Xerium Technologies, Inc. (NYSE: XRM), a leading global manufacturer of industrial textiles and rolls used primarily in the paper production process, today commented on a recent media report suggesting that the Company has finalized plans regarding possible restructuring opportunities and further that the Company will fund any such projects through an amendment to its credit facility. The Company wishes to clarify, however, that as of today and consistent with remarks made on its conference call on May 9, 2012, regarding its financial results for the first quarter, the Company has not finalized or committed to any such restructuring plans.
During the call held on May 9, 2012, the Company made reference to possible restructuring opportunities currently under review that are aimed at reducing the Company’s fixed costs, restoring historical gross margins and simplifying its business processes. The specific projects under consideration include, among other things, asset rationalizations, redeployment of assets across the Company’s platform and reductions in selling, general and administrative expenses.
The Company has preliminarily identified projects that, if implemented, would be expected to result in approximately $50 million of restructuring expenses over their period of implementation, of which net cash costs would be anticipated to be approximately $35 million. In addition, the Company would expect capital expenditures related to these initiatives of approximately $10 million, which would be incurred within its regular capital expenditure budget. The Company generally anticipates that it would fund the cash requirements of these restructurings from the free cash flow of its business as incurred, with specific funding arrangements to be determined as plans are finalized. Internal planning estimates suggest these initiatives, if fully implemented, could improve gross margins by approximately 200 to 300 basis points and operating income by up to $20 million annually.
The Company continues to explore fixed cost reduction opportunities, but the nature, magnitude and timing of any final plans may vary and will be subject to various factors including, but not limited to, global and regional market conditions in the paper industry, the projected costs and relative payback periods at the time of implementation, the potential impact on the Company’s highly trained workforce, compliance with all employee and governmental notice regulations and periods, and continued compliance with the Company’s credit facility. Should the Company decide to implement any such plans, management’s desire would be to conduct the projects in the most expeditious and orderly manner possible so as to deliver the bottom line improvements most rapidly while minimizing any potential disruptions to our global customers. In furtherance of this goal, the Company may consider, among other things, whether any amendment to its credit facility may facilitate the implementation of any proposed restructurings. Should the Company pursue any such amendment, the terms, timing and structure of any amendment will naturally depend on market conditions, and the amounts involved may or may not be material. Further, there can be no assurance that any restructuring will ultimately be pursued, that any amendment will be sought or obtained on terms acceptable to the Company, or that any restructuring, if pursued, will be successful.
About Xerium Technologies
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 31 manufacturing facilities in 14 countries around the world, Xerium has approximately 3,400 employees.
This press release contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause actual results to differ materially from those indicated. These risks and uncertainties include the following items: (1) our financial results could be adversely affected by fluctuations in interest rates and currency exchange rates, for instance a marked decline in the value of the Euro relative to the U.S. Dollar stemming from the European sovereign debt crisis; (2) a sustained downturn in the paper industry, compounded by uncertainty in global economic conditions, could adversely affect our revenues and profitability; (3) market improvement in our industry may occur more slowly than we anticipate, may stall or may not occur at all; (4) variations in demand for our products, including our new products, could negatively affect our revenues and profitability; (5) our manufacturing facilities may be required to quickly increase or decrease production, which could negatively affect our production facilities, customer order lead time, product quality, labor relations or gross margin; (6) our plans to develop and market new products, enhance operational efficiencies, and reduce costs may not be successful; and (7) the other risks and uncertainties discussed elsewhere in this press release, our Form 10-K for the year ended December 31, 2011 filed on March 14, 2012 and our other SEC filings. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement in this press release reflects our current views with respect to future events. We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise. As discussed above, we are subject to substantial risks and uncertainties related to current economic conditions, and we encourage investors to refer to our SEC filings for additional information. Copies of these filings are available from the SEC and in the investor relations section of our website at www.xerium.com.
Clifford E. Pietrafitta, Executive Vice President and CFO, 919-526-1444