I did a quick analysis and like what I am seeing from their earnings. First this is their 3rd Q in a row that revenues increased. Last Q their earnings were $130.3 million, this one was $132.4. So he didn't lie when he said that business is picking up. Also I noticed that Cash balanced increased by a few million, which means they are generating a positive cash flow. The goodwill writeoff is accounting hocus-pocus and is insignificant. It's used to boost book value of the company but the number is just imaginary in reality. Company is cutting expenses left and right. Take away one time writeoff and they slimmed down very nicely. Don't like the fact that the gross margin fell a few points, but it's still strong compaired to industry standard. There are a lot of one time fees which are clouding up the final results, such as restructuring fees, bank fees, legal fees, consulting fees, etc.. These fees are taking a big bite out of the bottom line and are also temp and should be history by second Q. Overall, not bad. Now we wait for the rest of the debt holders to get in line with the majority and start rolling northward. They got 7 days to get their crap together or they will be force fed. Either way, I see value in this company and the light at the end of the tunnel.
Note: Their overall debt increased to $640 and if the terms of the agreement haven't changed. "approximately $620 million of existing debt would be exchanged for approximately $10 million in cash, $410 million in new term loans maturing in 2015, and approximately 82.6% of the common stock of Xerium" So if this holds, debt holders rate of conversion is about $1.16 a share. ($240 million for 82.6% of the company)
Also of interest, I see now how the got their number when they said that they will reduce their total debt by $150 million. "In addition, the Company would enter into a new revolving loan of up to $20 million and a term loan of $60 million."
So they are reducing their current loan and getting a new one for $60 million, which will increase their cash by $60 million and they are also getting a revolving credit line for an additional $20 million. So $410 in old debt and this new $60 million would raise it to $470, which is $150 less then $620. On the other hand, they have $23 million in cash now, will add $10 million from the debt holders through the exchange, add $60 million through this loan and a potentially another $30 million through those warrants that they will issue current shareholders. So they will have $470 in long term debt and $123 million in cash on hand after the dust settles. Not a bad looking balance sheet.
Question is: Why do they need that much cash on hand and the $20M credit facility on top? Are they planning to take over someone or expending? What was the last time they had this much cash on hand? That question should be addressed at the CC tomorrow.