|
ý
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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¨
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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DELAWARE
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42-1558674
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
|
|
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14101 Capital Boulevard
Youngsville, North Carolina
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27596
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
|
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£
|
|
|
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Accelerated filer
|
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£
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Non-accelerated filer
|
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¨
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(Do not check if a smaller reporting company)
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|
Smaller reporting company
|
|
x
|
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Page
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Item 1.
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3
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|
|
|
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Item 2.
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25
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|
|
|
|
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Item 3.
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36
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|
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Item 4.
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36
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|||
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Item 1.
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37
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Item 1A.
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37
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Item 6.
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37
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ITEM 1.
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FINANCIAL STATEMENTS
|
|
June 30, 2013
(Unaudited) |
|
December 31, 2012
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
36,514
|
|
|
$
|
34,777
|
|
Accounts receivable, net
|
89,196
|
|
|
84,456
|
|
||
Inventories, net
|
75,536
|
|
|
77,391
|
|
||
Prepaid expenses
|
8,695
|
|
|
9,386
|
|
||
Other current assets
|
14,749
|
|
|
14,839
|
|
||
Total current assets
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224,690
|
|
|
220,849
|
|
||
Property and equipment, net
|
289,161
|
|
|
308,806
|
|
||
Goodwill
|
63,213
|
|
|
61,127
|
|
||
Intangible assets
|
16,027
|
|
|
18,678
|
|
||
Other assets
|
7,723
|
|
|
9,383
|
|
||
Total assets
|
$
|
600,814
|
|
|
$
|
618,843
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Notes payable
|
$
|
7,806
|
|
|
$
|
7,911
|
|
Accounts payable
|
31,808
|
|
|
36,884
|
|
||
Accrued expenses
|
59,147
|
|
|
59,757
|
|
||
Current maturities of long-term debt
|
2,134
|
|
|
2,397
|
|
||
Total current liabilities
|
100,895
|
|
|
106,949
|
|
||
Long-term debt, net of current maturities
|
433,410
|
|
|
434,684
|
|
||
Deferred and long-term taxes
|
15,300
|
|
|
16,582
|
|
||
Pension, other post-retirement and post-employment obligations
|
80,259
|
|
|
83,949
|
|
||
Other long-term liabilities
|
6,049
|
|
|
5,740
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
|
|
||
Stockholders’ deficit
|
|
|
|
||||
Preferred stock, $0.001 par value, 1,000,000 shares authorized; no shares outstanding as of June 30, 2013 and December 31, 2012
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value, 20,000,000 shares authorized; 15,375,675 and 15,309,717 shares outstanding as of June 30, 2013 and December 31, 2012, respectively
|
15
|
|
|
15
|
|
||
Stock warrants
|
13,532
|
|
|
13,532
|
|
||
Paid-in capital
|
413,603
|
|
|
413,124
|
|
||
Accumulated deficit
|
(415,232
|
)
|
|
(413,839
|
)
|
||
Accumulated other comprehensive loss
|
(47,017
|
)
|
|
(41,893
|
)
|
||
Total stockholders’ deficit
|
(35,099
|
)
|
|
(29,061
|
)
|
||
Total liabilities and stockholders’ deficit
|
$
|
600,814
|
|
|
$
|
618,843
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net Sales
|
$
|
138,324
|
|
|
$
|
136,378
|
|
|
$
|
278,129
|
|
|
$
|
270,742
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of products sold
|
85,674
|
|
|
85,396
|
|
|
170,972
|
|
|
173,317
|
|
||||
Selling
|
17,585
|
|
|
19,070
|
|
|
36,107
|
|
|
38,558
|
|
||||
General and administrative
|
15,506
|
|
|
14,034
|
|
|
30,140
|
|
|
31,860
|
|
||||
Research and development
|
2,599
|
|
|
2,869
|
|
|
5,252
|
|
|
5,831
|
|
||||
Restructuring
|
4,165
|
|
|
1,129
|
|
|
5,420
|
|
|
5,103
|
|
||||
|
125,529
|
|
|
122,498
|
|
|
247,891
|
|
|
254,669
|
|
||||
Income from operations
|
12,795
|
|
|
13,880
|
|
|
30,238
|
|
|
16,073
|
|
||||
Interest expense, net
|
(13,112
|
)
|
|
(9,120
|
)
|
|
(22,318
|
)
|
|
(18,718
|
)
|
||||
Loss on extinguishment of debt
|
(3,123
|
)
|
|
—
|
|
|
(3,123
|
)
|
|
—
|
|
||||
Foreign exchange gain (loss)
|
50
|
|
|
(180
|
)
|
|
(198
|
)
|
|
360
|
|
||||
(Loss) income before provision for income taxes
|
(3,390
|
)
|
|
4,580
|
|
|
4,599
|
|
|
(2,285
|
)
|
||||
Provision for income taxes
|
(3,489
|
)
|
|
(2,354
|
)
|
|
(5,992
|
)
|
|
(3,011
|
)
|
||||
Net (loss) income
|
$
|
(6,879
|
)
|
|
$
|
2,226
|
|
|
$
|
(1,393
|
)
|
|
$
|
(5,296
|
)
|
Comprehensive loss
|
$
|
(9,245
|
)
|
|
$
|
(10,232
|
)
|
|
$
|
(6,517
|
)
|
|
$
|
(13,710
|
)
|
Net (loss) income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.45
|
)
|
|
$
|
0.15
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.35
|
)
|
Diluted
|
$
|
(0.45
|
)
|
|
$
|
0.15
|
|
|
$
|
(0.09
|
)
|
|
$
|
(0.35
|
)
|
Shares used in computing net (loss) income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
15,370,223
|
|
|
15,226,995
|
|
|
15,340,471
|
|
|
15,194,432
|
|
||||
Diluted
|
15,370,223
|
|
|
15,236,651
|
|
|
15,340,471
|
|
|
15,194,432
|
|
|
Six Months Ended June 30,
|
||||||
|
2013
|
|
2012
|
||||
Operating activities
|
|
|
|
||||
Net loss
|
$
|
(1,393
|
)
|
|
$
|
(5,296
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Stock-based compensation
|
595
|
|
|
754
|
|
||
Depreciation
|
17,667
|
|
|
19,193
|
|
||
Amortization of intangibles
|
961
|
|
|
1,153
|
|
||
Deferred financing cost amortization
|
1,618
|
|
|
1,736
|
|
||
Foreign exchange loss on revaluation of debt
|
1,324
|
|
|
381
|
|
||
Deferred taxes
|
748
|
|
|
(360
|
)
|
||
Asset impairment
|
1,078
|
|
|
—
|
|
||
Gain on disposition of property and equipment
|
(7
|
)
|
|
(617
|
)
|
||
Loss on extinguishment of debt
|
3,123
|
|
|
—
|
|
||
Provision for doubtful accounts
|
122
|
|
|
193
|
|
||
Change in assets and liabilities which provided (used) cash:
|
|
|
|
||||
Accounts receivable
|
(7,809
|
)
|
|
3,861
|
|
||
Inventories
|
(934
|
)
|
|
230
|
|
||
Prepaid expenses
|
480
|
|
|
(4,076
|
)
|
||
Other current assets
|
(303
|
)
|
|
603
|
|
||
Accounts payable and accrued expenses
|
(4,166
|
)
|
|
(3,609
|
)
|
||
Deferred and other long-term liabilities
|
(829
|
)
|
|
(350
|
)
|
||
Net cash provided by operating activities
|
12,275
|
|
|
13,796
|
|
||
Investing activities
|
|
|
|
||||
Capital expenditures, gross
|
(8,457
|
)
|
|
(7,330
|
)
|
||
Proceeds from disposals of property and equipment
|
354
|
|
|
981
|
|
||
Net cash used in investing activities
|
(8,103
|
)
|
|
(6,349
|
)
|
||
Financing activities
|
|
|
|
||||
Proceeds from borrowings
|
199,000
|
|
|
—
|
|
||
Principal payments on debt
|
(198,348
|
)
|
|
(14,875
|
)
|
||
Payment of deferred financing fees
|
(2,772
|
)
|
|
(1,762
|
)
|
||
Net cash used in financing activities
|
(2,120
|
)
|
|
(16,637
|
)
|
||
Effect of exchange rate changes on cash flows
|
(315
|
)
|
|
(780
|
)
|
||
Net increase (decrease) in cash
|
1,737
|
|
|
(9,970
|
)
|
||
Cash and cash equivalents at beginning of period
|
34,777
|
|
|
43,566
|
|
||
Cash and cash equivalents at end of period
|
$
|
36,514
|
|
|
$
|
33,596
|
|
|
June 30,
2013 |
|
December 31,
2012 |
||||
Raw materials
|
$
|
17,825
|
|
|
$
|
16,924
|
|
Work in process
|
24,127
|
|
|
23,681
|
|
||
Finished goods (includes consigned inventory of $7,948 at June 30, 2013 and $8,726 at December 31, 2012.)
|
33,584
|
|
|
36,786
|
|
||
|
$
|
75,536
|
|
|
$
|
77,391
|
|
|
Balance at
December 31, 2012 |
|
Charged to
Revenue or Cost
of Sales
|
|
Effect of Foreign
Currency
Translation
|
|
Deduction
from
Reserves
|
|
Balance at
June 30, 2013 |
||||||||||
For the six months ended June 30, 2013
|
$
|
1,848
|
|
|
$
|
794
|
|
|
$
|
(16
|
)
|
|
$
|
(786
|
)
|
|
$
|
1,840
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Weighted-average common shares outstanding–basic
|
15,370,223
|
|
|
15,226,995
|
|
|
15,340,471
|
|
|
15,194,432
|
|
Dilutive effect of stock-based compensation awards outstanding
|
—
|
|
|
9,656
|
|
|
—
|
|
|
—
|
|
Weighted-average common shares outstanding–diluted
|
15,370,223
|
|
|
15,236,651
|
|
|
15,340,471
|
|
|
15,194,432
|
|
|
June 30, 2013
|
|
December 31, 2012
|
|
|||
Fair value of interest rate rate cap included in other assets in the Consolidated Balance Sheets
|
$
|
8
|
|
|
$
|
16
|
|
Unrecognized losses included in accumulated other comprehensive income (loss)
|
$
|
(271
|
)
|
|
$
|
(644
|
)
|
|
June 30, 2013
|
|
December 31, 2012
|
||||
Fair value of derivatives
|
$
|
1,229
|
|
|
$
|
357
|
|
|
Three Months Ended June 30, 2013
|
|
Three Months Ended June 30, 2012
|
||||
Change in fair value included in foreign exchange gain for the three months ended June 30, 2013 and June 30, 2012
|
$
|
1,439
|
|
|
$
|
168
|
|
|
Six Months Ended June 30, 2013
|
|
Six Months Ended June 30, 2012
|
||||
Change in fair value included in foreign exchange gain for the six months ended June 30, 2013 and June 30, 2012
|
$
|
1,542
|
|
|
$
|
283
|
|
|
Notional Sold
|
|
Notional Purchased
|
|
|||
Non-designated hedges of foreign exchange risk
|
$
|
22,126
|
|
|
$
|
(14,942
|
)
|
|
June 30, 2013
|
|
December 31, 2012
|
||||
New senior secured term loan facility, payable quarterly, U.S. Dollar denominated–LIBOR
(minimum 1.25%) plus 5.00% (6.25%) as of June 30, 2013, net of $1.0 discount |
$
|
199,000
|
|
|
$
|
—
|
|
Prior first lien debt, payable quarterly, U.S. Dollar denominated–LIBOR
(minimum 1.25%) plus 5.00% (6.25%) as of December 31, 2012 |
—
|
|
|
104,557
|
|
||
Prior first lien debt, payable quarterly, Euro denominated–EURIBOR
(minimum 1.25%) plus 5.00% (6.25%) as of December 31, 2012 |
—
|
|
|
95,979
|
|
||
|
199,000
|
|
|
200,536
|
|
||
Senior Notes (Unsecured), payable semi-annually–U.S. Dollar denominated interest rate fixed at 8.875%, matures June of 2018
|
236,410
|
|
|
236,410
|
|
||
|
|
|
|
||||
Unsecured, interest rate fixed at 2.00%, Euro denominated
|
134
|
|
|
135
|
|
||
|
435,544
|
|
|
437,081
|
|
||
Less current maturities
|
2,134
|
|
|
2,397
|
|
||
Total
|
$
|
433,410
|
|
|
$
|
434,684
|
|
•
|
a six-year
$200 million
senior secured term loan facility, provided the facility would mature in
March 2018
if any of the Company's senior notes due
2018
("Senior Notes") remain outstanding at that time; and
|
•
|
an uncommitted accordion option (the “Incremental Facility”) allowing for increases for borrowings under the New Term Credit Facility with the same terms, and borrowing of new tranches of term loans, up to an aggregate principal amount equal to (i)
$75 million
plus (ii) an additional amount (the “Facility Increase”) provided, if after giving effect to such Facility Increase (as well as any other additional term loans), on a pro forma basis, the Senior Secured Leverage Ratio (as defined in the New Term Credit Facility) for the most recent four consecutive fiscal quarters does not exceed
2.25
:1.
|
|
Total Scheduled
Principal Payments including balloon payments (in USD) |
|
Total Estimated
Interest Payments Converted into U.S. Dollars at June 30, 2013 Exchange Rates (in USD thousands) |
||||
2013
|
$
|
1,134
|
|
|
$
|
16,710
|
|
2014
|
2,000
|
|
|
32,308
|
|
||
2015
|
2,000
|
|
|
32,194
|
|
||
2016
|
2,000
|
|
|
32,079
|
|
||
2017
|
2,000
|
|
|
31,964
|
|
||
2018 and thereafter
|
427,410
|
|
|
15,983
|
|
||
|
$
|
436,544
|
|
|
$
|
161,238
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Service cost
|
$
|
966
|
|
|
$
|
888
|
|
|
$
|
1,939
|
|
|
$
|
1,773
|
|
Interest cost
|
1,548
|
|
|
1,838
|
|
|
3,108
|
|
|
3,668
|
|
||||
Expected return on plan assets
|
(1,401
|
)
|
|
(1,377
|
)
|
|
(2,813
|
)
|
|
(2,750
|
)
|
||||
Amortization of prior service cost
|
—
|
|
|
4
|
|
|
3
|
|
|
7
|
|
||||
Amortization of net loss
|
571
|
|
|
633
|
|
|
1,143
|
|
|
1,266
|
|
||||
Net periodic benefit cost
|
$
|
1,684
|
|
|
$
|
1,986
|
|
|
$
|
3,380
|
|
|
$
|
3,964
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net (loss) income
|
$
|
(6,879
|
)
|
|
$
|
2,226
|
|
|
$
|
(1,393
|
)
|
|
$
|
(5,296
|
)
|
Foreign currency translation adjustments
|
(3,720
|
)
|
|
(13,025
|
)
|
|
(8,112
|
)
|
|
(8,399
|
)
|
||||
Pension liability changes under Topic 715
|
1,013
|
|
|
578
|
|
|
2,615
|
|
|
90
|
|
||||
Change in value of derivative instruments
|
341
|
|
|
(11
|
)
|
|
373
|
|
|
(105
|
)
|
||||
Comprehensive loss
|
$
|
(9,245
|
)
|
|
$
|
(10,232
|
)
|
|
$
|
(6,517
|
)
|
|
$
|
(13,710
|
)
|
|
Foreign
Currency
Translation
Adjustment
|
|
Pension
Liability
Changes Under
Topic 715
|
|
Change in
Value of
Derivative
Instruments
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
||||||||
Balance at March 31, 2013
|
$
|
(1,139
|
)
|
|
$
|
(42,900
|
)
|
|
$
|
(612
|
)
|
|
$
|
(44,651
|
)
|
Other comprehensive (loss) income before reclassifications
|
(3,720
|
)
|
|
560
|
|
|
14
|
|
|
(3,146
|
)
|
||||
Amounts reclassified from other comprehensive (loss) income
|
|
|
|
|
|
|
|
||||||||
Amortization of actuarial losses
|
—
|
|
|
453
|
|
|
—
|
|
|
453
|
|
||||
Amortization of interest expense
|
—
|
|
|
—
|
|
|
327
|
|
|
327
|
|
||||
Net current period other comprehensive (loss) income
|
(3,720
|
)
|
|
1,013
|
|
|
341
|
|
|
(2,366
|
)
|
||||
Balance at June 30, 2013
|
$
|
(4,859
|
)
|
|
$
|
(41,887
|
)
|
|
$
|
(271
|
)
|
|
$
|
(47,017
|
)
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
Translation
Adjustment
|
|
Pension
Liability
Changes Under
Topic 715
|
|
Change in
Value of
Derivative
Instruments
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
||||||||
Balance at December 31, 2012
|
$
|
3,253
|
|
|
$
|
(44,502
|
)
|
|
$
|
(644
|
)
|
|
$
|
(41,893
|
)
|
Other comprehensive (loss) income before reclassifications
|
(8,112
|
)
|
|
1,587
|
|
|
14
|
|
|
(6,511
|
)
|
||||
Amounts reclassified from other comprehensive (loss) income
|
|
|
|
|
|
|
|
||||||||
Amortization of actuarial losses
|
—
|
|
|
1,028
|
|
|
—
|
|
|
1,028
|
|
||||
Amortization of interest expense
|
—
|
|
|
—
|
|
|
359
|
|
|
359
|
|
||||
Net current period other comprehensive (loss) income
|
(8,112
|
)
|
|
2,615
|
|
|
373
|
|
|
(5,124
|
)
|
||||
Balance at June 30, 2013
|
$
|
(4,859
|
)
|
|
$
|
(41,887
|
)
|
|
$
|
(271
|
)
|
|
$
|
(47,017
|
)
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2012 |
|
Charges (1)
|
|
Currency
Effects |
|
Cash
Payments |
|
Balance at
June 30, 2013 |
||||||||||
Severance and other benefits
|
$
|
15,577
|
|
|
$
|
3,339
|
|
|
$
|
(348
|
)
|
|
$
|
(8,876
|
)
|
|
$
|
9,692
|
|
Facility costs and other
|
335
|
|
|
1,669
|
|
|
(8
|
)
|
|
(1,225
|
)
|
|
771
|
|
|||||
Total
|
$
|
15,912
|
|
|
$
|
5,008
|
|
|
$
|
(356
|
)
|
|
$
|
(10,101
|
)
|
|
$
|
10,463
|
|
|
Balance at
December 31, 2011 |
|
Charges
|
|
Currency
Effects |
|
Cash
Payments |
|
Balance at
June 30, 2012 |
||||||||||
Severance and other benefits
|
$
|
800
|
|
|
$
|
705
|
|
|
$
|
4
|
|
|
$
|
(1,142
|
)
|
|
$
|
367
|
|
Facility costs and other
|
452
|
|
|
4,398
|
|
|
(124
|
)
|
|
(4,299
|
)
|
|
427
|
|
|||||
Total
|
$
|
1,252
|
|
|
$
|
5,103
|
|
|
$
|
(120
|
)
|
|
$
|
(5,441
|
)
|
|
$
|
794
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Clothing
|
$
|
3,578
|
|
|
$
|
1,007
|
|
|
$
|
3,986
|
|
|
$
|
4,766
|
|
Roll Covers
|
705
|
|
|
—
|
|
|
1,434
|
|
|
179
|
|
||||
Corporate
|
(118
|
)
|
|
122
|
|
|
—
|
|
|
158
|
|
||||
Total
|
$
|
4,165
|
|
|
$
|
1,129
|
|
|
$
|
5,420
|
|
|
$
|
5,103
|
|
|
Clothing
|
|
Roll
Covers |
|
Corporate
|
|
Total
|
||||||||
Three Months Ended June 30, 2013:
|
|
|
|
|
|
|
|
||||||||
Net Sales
|
$
|
89,414
|
|
|
$
|
48,910
|
|
|
$
|
—
|
|
|
$
|
138,324
|
|
Segment Earnings (Loss)
|
$
|
20,148
|
|
|
$
|
10,592
|
|
|
$
|
(3,842
|
)
|
|
|
||
Three Months Ended June 30, 2012:
|
|
|
|
|
|
|
|
||||||||
Net Sales
|
$
|
88,115
|
|
|
$
|
48,263
|
|
|
$
|
—
|
|
|
$
|
136,378
|
|
Segment Earnings (Loss)
|
$
|
15,861
|
|
|
$
|
12,126
|
|
|
$
|
(2,591
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Six Months Ended June 30, 2013:
|
|
|
|
|
|
|
|
||||||||
Net Sales
|
$
|
179,351
|
|
|
$
|
98,778
|
|
|
$
|
—
|
|
|
$
|
278,129
|
|
Segment Earnings (Loss)
|
$
|
38,210
|
|
|
$
|
24,662
|
|
|
$
|
(6,831
|
)
|
|
|
||
Six Months Ended June 30, 2012:
|
|
|
|
|
|
|
|
||||||||
Net Sales
|
$
|
176,798
|
|
|
$
|
93,944
|
|
|
$
|
—
|
|
|
$
|
270,742
|
|
Segment Earnings (Loss)
|
$
|
30,622
|
|
|
$
|
20,016
|
|
|
$
|
(6,421
|
)
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Segment Earnings (Loss):
|
|
|
|
|
|
|
|
||||||||
Clothing
|
$
|
20,148
|
|
|
$
|
15,861
|
|
|
$
|
38,210
|
|
|
$
|
30,622
|
|
Roll Covers
|
10,592
|
|
|
12,126
|
|
|
24,662
|
|
|
20,016
|
|
||||
Corporate
|
(3,842
|
)
|
|
(2,591
|
)
|
|
(6,831
|
)
|
|
(6,421
|
)
|
||||
Stock-based compensation
|
(300
|
)
|
|
218
|
|
|
(595
|
)
|
|
(754
|
)
|
||||
Inventory write-off
|
(692
|
)
|
|
—
|
|
|
(692
|
)
|
|
—
|
|
||||
Impairment expense
|
191
|
|
|
—
|
|
|
(666
|
)
|
|
|
|||||
Legal fees related to term debt amendment
|
|
|
(85
|
)
|
|
|
|
(85
|
)
|
||||||
Non-recurring expenses related to CEO retirement
|
—
|
|
|
(695
|
)
|
|
—
|
|
|
(1,496
|
)
|
||||
Interest expense, net
|
(13,112
|
)
|
|
(9,120
|
)
|
|
(22,318
|
)
|
|
(18,718
|
)
|
||||
Depreciation and amortization
|
(9,087
|
)
|
|
(10,005
|
)
|
|
(18,628
|
)
|
|
(20,346
|
)
|
||||
Loss on debt extinguishment
|
(3,123
|
)
|
|
—
|
|
|
(3,123
|
)
|
|
—
|
|
||||
Restructuring expense
|
(4,165
|
)
|
|
(1,129
|
)
|
|
(5,420
|
)
|
|
(5,103
|
)
|
||||
(Loss) income before provision for income taxes
|
$
|
(3,390
|
)
|
|
$
|
4,580
|
|
|
$
|
4,599
|
|
|
$
|
(2,285
|
)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30, |
||||||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
RSU and DSU Awards (1)
|
|
$
|
300
|
|
|
$
|
344
|
|
|
$
|
595
|
|
|
$
|
754
|
|
Management Incentive/Performance Award Programs (2)
|
|
—
|
|
|
(562
|
)
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
300
|
|
|
$
|
(218
|
)
|
|
$
|
595
|
|
|
$
|
754
|
|
(1)
|
Related to RSUs, Options and DSUs awarded to certain employees and non-employee directors.
|
(2)
|
In 2012, the amount represents the value of stock awards granted under the 2012 Management Incentive Compensation Program, adjusted for payout based on the projected performance targets. In March of 2013, the Compensation Committee approved the 2013 Management Incentive Compensation Award Program. This award, if earned, will be paid out entirely in cash, and therefore, the expense is no longer considered stock compensation.
|
|
Parent
|
|
Total
Guarantors |
|
Total Non
Guarantors |
|
Other
Eliminations |
|
The
Company |
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
47,265
|
|
|
$
|
103,218
|
|
|
$
|
(12,159
|
)
|
|
$
|
138,324
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of products sold
|
(399
|
)
|
|
32,470
|
|
|
65,762
|
|
|
(12,159
|
)
|
|
85,674
|
|
|||||
Selling
|
—
|
|
|
4,972
|
|
|
12,613
|
|
|
—
|
|
|
17,585
|
|
|||||
General and administrative
|
2,299
|
|
|
1,738
|
|
|
11,469
|
|
|
—
|
|
|
15,506
|
|
|||||
Research and development
|
—
|
|
|
2,037
|
|
|
562
|
|
|
—
|
|
|
2,599
|
|
|||||
Restructuring and impairment
|
(118
|
)
|
|
556
|
|
|
3,727
|
|
|
—
|
|
|
4,165
|
|
|||||
|
1,782
|
|
|
41,773
|
|
|
94,133
|
|
|
(12,159
|
)
|
|
125,529
|
|
|||||
(Loss) income from operations
|
(1,782
|
)
|
|
5,492
|
|
|
9,085
|
|
|
—
|
|
|
12,795
|
|
|||||
Interest (expense) income, net
|
(8,113
|
)
|
|
1,405
|
|
|
(6,404
|
)
|
|
—
|
|
|
(13,112
|
)
|
|||||
Foreign exchange (loss) gain
|
(87
|
)
|
|
9
|
|
|
128
|
|
|
—
|
|
|
50
|
|
|||||
Equity in subsidiaries income (deficit)
|
6,273
|
|
|
(1,768
|
)
|
|
—
|
|
|
(4,505
|
)
|
|
—
|
|
|||||
Loss on extinguishment of debt
|
(3,123
|
)
|
|
|
|
|
|
|
|
(3,123
|
)
|
||||||||
Dividend income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
(Loss) income before provision for income taxes
|
(6,832
|
)
|
|
5,138
|
|
|
2,809
|
|
|
(4,505
|
)
|
|
(3,390
|
)
|
|||||
Provision for income taxes
|
(47
|
)
|
|
(38
|
)
|
|
(3,404
|
)
|
|
—
|
|
|
(3,489
|
)
|
|||||
Net (loss) income
|
$
|
(6,879
|
)
|
|
$
|
5,100
|
|
|
$
|
(595
|
)
|
|
$
|
(4,505
|
)
|
|
$
|
(6,879
|
)
|
Comprehensive (loss) income
|
$
|
(8,449
|
)
|
|
$
|
5,279
|
|
|
$
|
(1,570
|
)
|
|
$
|
(4,505
|
)
|
|
$
|
(9,245
|
)
|
|
Parent
|
|
Total
Guarantors |
|
Total Non
Guarantors |
|
Other
Eliminations |
|
The
Company |
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
45,787
|
|
|
$
|
102,122
|
|
|
$
|
(11,531
|
)
|
|
$
|
136,378
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of products sold
|
(336
|
)
|
|
32,009
|
|
|
65,350
|
|
|
(11,627
|
)
|
|
85,396
|
|
|||||
Selling
|
—
|
|
|
5,609
|
|
|
13,461
|
|
|
—
|
|
|
19,070
|
|
|||||
General and administrative
|
1,151
|
|
|
2,129
|
|
|
10,754
|
|
|
—
|
|
|
14,034
|
|
|||||
Research and development
|
—
|
|
|
2,083
|
|
|
786
|
|
|
—
|
|
|
2,869
|
|
|||||
Restructuring and impairment
|
122
|
|
|
23
|
|
|
984
|
|
|
—
|
|
|
1,129
|
|
|||||
|
937
|
|
|
41,853
|
|
|
91,335
|
|
|
(11,627
|
)
|
|
122,498
|
|
|||||
(Loss) income from operations
|
(937
|
)
|
|
3,934
|
|
|
10,787
|
|
|
96
|
|
|
13,880
|
|
|||||
Interest (expense) income, net
|
(7,092
|
)
|
|
1,766
|
|
|
(3,794
|
)
|
|
—
|
|
|
(9,120
|
)
|
|||||
Foreign exchange (loss) gain
|
(154
|
)
|
|
3
|
|
|
(29
|
)
|
|
—
|
|
|
(180
|
)
|
|||||
Equity in subsidiaries income (deficit)
|
10,435
|
|
|
3,078
|
|
|
—
|
|
|
(13,513
|
)
|
|
—
|
|
|||||
Income (loss) before provision for income taxes
|
2,252
|
|
|
8,781
|
|
|
6,964
|
|
|
(13,417
|
)
|
|
4,580
|
|
|||||
Provision for income taxes
|
(26
|
)
|
|
(33
|
)
|
|
(2,295
|
)
|
|
—
|
|
|
(2,354
|
)
|
|||||
Net income (loss)
|
$
|
2,226
|
|
|
$
|
8,748
|
|
|
$
|
4,669
|
|
|
$
|
(13,417
|
)
|
|
$
|
2,226
|
|
Comprehensive income (loss)
|
$
|
3,505
|
|
|
$
|
8,834
|
|
|
$
|
(9,154
|
)
|
|
$
|
(13,417
|
)
|
|
$
|
(10,232
|
)
|
|
Parent
|
|
Total
Guarantors |
|
Total Non
Guarantors |
|
Other
Eliminations |
|
The
Company |
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
93,381
|
|
|
$
|
208,617
|
|
|
$
|
(23,869
|
)
|
|
$
|
278,129
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of products sold
|
(849
|
)
|
|
63,334
|
|
|
132,356
|
|
|
(23,869
|
)
|
|
170,972
|
|
|||||
Selling
|
—
|
|
|
10,191
|
|
|
25,916
|
|
|
—
|
|
|
36,107
|
|
|||||
General and administrative
|
4,281
|
|
|
2,544
|
|
|
23,315
|
|
|
—
|
|
|
30,140
|
|
|||||
Research and development
|
—
|
|
|
4,049
|
|
|
1,203
|
|
|
—
|
|
|
5,252
|
|
|||||
Restructuring and impairment
|
1
|
|
|
794
|
|
|
4,625
|
|
|
—
|
|
|
5,420
|
|
|||||
|
3,433
|
|
|
80,912
|
|
|
187,415
|
|
|
(23,869
|
)
|
|
247,891
|
|
|||||
(Loss) income from operations
|
(3,433
|
)
|
|
12,469
|
|
|
21,202
|
|
|
—
|
|
|
30,238
|
|
|||||
Interest (expense) income, net
|
(14,817
|
)
|
|
2,811
|
|
|
(10,312
|
)
|
|
—
|
|
|
(22,318
|
)
|
|||||
Foreign exchange (loss) gain
|
96
|
|
|
(5
|
)
|
|
(289
|
)
|
|
—
|
|
|
(198
|
)
|
|||||
Equity in subsidiaries income (deficit)
|
19,977
|
|
|
2,986
|
|
|
—
|
|
|
(22,963
|
)
|
|
—
|
|
|||||
Loss on extinguishment of debt
|
(3,123
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,123
|
)
|
|||||
Dividend income
|
—
|
|
|
1,555
|
|
|
—
|
|
|
(1,555
|
)
|
|
—
|
|
|||||
(Loss) income before provision for income taxes
|
(1,300
|
)
|
|
19,816
|
|
|
10,601
|
|
|
(24,518
|
)
|
|
4,599
|
|
|||||
Provision for income taxes
|
(93
|
)
|
|
68
|
|
|
(5,967
|
)
|
|
—
|
|
|
(5,992
|
)
|
|||||
Net (loss) income
|
$
|
(1,393
|
)
|
|
$
|
19,884
|
|
|
$
|
4,634
|
|
|
$
|
(24,518
|
)
|
|
$
|
(1,393
|
)
|
Comprehensive (loss) income
|
$
|
(3,196
|
)
|
|
$
|
19,841
|
|
|
$
|
1,356
|
|
|
$
|
(24,518
|
)
|
|
$
|
(6,517
|
)
|
|
Parent
|
|
Total
Guarantors |
|
Total Non
Guarantors |
|
Other
Eliminations |
|
The
Company |
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
89,850
|
|
|
$
|
204,798
|
|
|
$
|
(23,906
|
)
|
|
$
|
270,742
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of products sold
|
(808
|
)
|
|
65,424
|
|
|
132,849
|
|
|
(24,148
|
)
|
|
173,317
|
|
|||||
Selling
|
—
|
|
|
11,332
|
|
|
27,226
|
|
|
—
|
|
|
38,558
|
|
|||||
General and administrative
|
5,264
|
|
|
3,767
|
|
|
22,829
|
|
|
—
|
|
|
31,860
|
|
|||||
Research and development
|
—
|
|
|
4,153
|
|
|
1,678
|
|
|
—
|
|
|
5,831
|
|
|||||
Restructuring and impairment
|
158
|
|
|
163
|
|
|
4,782
|
|
|
—
|
|
|
5,103
|
|
|||||
|
4,614
|
|
|
84,839
|
|
|
189,364
|
|
|
(24,148
|
)
|
|
254,669
|
|
|||||
(Loss) income from operations
|
(4,614
|
)
|
|
5,011
|
|
|
15,434
|
|
|
242
|
|
|
16,073
|
|
|||||
Interest (expense) income, net
|
(14,447
|
)
|
|
3,545
|
|
|
(7,816
|
)
|
|
—
|
|
|
(18,718
|
)
|
|||||
Foreign exchange (loss) gain
|
(308
|
)
|
|
(3
|
)
|
|
671
|
|
|
—
|
|
|
360
|
|
|||||
Equity in subsidiaries income (deficit)
|
14,128
|
|
|
2,388
|
|
|
—
|
|
|
(16,516
|
)
|
|
—
|
|
|||||
(Loss) income before provision for income taxes
|
(5,241
|
)
|
|
10,941
|
|
|
8,289
|
|
|
(16,274
|
)
|
|
(2,285
|
)
|
|||||
Provision for income taxes
|
(54
|
)
|
|
(73
|
)
|
|
(2,884
|
)
|
|
—
|
|
|
(3,011
|
)
|
|||||
Net (loss) income
|
$
|
(5,295
|
)
|
|
$
|
10,868
|
|
|
$
|
5,405
|
|
|
$
|
(16,274
|
)
|
|
$
|
(5,296
|
)
|
Comprehensive (loss) income
|
$
|
(4,663
|
)
|
|
$
|
11,396
|
|
|
$
|
(4,169
|
)
|
|
$
|
(16,274
|
)
|
|
$
|
(13,710
|
)
|
|
Parent
|
|
Total
Guarantors |
|
Total Non
Guarantors |
|
Other
Eliminations |
|
The
Company |
||||||||||
Operating activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Net (loss) income
|
$
|
(1,393
|
)
|
|
$
|
19,884
|
|
|
$
|
4,634
|
|
|
$
|
(24,518
|
)
|
|
$
|
(1,393
|
)
|
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Stock-based compensation
|
595
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
595
|
|
|||||
Depreciation
|
197
|
|
|
3,764
|
|
|
13,706
|
|
|
—
|
|
|
17,667
|
|
|||||
Amortization of intangibles
|
—
|
|
|
914
|
|
|
47
|
|
|
—
|
|
|
961
|
|
|||||
Deferred financing cost amortization
|
(2,141
|
)
|
|
—
|
|
|
3,759
|
|
|
—
|
|
|
1,618
|
|
|||||
Foreign exchange loss on revaluation of debt
|
1,612
|
|
|
—
|
|
|
(288
|
)
|
|
—
|
|
|
1,324
|
|
|||||
Deferred taxes
|
—
|
|
|
—
|
|
|
748
|
|
|
—
|
|
|
748
|
|
|||||
Asset impairment
|
17
|
|
|
341
|
|
|
720
|
|
|
|
|
1,078
|
|
||||||
Loss (gain) on disposition of property and equipment
|
1
|
|
|
17
|
|
|
(25
|
)
|
|
—
|
|
|
(7
|
)
|
|||||
Loss (gain) on extinguishment of debt
|
3,123
|
|
|
|
|
|
|
|
|
3,123
|
|
||||||||
Provision for doubtful accounts
|
—
|
|
|
28
|
|
|
94
|
|
|
—
|
|
|
122
|
|
|||||
Undistributed equity in (earnings) loss of subsidiaries
|
(19,977
|
)
|
|
(2,986
|
)
|
|
—
|
|
|
22,963
|
|
|
—
|
|
|||||
Change in assets and liabilities which provided (used) cash:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts receivable
|
—
|
|
|
(2,563
|
)
|
|
(5,246
|
)
|
|
—
|
|
|
(7,809
|
)
|
|||||
Inventories
|
—
|
|
|
(45
|
)
|
|
(889
|
)
|
|
—
|
|
|
(934
|
)
|
|||||
Prepaid expenses
|
(225
|
)
|
|
(637
|
)
|
|
1,342
|
|
|
—
|
|
|
480
|
|
|||||
Other current assets
|
(32
|
)
|
|
120
|
|
|
(391
|
)
|
|
—
|
|
|
(303
|
)
|
|||||
Accounts payable and accrued expenses
|
1,338
|
|
|
295
|
|
|
(7,354
|
)
|
|
1,555
|
|
|
(4,166
|
)
|
|||||
Deferred and other long-term liabilities
|
82
|
|
|
107
|
|
|
(1,018
|
)
|
|
—
|
|
|
(829
|
)
|
|||||
Intercompany loans
|
1,111
|
|
|
(2,344
|
)
|
|
1,233
|
|
|
—
|
|
|
—
|
|
|||||
Net cash used in operating activities
|
(15,692
|
)
|
|
16,895
|
|
|
11,072
|
|
|
—
|
|
|
12,275
|
|
|||||
Investing activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures, gross
|
(2,265
|
)
|
|
(1,557
|
)
|
|
(4,635
|
)
|
|
—
|
|
|
(8,457
|
)
|
|||||
Intercompany property and equipment transfers, net
|
3
|
|
|
84
|
|
|
(87
|
)
|
|
|
|
—
|
|
||||||
Proceeds from disposals of property and equipment
|
—
|
|
|
4
|
|
|
350
|
|
|
—
|
|
|
354
|
|
|||||
Net cash (used in) provided by investing activities
|
(2,262
|
)
|
|
(1,469
|
)
|
|
(4,372
|
)
|
|
—
|
|
|
(8,103
|
)
|
|||||
Financing activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from borrowings
|
199,000
|
|
|
|
|
|
|
|
|
199,000
|
|
||||||||
Principal payments on debt
|
(104,557
|
)
|
|
—
|
|
|
(93,791
|
)
|
|
—
|
|
|
(198,348
|
)
|
|||||
Payment of deferred financing fees
|
(2,772
|
)
|
|
|
|
|
|
|
|
(2,772
|
)
|
||||||||
Intercompany loans
|
(72,949
|
)
|
|
(15,471
|
)
|
|
88,420
|
|
|
—
|
|
|
—
|
|
|||||
Net cash provided by (used in) financing activities
|
18,722
|
|
|
(15,471
|
)
|
|
(5,371
|
)
|
|
—
|
|
|
(2,120
|
)
|
|||||
Effect of exchange rate changes on cash flows
|
—
|
|
|
—
|
|
|
(315
|
)
|
|
—
|
|
|
(315
|
)
|
|||||
Net increase (decrease) in cash
|
768
|
|
|
(45
|
)
|
|
1,014
|
|
|
—
|
|
|
1,737
|
|
|||||
Cash and cash equivalents at beginning of period
|
6,471
|
|
|
36
|
|
|
28,270
|
|
|
—
|
|
|
34,777
|
|
|||||
Cash and cash equivalents at end of period
|
$
|
7,239
|
|
|
$
|
(9
|
)
|
|
$
|
29,284
|
|
|
$
|
—
|
|
|
$
|
36,514
|
|
|
Parent
|
|
Total
Guarantors |
|
Total Non
Guarantors |
|
Other
Eliminations |
|
The
Company |
||||||||||
Operating activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Net (loss) income
|
$
|
(5,295
|
)
|
|
$
|
10,868
|
|
|
$
|
5,405
|
|
|
$
|
(16,274
|
)
|
|
$
|
(5,296
|
)
|
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Stock-based compensation
|
754
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
754
|
|
|||||
Depreciation
|
97
|
|
|
3,943
|
|
|
15,153
|
|
|
—
|
|
|
19,193
|
|
|||||
Amortization of intangibles
|
—
|
|
|
1,106
|
|
|
47
|
|
|
—
|
|
|
1,153
|
|
|||||
Deferred financing cost amortization
|
1,211
|
|
|
—
|
|
|
525
|
|
|
—
|
|
|
1,736
|
|
|||||
Foreign exchange loss on revaluation of debt
|
—
|
|
|
—
|
|
|
381
|
|
|
—
|
|
|
381
|
|
|||||
Deferred taxes
|
—
|
|
|
—
|
|
|
(360
|
)
|
|
—
|
|
|
(360
|
)
|
|||||
Gain on disposition of property and equipment
|
—
|
|
|
(4
|
)
|
|
(613
|
)
|
|
—
|
|
|
(617
|
)
|
|||||
Provision for doubtful accounts
|
—
|
|
|
(66
|
)
|
|
259
|
|
|
—
|
|
|
193
|
|
|||||
Undistributed equity in (earnings) loss of subsidiaries
|
(14,128
|
)
|
|
(2,388
|
)
|
|
—
|
|
|
16,516
|
|
|
—
|
|
|||||
Change in assets and liabilities which provided (used) cash:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts receivable
|
5
|
|
|
1,027
|
|
|
2,829
|
|
|
—
|
|
|
3,861
|
|
|||||
Inventories
|
—
|
|
|
2,038
|
|
|
(1,566
|
)
|
|
(242
|
)
|
|
230
|
|
|||||
Prepaid expenses
|
1,097
|
|
|
(757
|
)
|
|
(4,416
|
)
|
|
—
|
|
|
(4,076
|
)
|
|||||
Other current assets
|
—
|
|
|
1,419
|
|
|
(816
|
)
|
|
—
|
|
|
603
|
|
|||||
Accounts payable and accrued expenses
|
(640
|
)
|
|
(1,346
|
)
|
|
(1,623
|
)
|
|
—
|
|
|
(3,609
|
)
|
|||||
Deferred and other long-term liabilities
|
195
|
|
|
127
|
|
|
(672
|
)
|
|
—
|
|
|
(350
|
)
|
|||||
Intercompany loans
|
796
|
|
|
(484
|
)
|
|
(312
|
)
|
|
—
|
|
|
—
|
|
|||||
Net cash (used in) provided by operating activities
|
(15,908
|
)
|
|
15,483
|
|
|
14,221
|
|
|
—
|
|
|
13,796
|
|
|||||
Investing activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures, gross
|
(15
|
)
|
|
(1,293
|
)
|
|
(6,022
|
)
|
|
—
|
|
|
(7,330
|
)
|
|||||
Intercompany property and equipment transfers, net
|
343
|
|
|
(337
|
)
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|||||
Proceeds from disposals of property and equipment
|
—
|
|
|
3
|
|
|
978
|
|
|
—
|
|
|
981
|
|
|||||
Net cash provided by (used in) investing activities
|
328
|
|
|
(1,627
|
)
|
|
(5,050
|
)
|
|
—
|
|
|
(6,349
|
)
|
|||||
Financing activities
|
|
|
|
|
|
|
|
|
|
||||||||||
Principal payments on debt
|
(6,854
|
)
|
|
—
|
|
|
(8,021
|
)
|
|
—
|
|
|
(14,875
|
)
|
|||||
Payment of deferred financing fees
|
(1,027
|
)
|
|
—
|
|
|
(735
|
)
|
|
—
|
|
|
(1,762
|
)
|
|||||
Intercompany loans
|
19,017
|
|
|
(14,105
|
)
|
|
(4,912
|
)
|
|
—
|
|
|
—
|
|
|||||
Net cash provided by (used in) financing activities
|
11,136
|
|
|
(14,105
|
)
|
|
(13,668
|
)
|
|
—
|
|
|
(16,637
|
)
|
|||||
Effect of exchange rate changes on cash flows
|
—
|
|
|
3
|
|
|
(783
|
)
|
|
—
|
|
|
(780
|
)
|
|||||
Net (decrease) increase in cash
|
(4,444
|
)
|
|
(246
|
)
|
|
(5,280
|
)
|
|
—
|
|
|
(9,970
|
)
|
|||||
Cash and cash equivalents at beginning of period
|
11,548
|
|
|
280
|
|
|
31,738
|
|
|
—
|
|
|
43,566
|
|
|||||
Cash and cash equivalents at end of period
|
$
|
7,104
|
|
|
$
|
34
|
|
|
$
|
26,458
|
|
|
$
|
—
|
|
|
$
|
33,596
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
we are subject to the risk of a weaker global economy that influences the paper industry as well as local economic conditions in the areas around the world where we conduct business;
|
•
|
structural shifts in the demand for paper, for instance the shift away from newsprint, printing and writing paper in favor of digital media, may adversely impact our financial results;
|
•
|
our strategy to lower our costs in response to market changes in the paper industry by reorganizing and restructuring our operations will require us to incur significant costs and may not provide the savings and results we anticipate;
|
•
|
our strategies and plans, including, but not limited to, those relating to developing and successfully marketing new products, enhancing our operational efficiencies and reducing costs, may not result in the anticipated benefits;
|
•
|
our financial results could be adversely affected by fluctuations in interest rates and currency exchange rates;
|
•
|
our manufacturing facilities may be required to quickly increase or decrease production capacity, which could negatively affect our production, customer order lead time, product quality, labor relations or gross margin;
|
•
|
we may not be successful in developing and marketing new technologies or in competing against new technologies developed by competitors;
|
•
|
variations in demand for our products, including our new products, could negatively affect our net sales and profitability;
|
•
|
we are subject to fluctuations in the price of our component supply costs;
|
•
|
due to our high degree of leverage and significant debt service obligations, we need to generate substantial operating cash flow to fund growth and unexpected cash needs;
|
•
|
we are subject to the risk of terrorist attacks or an outbreak or escalation of any insurrection or armed conflict involving the United States or any other country in which we conduct business, or any other domestic or international calamity, including natural disasters;
|
•
|
we are subject to the impact of changes in the policies, laws, regulations and practices of the United States and any foreign country in which we operate or conduct business, including changes regarding taxes and the repatriation of earnings; and
|
•
|
anti-takeover provisions could make it more difficult for a third-party to acquire us.
|
|
|
|
The volume (tonnage) of worldwide paper production;
|
|
|
|
Our ability to introduce new products that our customers value and will pay for;
|
|
|
|
Advances in the technology of our products, which can provide value to our customers by improving the efficiency of paper-making machines and reduce their manufacturing costs;
|
|
|
|
Growth in developing markets, particularly in Asia;
|
|
|
|
The mix of paper grades being produced;
|
|
|
|
Our ability to enter and expand our business in non-paper products; and
|
|
|
|
The impact of currency fluctuations.
|
|
|
|
|
|
Currency
|
|
Average exchange rate of the
U.S. Dollar in the six months ended June 30, 2013 |
|
Average exchange rate of the
U.S. Dollar in the six months ended June 30, 2012 |
Euro
|
|
$1.31 = 1 Euro
|
|
$1.30 = 1 Euro
|
Brazilian Real
|
|
$0.49 = 1 Brazilian Real
|
|
$0.54 = 1 Brazilian Real
|
Canadian Dollar
|
|
$0.98 = 1 Canadian Dollar
|
|
$0.99 = 1 Canadian Dollar
|
Australian Dollar
|
|
$1.01 = 1 Australian Dollar
|
|
$1.03 = 1 Australian Dollar
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||
|
2013
|
|
2012
|
2013
|
|
2012
|
||||||||
Domestic income from operations
|
$
|
3,710
|
|
|
$
|
2,997
|
|
$
|
9,036
|
|
|
$
|
397
|
|
Foreign income from operations
|
9,085
|
|
|
10,883
|
|
21,202
|
|
|
15,676
|
|
||||
Total income from operations
|
$
|
12,795
|
|
|
$
|
13,880
|
|
$
|
30,238
|
|
|
$
|
16,073
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Net Sales
|
$
|
138,324
|
|
|
$
|
136,378
|
|
|
$
|
278,129
|
|
|
$
|
270,742
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of products sold
|
85,674
|
|
|
85,396
|
|
|
170,972
|
|
|
173,317
|
|
||||
Selling
|
17,585
|
|
|
19,070
|
|
|
36,107
|
|
|
38,558
|
|
||||
General and administrative
|
15,506
|
|
|
14,034
|
|
|
30,140
|
|
|
31,860
|
|
||||
Research and development
|
2,599
|
|
|
2,869
|
|
|
5,252
|
|
|
5,831
|
|
||||
Restructuring
|
4,165
|
|
|
1,129
|
|
|
5,420
|
|
|
5,103
|
|
||||
|
125,529
|
|
|
122,498
|
|
|
247,891
|
|
|
254,669
|
|
||||
Income from operations
|
12,795
|
|
|
13,880
|
|
|
30,238
|
|
|
16,073
|
|
||||
Interest expense, net
|
(13,112
|
)
|
|
(9,120
|
)
|
|
(22,318
|
)
|
|
(18,718
|
)
|
||||
Loss on extinguishment of debt
|
(3,123
|
)
|
|
—
|
|
|
(3,123
|
)
|
|
—
|
|
||||
Foreign exchange gain (loss)
|
50
|
|
|
(180
|
)
|
|
(198
|
)
|
|
360
|
|
||||
(Loss) income before provision for income taxes
|
(3,390
|
)
|
|
4,580
|
|
|
4,599
|
|
|
(2,285
|
)
|
||||
Provision for income taxes
|
(3,489
|
)
|
|
(2,354
|
)
|
|
(5,992
|
)
|
|
(3,011
|
)
|
||||
Net (loss) income
|
$
|
(6,879
|
)
|
|
$
|
2,226
|
|
|
$
|
(1,393
|
)
|
|
$
|
(5,296
|
)
|
Comprehensive loss
|
$
|
(9,245
|
)
|
|
$
|
(10,232
|
)
|
|
$
|
(6,517
|
)
|
|
$
|
(13,710
|
)
|
•
|
a six-year $200 million senior secured term loan facility, provided the facility would mature in March 2018 if any of the Company's senior notes due 2018 ("Senior Notes") remain outstanding at that time; and
|
•
|
an uncommitted accordion option (the “Incremental Facility”) allowing for increases for borrowings under the New Term Credit Facility with the same terms, and borrowing of new tranches of term loans, up to an aggregate principal amount equal to (i) $75 million plus (ii) an additional amount (the “Facility Increase”) provided, if after giving effect to such Facility Increase (as well as any other additional term loans), on a pro forma basis, the Senior Secured Leverage Ratio (as defined in the New Term Credit Facility) for the most recent four consecutive fiscal quarters does not exceed 2.25:1.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net (loss) income
|
$
|
(6,879
|
)
|
|
$
|
2,226
|
|
|
$
|
(1,393
|
)
|
|
$
|
(5,296
|
)
|
Stock-based compensation
|
300
|
|
|
(218
|
)
|
|
595
|
|
|
754
|
|
||||
Depreciation
|
8,702
|
|
|
9,429
|
|
|
17,667
|
|
|
19,193
|
|
||||
Amortization of intangibles
|
385
|
|
|
576
|
|
|
961
|
|
|
1,153
|
|
||||
Deferred financing cost amortization
|
909
|
|
|
682
|
|
|
1,618
|
|
|
1,736
|
|
||||
Foreign exchange loss on revaluation of debt
|
1,268
|
|
|
373
|
|
|
1,324
|
|
|
381
|
|
||||
Deferred taxes
|
466
|
|
|
(179
|
)
|
|
748
|
|
|
(360
|
)
|
||||
Asset impairment
|
150
|
|
|
—
|
|
|
1,078
|
|
|
—
|
|
||||
Gain (loss) on disposition of property and equipment
|
3
|
|
|
(170
|
)
|
|
(7
|
)
|
|
(617
|
)
|
||||
Loss on extinguishment of debt
|
3,123
|
|
|
—
|
|
|
3,123
|
|
|
—
|
|
||||
Net change in operating assets and liabilities
|
(6,610
|
)
|
|
(9,075
|
)
|
|
(13,439
|
)
|
|
(3,148
|
)
|
||||
Net cash provided by operating activities
|
1,817
|
|
|
3,644
|
|
|
12,275
|
|
|
13,796
|
|
||||
Interest expense, excluding amortization
|
12,203
|
|
|
8,438
|
|
|
20,700
|
|
|
16,981
|
|
||||
Net change in operating assets and liabilities
|
6,610
|
|
|
9,075
|
|
|
13,439
|
|
|
3,148
|
|
||||
Current portion of income tax expense
|
3,023
|
|
|
2,533
|
|
|
5,244
|
|
|
3,371
|
|
||||
Stock-based compensation
|
(300
|
)
|
|
218
|
|
|
(595
|
)
|
|
(754
|
)
|
||||
Foreign exchange loss on revaluation of debt
|
(1,268
|
)
|
|
(373
|
)
|
|
(1,324
|
)
|
|
(381
|
)
|
||||
Asset impairment
|
(150
|
)
|
|
—
|
|
|
(1,078
|
)
|
|
—
|
|
||||
Gain (loss) on disposition of property and equipment
|
(3
|
)
|
|
170
|
|
|
7
|
|
|
617
|
|
||||
Loss on extinguishment of debt
|
(3,123
|
)
|
|
—
|
|
|
(3,123
|
)
|
|
—
|
|
||||
EBITDA
|
18,809
|
|
|
23,705
|
|
|
45,545
|
|
|
36,778
|
|
||||
Loss on extinguishment of debt
|
3,123
|
|
|
—
|
|
|
3,123
|
|
|
—
|
|
||||
Stock-based compensation
|
300
|
|
|
(218
|
)
|
|
595
|
|
|
754
|
|
||||
Operational restructuring expenses
|
4,165
|
|
|
1,129
|
|
|
5,420
|
|
|
5,103
|
|
||||
Inventory write off
|
692
|
|
|
—
|
|
|
692
|
|
|
—
|
|
||||
Non-restructuring impairment (income) expense
|
(191
|
)
|
|
—
|
|
|
666
|
|
|
—
|
|
||||
Legal fees related to term debt amendment
|
—
|
|
|
85
|
|
|
—
|
|
|
85
|
|
||||
Non-recurring CEO retirement expenses
|
—
|
|
|
695
|
|
|
—
|
|
|
1,496
|
|
||||
Adjusted EBITDA
|
$
|
26,898
|
|
|
$
|
25,396
|
|
|
$
|
56,041
|
|
|
$
|
44,216
|
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
|
|
|
|
XERIUM TECHNOLOGIES, INC.
|
|
|
(Registrant)
|
|
|
|
|
August 1, 2013
|
By:
|
/s/Clifford E. Pietrafitta
|
|
|
Clifford E. Pietrafitta
|
|
|
Executive Vice President and CFO
|
|
|
(Principal Financial Officer)
|
Exhibit
Number
|
|
Description of Exhibits
|
|
|
|
10.1(1)
|
|
New $200 million credit facility among the Company, certain direct and indirect U.S. subsidiaries of the Company, and certain financial institutions, dated May 17, 2013.
|
10.2(2)
|
|
New $40 million revolving credit facility among the Company, certain direct and indirect U.S. and Canadian subsidiaries of the Company, and certain financial institutions, dated May 17, 2013.
|
10.3
|
|
Amendment No. 2 to the 2010 Equity Incentive Plan.
|
10.4
|
|
2013-2015 Executive Long-Term Incentive Plan and Form of Award Agreement.
|
10.5
|
|
Employment Agreement of Michael Bly.
|
31.1
|
|
Certification Statement of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
31.2
|
|
Certification Statement of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.1
|
|
Certification Statement of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification Statement of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
Number of Time-Based RSUs
|
Number of Performance Shares
|
_____________________
|
______________________
|
|
/s/ Harold C. Bevis
|
Harold C. Bevis
|
President and Chief Executive Officer
|
(Principal Executive Officer)
|
/s/ Clifford E. Pietrafitta
|
Clifford E. Pietrafitta
|
Executive Vice President and CFO
|
(Principal Financial Officer)
|
|
/s/ Harold C. Bevis
|
Harold C. Bevis
|
President and Chief Executive Officer
|
(Principal Executive Officer)
|
/s/ Clifford E. Pietrafitta
|
Clifford E. Pietrafitta
|
Executive Vice President and CFO
|
(Principal Financial Officer)
|