Xerium Technologies, Inc., 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 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. Xerium Technologies, Inc., a leading global manufacturer of specially engineered textiles and roll covers used in the production of paper, paperboard, building products, non-wovens and specific #
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 million from $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.
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.
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.
Fourth Quarter Financial highlights
Net sales in the fourth quarter of 2012 were $133.8 million, essentially the same compared to the third quarter of 2012 at a 0.3% decline. Excluding favorable currency effects of $1.4 million, fourth quarter 2012 net sales decreased 1.4%, with a decrease of 1.3% in the clothing segment and a decrease of 1.5% in the roll covers segment.
Net sales decreased 7.9% from net sales in the fourth quarter of 2011 of $145.2 million. Excluding unfavorable currency effects of $2.4 million, fourth quarter 2012 net sales decreased 6.2% from the fourth quarter of 2011, with a decrease of 5.4% in the clothing segment and a decrease of 7.8% in the roll covers segment.
Gross profit decreased by 4.5% to $47.0 million in the fourth quarter of 2012 from $49.2 million in the third quarter of 2012. Lower constant currency sales volume, special charges for asset impairments and lower production absorption were the primary drivers of this unfavorable result. Gross profit decreased 6.4% to $47.0 million in the fourth quarter of 2012 from $50.2 million in the fourth quarter of 2011. This reduction was primarily due to lower sales volume and specific write-offs of impaired assets, net of favorable labor and material costs and favorable currency impacts.
The Company's operating expenses (selling, general and administrative and research and development expenses) of $38.3 million for the fourth quarter of 2012 increased by $1.1 million, or 3.0%, from operating expenses of $37.2 million in the fourth quarter of 2011. The net increase is comprised of various special charges totaling $2.0 million, including a non-restructuring impairment charge of $1.2 million taken on an asset held for sale in the fourth quarter of 2012 and various special charges of $0.8 million related to a payroll tax exposure and accounts receivables.
Net loss for the fourth quarter of 2012 was $(9.1) million or $(0.59) per diluted share, compared to net it income of $2.4 million or $0.16 per diluted share for the fourth quarter of 2011. Restructuring expenses of $14.8 million ($10.6 million, after tax) or $(0.70) per diluted share, in the fourth quarter of 2012 accounted for the majority of the increase in the net loss in the fourth quarter of 2012 as compared to the fourth quarter of 2011.
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