Xerium Technologies Inc. (XRM, Financial) filed Quarterly Report for the period ended 2010-09-30.
Xerium Technologies Inc. has a market cap of $196.7 million; its shares were traded at around $13.2 with and P/S ratio of 0.4. XRM is in the portfolios of Daniel Loeb of Third Point, LLC.
Currency fluctuations, as they pertain to the Euro, generally have a greater effect on the level of our net sales than on the level of our income from operations due to the amount of business the Company conducts in Euros. An increase in the U.S. dollar against the Euro generally results in a decrease to net sales and net income. Increases in the U.S. dollar against other currencies, such as the Brazilian Real and the Canadian Dollar, would not impact consolidated net sales as much, as sales in those countries are significantly denominated in or indexed to U.S. dollars, but generally would decrease net income as local currency costs would be translated into more U.S. Dollar expenses for financial reporting purposes. We would expect a similar but opposite effect in a period in which the value of the U.S. Dollar decreases against these currencies. For the three months ended September 30, 2010 as compared with the three months ended September 30, 2009, the change in the value of the U.S. Dollar against the currencies in which we conduct our business resulted in currency translation decreases in net sales and decreases to income from operations of $3.5 million and $1.6 million, respectively.
Pursuant to the Plan, on the Effective Date, our existing senior credit facility was amended and restated as the Second Amended and Restated Credit and Guaranty Agreement (the Amended and Restated Credit Facility), dated as of May 25, 2010. Also on the Effective Date, the DIP Facility was converted into an exit facility consisting of a $20 million revolving credit facility and a $60 million term loan (collectively, the Exit Facility) that was used to satisfy our obligations under the Plan and for ongoing working capital (including letters of credit) requirements. As of September 30, 2010, costs of approximately $3.4 million related to the Exit Facility have been deferred to be amortized over the life of the facility. See Credit Facilities for further discussion of these credit facilities.
Pursuant to the Plan, on the Effective Date, we issued a dividend of one preferred share purchase right (a Right) for each share of New Common Stock outstanding. Each Right entitles the registered holder to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $0.001 per share (the Preferred Shares), at a price of $60.00 per one one-thousandth of a Preferred Share, subject to adjustment.
Pursuant to the Plan, we entered into a Registration Rights Agreement (the Registration Rights Agreement) on the Effective Date with Apax WW Nominees Ltd, Apax-Xerium Apia L.P., AS Investors, LLC, Carl Marks Strategic Investments, L.P., and Carl Marks Strategic Opportunities Fund, L.P. (the RRA Parties). Pursuant to the Registration Rights Agreement, we agreed that commencing on the 90th day after the Effective Date, any of the RRA Parties or group of RRA Parties may request registration under the Securities Act of 1933, as amended (the Securities Act), of all or any portion of the New Common Stock held by such RRA Party on Form S-1 or Form S-3, as applicable. A RRA Party may not demand registration rights unless (A) the total offering price of the shares is reasonably expected to be at least $50 million (in the case of a Form S-1) or $20 million (in the case of a Form S-3) or (B) the shares to be registered represent at least 10% of the our outstanding New Common Stock. In addition, the Registration Rights Agreement provides the RRA Parties with certain piggyback registration rights.
During 2010, we continued our program of streamlining our operating structure and recorded restructuring and impairment expenses in connection therewith of approximately $1.6 million, $2.5 million and $3.3 million, during the first, second and third quarters, respectively. The amount for the second quarter included approximately $1.8 million of expenses related to our announcement, at the end of the second quarter of 2010, of our plan to cease production at our Stowe Woodward roll covers facility in North Bay, Ontario by August 20, 2010 and consisted of severance costs of $1.1 million and asset impairment charges of $0.7 million. The amount for the third quarter of 2010 included approximately $2.1 million of asset impairment charges, primarily for the Vietnam facility, $0.9 million of facility and other costs and $0.3 million of severance costs.
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Xerium Technologies Inc. has a market cap of $196.7 million; its shares were traded at around $13.2 with and P/S ratio of 0.4. XRM is in the portfolios of Daniel Loeb of Third Point, LLC.
Highlight of Business Operations:
The level of research and development spending is driven by market demand for technology enhancements, including both specific customer needs and general market requirements, as well as by our own analysis of applied technology opportunities. With the exception of purchases of equipment and similar capital items used in our research and development activities, all research and development is expensed as incurred. Research and development expenses were $2.9 million and $2.7 million for the three months ended September 30, 2010 and 2009, respectively.Currency fluctuations, as they pertain to the Euro, generally have a greater effect on the level of our net sales than on the level of our income from operations due to the amount of business the Company conducts in Euros. An increase in the U.S. dollar against the Euro generally results in a decrease to net sales and net income. Increases in the U.S. dollar against other currencies, such as the Brazilian Real and the Canadian Dollar, would not impact consolidated net sales as much, as sales in those countries are significantly denominated in or indexed to U.S. dollars, but generally would decrease net income as local currency costs would be translated into more U.S. Dollar expenses for financial reporting purposes. We would expect a similar but opposite effect in a period in which the value of the U.S. Dollar decreases against these currencies. For the three months ended September 30, 2010 as compared with the three months ended September 30, 2009, the change in the value of the U.S. Dollar against the currencies in which we conduct our business resulted in currency translation decreases in net sales and decreases to income from operations of $3.5 million and $1.6 million, respectively.
Pursuant to the Plan, on the Effective Date, our existing senior credit facility was amended and restated as the Second Amended and Restated Credit and Guaranty Agreement (the Amended and Restated Credit Facility), dated as of May 25, 2010. Also on the Effective Date, the DIP Facility was converted into an exit facility consisting of a $20 million revolving credit facility and a $60 million term loan (collectively, the Exit Facility) that was used to satisfy our obligations under the Plan and for ongoing working capital (including letters of credit) requirements. As of September 30, 2010, costs of approximately $3.4 million related to the Exit Facility have been deferred to be amortized over the life of the facility. See Credit Facilities for further discussion of these credit facilities.
Pursuant to the Plan, on the Effective Date, we issued a dividend of one preferred share purchase right (a Right) for each share of New Common Stock outstanding. Each Right entitles the registered holder to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $0.001 per share (the Preferred Shares), at a price of $60.00 per one one-thousandth of a Preferred Share, subject to adjustment.
Pursuant to the Plan, we entered into a Registration Rights Agreement (the Registration Rights Agreement) on the Effective Date with Apax WW Nominees Ltd, Apax-Xerium Apia L.P., AS Investors, LLC, Carl Marks Strategic Investments, L.P., and Carl Marks Strategic Opportunities Fund, L.P. (the RRA Parties). Pursuant to the Registration Rights Agreement, we agreed that commencing on the 90th day after the Effective Date, any of the RRA Parties or group of RRA Parties may request registration under the Securities Act of 1933, as amended (the Securities Act), of all or any portion of the New Common Stock held by such RRA Party on Form S-1 or Form S-3, as applicable. A RRA Party may not demand registration rights unless (A) the total offering price of the shares is reasonably expected to be at least $50 million (in the case of a Form S-1) or $20 million (in the case of a Form S-3) or (B) the shares to be registered represent at least 10% of the our outstanding New Common Stock. In addition, the Registration Rights Agreement provides the RRA Parties with certain piggyback registration rights.
During 2010, we continued our program of streamlining our operating structure and recorded restructuring and impairment expenses in connection therewith of approximately $1.6 million, $2.5 million and $3.3 million, during the first, second and third quarters, respectively. The amount for the second quarter included approximately $1.8 million of expenses related to our announcement, at the end of the second quarter of 2010, of our plan to cease production at our Stowe Woodward roll covers facility in North Bay, Ontario by August 20, 2010 and consisted of severance costs of $1.1 million and asset impairment charges of $0.7 million. The amount for the third quarter of 2010 included approximately $2.1 million of asset impairment charges, primarily for the Vietnam facility, $0.9 million of facility and other costs and $0.3 million of severance costs.
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