year-ago quarter to 27%.