10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2012

Or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from             to             

Commission File Number 001-32498

Xerium Technologies, Inc.

(Exact name of registrant as specified in its charter)

DELAWARE	42-1558674
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
8537 Six Forks Road Suite 300 Raleigh, North Carolina	27615
(Address of principal executive offices)	(Zip Code)

(919) 526-1400

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  x    No  ¨

The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of August 1, 2012 was 15,245,620.

TABLE OF CONTENTS

		Page
Part I. Financial Information
Item 1.	Financial Statements		3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		34
Item 4.	Controls and Procedures		34
Part II. Other Information
Item 1.	Legal Proceedings		34
Item 1A.	Risk Factors		34
Item 6.	Exhibits		34

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Xerium Technologies, Inc.

Condensed Consolidated Balance Sheets—(Unaudited)

(Dollars in thousands)

	June 30,     2012		December 31,     2011
ASSETS
Current assets:
Cash and cash equivalents	$	33,596	$	43,566
Accounts receivable, net		86,085		91,784
Inventories, net		81,296		83,317
Prepaid expenses		10,047		6,177
Other current assets		14,505		15,051
Total current assets		225,529		239,895
Property and equipment, net		314,721		335,256
Goodwill		58,646		59,120
Intangible assets		21,450		22,640
Other assets		8,297		8,810
Total assets	$	628,643	$	665,721
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	34,269	$	39,743
Accrued expenses		48,582		47,805
Current maturities of long-term debt		2,352		3,548
Total current liabilities		85,203		91,096
Long-term debt, net of current maturities		449,492		465,506
Deferred and long-term taxes		17,998		18,582
Pension, other post-retirement and post-employment obligations		79,904		81,188
Other long-term liabilities		11,539		11,654
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, 2012 and December 31, 2011		-		-
Common stock, $0.001 par value, 20,000,000 shares authorized; 15,245,620 and 15,145,451 shares outstanding as of June 30, 2012 and December 31, 2011, respectively		15		15
Stock warrants		13,532		13,532
Paid-in capital		412,020		411,498
Accumulated deficit		(401,100)		(395,804)
Accumulated other comprehensive loss		(39,960)		(31,546)
Total stockholders’ deficit		(15,493)		(2,305)
Total liabilities and stockholders’ deficit	$	628,643	$	665,721

See accompanying notes.

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Xerium Technologies, Inc.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Net sales	$	136,378	$	150,378	$	270,742	$	293,544
Costs and expenses:
Cost of products sold		85,396		92,507		173,317		181,758
Selling		19,070		20,507		38,558		40,031
General and administrative		14,034		16,178		31,860		33,558
Restructuring		1,129		542		5,103		710
Research and development		2,869		2,925		5,831		6,013
		122,498		132,659		254,669		262,070
Income from operations		13,880		17,719		16,073		31,474
Interest expense, net		(9,120)		(9,982)		(18,718)		(19,836)
Loss on extinguishment of debt		-		(2,926)		-		(2,926)
Foreign exchange (loss) gain		(180)		(159)		360		5
Income (loss) before provision for income taxes		4,580		4,652		(2,285)		8,717
Provision for income taxes		(2,354)		(3,030)		(3,011)		(6,447)
Net income (loss)	$	2,226	$	1,622	$	(5,296)	$	2,270
Comprehensive (loss) income	$	(10,232)	$	7,529	$	(13,710)	$	13,922
Net income (loss) per share:
Basic	$	0.15	$	0.11	$	(0.35)	$	0.15
Diluted	$	0.15	$	0.11	$	(0.35)	$	0.15
Shares used in computing net income (loss) per share:
Basic		15,226,995		15,051,860		15,194,432		15,020,696
Diluted		15,236,651		15,289,407		15,194,432		15,258,243

See accompanying notes.

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Xerium Technologies, Inc.

Condensed Consolidated Statements of Cash Flows—(Unaudited)

(Dollars in thousands)

	Six Months Ended June 30,
	2012		2011
Operating activities
Net (loss) income	$	(5,296)	$	2,270
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Stock-based compensation		754		2,081
Depreciation		19,193		20,918
Amortization of intangibles		1,153		1,152
Deferred financing cost amortization		1,736		602
Unrealized foreign exchange loss (gain) on revaluation of debt		381		(1,414)
Deferred taxes		(360)		1,209
Gain on disposition of property and equipment		(617)		(564)
Loss on extinguishment of debt		-		2,926
Provision for doubtful accounts		193		462
Change in assets and liabilities which provided (used) cash:
Accounts receivable		3,861		(1,244)
Inventories		230		(12,031)
Prepaid expenses		(4,076)		(1,840)
Other current assets		603		(309)
Accounts payable and accrued expenses		(3,609)		(6,363)
Deferred and other long-term liabilities		(350)		(1,094)
Net cash provided by operating activities		13,796		6,761
Investing activities
Capital expenditures, gross		(7,330)		(12,015)
Proceeds from disposals of property and equipment		981		1,916
Restricted cash		-		13,701
Net cash (used in) provided by investing activities		(6,349)		3,602
Financing activities
Net decrease in borrowings (maturities of 90 days or less)		-		(181)
Proceeds from borrowings (maturities longer than 90 days)		-		489,810
Principal payments on debt		(14,875)		(489,675)
Payment of deferred financing fees		(1,762)		(16,835)
Net cash used in financing activities		(16,637)		(16,881)
Effect of exchange rate changes on cash flows		(780)		2,308
Net decrease in cash		(9,970)		(4,210)
Cash and cash equivalents at beginning of period		43,566		38,701
Cash and cash equivalents at end of period	$	33,596	$	34,491

See accompanying notes.

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Xerium Technologies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Dollars in thousands, except per share data)

1. Description of Business and Significant Accounting Policies

Description of Business

Xerium Technologies, Inc. (the “Company”) is a leading global manufacturer and supplier of two types of consumable products used primarily in the production of paper – clothing and roll covers. Its operations are strategically located in the major paper-making regions of the world, including North America, Europe, South America and Asia-Pacific.

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements at June 30, 2012 and for the three and six months ended June 30, 2012 and 2011 include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, such financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. The interim results presented herein are not necessarily indicative of the results to be expected for the entire year. In management’s opinion, these unaudited condensed consolidated interim financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation of the financial statements for the interim periods presented. These unaudited consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2011 as reported on Form 10-K filed on March 14, 2012.

Accounting Policies

Inventories, net

Inventories are generally valued at the lower of cost or market using the first-in, first-out (FIFO) method. Raw materials are valued principally on a weighted average cost basis. The Company’s work in process and finished goods are specifically identified and valued based on actual inputs to production. Provisions are recorded as appropriate to write-down obsolete and excess inventory to estimated net realizable value. The process for evaluating obsolete and excess inventory often requires management to make subjective judgments and estimates concerning future sales levels, quantities and prices at which such inventory will be able to be sold in the normal course of business, while considering the general aging of inventory and factoring in any new business conditions.

The components of inventories are as follows at:

	June 30,     2012		December 31,   2011
Raw materials	$	16,906	$	19,872
Work in process		24,634		26,326
Finished goods (includes consigned inventory of $11,686 in 2012 and $12,953 in 2011)		39,756		37,119
	$	81,296	$	83,317

Goodwill

The Company accounts for goodwill and other intangible assets in accordance with ASC Topic 350, Intangibles—Goodwill and Other Intangible Assets (“Topic 350”). Topic 350 requires that goodwill and intangible assets that have indefinite lives not be amortized, but instead, must be tested for impairment at least annually or whenever events or business conditions warrant. During the six months ended June 30, 2012, the Company evaluated events and business conditions to determine if a test for an impairment of goodwill was warranted. No such events or business conditions took place during this period, therefore no test was determined to be warranted at June 30, 2012.

Warranties

The Company offers warranties on certain products that it sells. The specific terms and conditions of these warranties vary depending on the product sold, the country in which the product is sold and arrangements with the customer. The Company estimates the costs that may be incurred under its warranties and records a liability for such costs. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims, cost per claim and new product introduction. The Company periodically assesses the adequacy of its recorded warranty claims and adjusts the amounts as necessary. The table below represents the changes in the Company’s warranty liability for the six months ended June 30, 2012:

	Balance at December 31, 2011		Charged to Revenue or Cost of Sales		Effect of Foreign Currency Translation		Deduction from Reserves		Balance at June 30, 2012
For the six months ended June 30, 2012	$	2,121	$	697	$	(46)	$	(679)	$	2,093

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Net Income (Loss) Per Common Share

Net income (loss) per common share has been computed and presented pursuant to the provisions of ASC Topic 260, Earnings per Share (“Topic 260”). Net income (loss) per share is based on the weighted-average number of shares outstanding during the period. As of June 30, 2012 and 2011, the Company had outstanding restricted stock units (“RSUs”), deferred stock units (“DSUs”), warrants and options.

The following table sets forth the computation of basic and diluted weighted-average shares:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Weighted-average common shares outstanding–basic		15,226,995		15,051,860		15,194,432		15,020,696
Dilutive effect of stock-based compensation awards outstanding		9,656		237,547		-		237,547
Weighted-average common shares outstanding–diluted		15,236,651		15,289,407		15,194,432		15,258,243

Dilutive securities aggregating approximately 1.8 million were outstanding for the six months ended June 30, 2012, respectively, but were not included in the computation of diluted earnings per share because the impact of including such shares would be anti-dilutive to the earnings per share calculations.

2. Derivatives and Hedging

As required by ASC Topic 815, Derivatives and Hedging (“Topic 815”), the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. From time to time, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known cash amounts, the value of which are determined by interest rates or foreign exchange rates.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate caps as part of its interest rate risk management strategy. Interest rate caps designated as cash flow hedges protect the Company from increases in interest rates above the strike rate of the interest rate cap. However, the Company’s financial statements are exposed to the effects of interest rate fluctuations below the strike rate negotiated in the interest rate cap agreements, which could have a material impact on its results of operations.

On August 8, 2011, the Company entered into two interest rate cap agreements with certain financial institutions, with notional amounts totaling $114,400, whereby the Company limits its variable interest rate exposure to the strike rate of the interest rate cap agreements. At June 30, 2012, these agreements had notional amounts of $99,600. Under the terms of the interest rate cap agreements, the Company will receive payments based on the spread in rates if the three-month LIBOR rate

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increases above the negotiated cap rates of 3.0%. The interest rate caps are considered designated hedging instruments, classified as Level 2 in the fair value hierarchy. Changes in fair value will be deferred in accumulated other comprehensive loss and the cap purchase price will be reclassified from accumulated comprehensive loss into earnings as interest expense over the life of the agreements. The fair value of the interest rate caps was $60 at June 30, 2012 and $175 at December 31, 2011. These amounts are included in other assets in the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011. Unrecognized losses of ($625) and ($520) were recorded in accumulated other comprehensive income at June 30, 2012 and December 31, 2011, respectively.

Non-designated Hedges of Foreign Exchange Risk

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to foreign exchange rates, but do not meet the strict hedge accounting requirements of Topic 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly to earnings.

The Company, from time to time, may enter into foreign exchange forward contracts to fix currencies at specified rates based on expected future cash flows to protect against the fluctuations in cash flows resulting from sales denominated in foreign currencies. Additionally, to manage its exposure to fluctuations in foreign currency on intercompany balances and certain purchase commitments, the Company from time to time may use foreign exchange forward contracts.

As of June 30, 2012 and December 31, 2011, the Company had outstanding derivatives that were not designated as hedges in qualifying hedging relationships. The value of these contracts is recognized at fair value based on market exchange forward rates and is recorded in other assets or other liabilities on the Condensed Consolidated Balance Sheets. The fair value of these derivatives at June 30, 2012 and December 31, 2011 was ($105) and $123, respectively. The change in fair value of these contracts is included in foreign exchange (loss) gain and was ($168) and ($887) for the three months ended June 30, 2012 and 2011, respectively and $283 and ($1,479) for the six months ended June 30, 2012 and 2011, respectively.

The following represents the notional amounts of foreign exchange forward contracts at June 30, 2012:

Foreign Currency Derivative (as of June 30, 2012)	Notional Sold		Notional Purchased
Non-designated hedges of foreign exchange risk	$	31,754	$	(5,900)

Fair Value of Derivatives Under ASC Topic 820

ASC Topic 820, Fair Value Measurements and Disclosures (“Topic 820”), emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, Topic 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs including fair value of investments that do not have the ability to redeem at net asset value as of the measurement date, or during the first quarter following the measurement date. The derivative assets or liabilities are typically based on an entity’s own assumptions, as there is little, if any, market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and the Company considers factors specific to the asset or liability. The Company determined that its derivative valuations, which are based on market exchange forward rates, fall within Level 2 of the fair value hierarchy.

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3. Long-term Debt

At June 30, 2012 and December 31, 2011, long-term debt consisted of the following:

	June 30, 2012		December 31, 2011
Senior Bank Debt (Secured):
First lien debt, payable quarterly, U.S. Dollar denominated–LIBOR (minimum 1.25%) plus 5.00% (6.25%) as of June 30, 2012	$	112,513	$	119,366
First lien debt, payable quarterly, Euro denominated–EURIBOR (minimum 1.25%) plus 5.00% (6.25%) as of June 30, 2012		99,200		107,771
		211,713		227,137
Senior Notes (Unsecured), payable semi-annually–U.S. Dollar denominated interest rate fixed at 8.875%, matures June of 2018		240,000		240,000
Other Long-Term Debt:
Unsecured, interest rate fixed at 2.00%, Euro denominated		131		228
Unsecured, interest rate fixed at 1.31% to 3.40%, Yen denominated		-		1,689
		451,844		469,054
Less current maturities		2,352		3,548
Total	$	449,492	$	465,506

On May 26, 2011, the Company completed a refinancing transaction, which replaced certain of its then outstanding indebtedness with $240 million aggregate principal amount of 8.875% senior unsecured notes (the “Notes”) and a new approximately $278 million multi-currency senior secured credit facility (the “Credit Facility”), comprised of approximately $248 million of senior secured term loans and a $30 million senior secured revolving credit facility. The interest rates under the Credit Facility are calculated, at the Company’s option, as the Alternate Base Rate as defined in the Credit Facility, LIBOR or EURIBOR, subject to a minimum of 2.25%, 1.25% and 1.25%, respectively, plus, in each case, a margin. The Credit Facility and Notes contain customary covenants that, subject to certain exceptions, restrict the Company’s ability to enter into certain transactions and engage in certain activities. In addition, the Credit Facility includes specified financial covenants, requiring the Company to maintain certain consolidated leverage and interest coverage ratios and limiting its ability to make capital expenditures in excess of specified amounts. These covenants are included in Note 7 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2011. Management believes the Company is in compliance with all covenants under the Notes and Credit Facility at June 30, 2012.

To facilitate the planned restructuring activities, on June 28, 2012, the Company entered into an amendment to its senior secured credit facility. Among other revisions to the credit facility, the amendment allows for additional add backs to Adjusted EBITDA annually though 2015 up to the lesser of $15.0 million or the unused portion of the allowed annual capital expenditure limit; increases the maximum leverage ratios between September of 2012 and December of 2013; amends the definition of the leverage ratio to reduce debt by unrestricted surplus cash held by the Company and increases the interest rate on the term loans by 0.75% annually for eighteen months. The Company paid $1.5 million in deferred financing costs related to the amendment. This amount is classified as an intangible asset in the Condensed Consolidated Balance Sheets at June 30, 2012.

As of June 30, 2012, an aggregate of $17.6 million is available for additional borrowings under the Credit Facility. This availability represents the $30.0 million revolving facility less $12.4 million of that facility committed for letters of credit. Additionally, at June 30, 2012, the Company had $5.0 million available for borrowings under other small lines of credit.

As of June 30, 2012 and December 31, 2011, the carrying value of the Company’s long-term debt was $451.8 million and $469.1 million, respectively, and exceeded its fair value of approximately $394.7 million and $439.1 million, respectively. The Company determined the fair value of its debt utilizing significant other observable inputs (Level 2 of the fair value hierarchy).

4. Income Taxes

The Company utilizes the asset and liability method for accounting for income taxes in accordance with ASC Topic 740, Income Taxes (“Topic 740”). Under Topic 740, deferred tax assets and liabilities are determined based on the difference between their financial reporting and tax basis. The assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company reduces its deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In making this determination, the Company evaluates all available information including the Company’s financial position and results of operations for the current and preceding years, as well as any available projected information for future years.

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For the three and six months ended June 30, 2012, the provision for income taxes was $2,354 and $3,011, respectively, as compared with $3,030 and $6,447 for the three and six months ended June 30, 2011. The decrease in tax expense was primarily attributable to the geographic mix of earnings in the first half of 2012 as compared with the first half of 2011. The provision for income taxes is primarily impacted by income earned in tax paying jurisdictions relative to income earned in non-tax paying jurisdictions. The majority of income recognized for purposes of computing the effective tax rate is earned in countries where the statutory income tax rates range from 25% to 41%; however, permanent income adjustments recorded against pre-tax earnings may result in an effective tax rate that is higher or lower than the statutory tax rate in these jurisdictions. The Company generates losses in certain jurisdictions for which no tax benefit is received, as the deferred tax assets in these jurisdictions (including the net operating losses) are fully reserved in the valuation allowance. For this reason, the Company recognizes minimal income tax expense or benefit in these jurisdictions, of which the most material jurisdictions are the United States, the United Kingdom and Australia. Due to these reserves, the geographic mix of the Company’s pre-tax earnings has a direct correlation with how high or low its annual effective tax rate is relative to consolidated earnings.

As of June 30, 2012, the Company had a gross unrecognized tax benefit of $8,282. The unrecognized tax benefit decreased by approximately $338 during the six months ended June 30, 2012, as a result of foreign currency effects, statute expirations and ongoing changes in currently reserved positions. The Company’s policy is to recognize interest and penalties related to income tax matters as income tax expense, which were immaterial for the six months ended June 30, 2012 and 2011. The tax years 2000 through 2011 remain open to examination in a number of the major taxing jurisdictions to which the Company and its subsidiaries are subject.

In November of 2011, the Federal Revenue Department of the Ministry of Finance of Brazil (“FRD”) issued a tax assessment against the Company’s indirect subsidiary, Xerium Technologies Brasil Indústria e Comércio S.A. (“Xerium Brazil”), challenging the goodwill recorded in the 2005 acquisition of Wangner Itelpa and Huyck Indústria e Comércio S.A. by Robec Brasil Participações Ltda., a predecessor to Xerium Brazil. This assessment denies the amortization of that goodwill against net income for the years 2006 through 2010. As of June 30, 2012, the Company would be required to pay approximately $42.5 million (subject to currency exchange rates) in tax, penalties and interest in the event the Company was unable to overturn this assessment. The Company believes the transactions in question (i) complied with Brazilian tax and accounting rules, (ii) were effected for a legitimate business purpose, to consolidate the Company’s operating activities in Brazil into one legal entity, and (iii) were properly documented and declared to Brazilian tax and corporate authorities. Based on the foregoing, Xerium Brazil filed a response disputing the tax assessment at the first administrative level of appeal within the FRD in December 2011.

Although there can be no assurances, as of June 30, 2012, the Company believes it was more likely than not that it would prevail on every tax position under examination and therefore it did not accrue any amounts related to this assessment as of June 30, 2012. Because this dispute is at a preliminary stage for resolution with the FRD, the Company cannot assure a favorable outcome and cannot currently estimate the timing of the final resolution of this matter. The Company believes it has meritorious defenses and will vigorously contest this matter. However, if the FRD’s initial position is sustained, the amount assessed would result in a material adjustment to the Company’s consolidated financial statements and would adversely impact the Company’s financial condition and results of operations.

The Company believes that it has made adequate provisions for all income tax uncertainties.

5. Pensions, Other Post-retirement and Post-employment Benefits

The Company accounts for its pensions, other post-retirement and post-employment benefit plans in accordance with ASC Topic 715, Compensation—Retirement Benefits (“Topic 715”). The Company has defined benefit pension plans covering substantially all of its U.S. and Canadian employees and employees of certain subsidiaries in other countries. Benefits are generally based on the employee’s years of service and compensation. These plans are funded in conformity with the funding requirements of applicable government regulations. The Company does not fund certain plans, as funding is not required. The Company plans to continue to fund its U.S. defined benefit plans to comply with the Pension Protection Act of 2006. In addition, the Company also intends to fund its UK and Canadian defined benefit plans in accordance with local regulations.

The Company sponsors various unfunded defined contribution plans that provide for retirement benefits to employees, some in accordance with local government requirements. The Company also maintains a funded retirement savings plan for U.S. employees which is qualified under Section 401(k) of the U.S. Internal Revenue Code. The plan allows eligible employees to contribute up to 15% of their compensation (plus catch-up contributions for participants over age 50), with the

10

Company matching 200% of the first 1% of employee compensation and 100% of the next 4% of employee compensation. The following represents the approximate matching contribution expense for the three and six months ended June 30, 2012 and 2011:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Matching contribution expense	$	434	$	446	$	878	$	889

As required by Topic 715, the following tables summarize the components of net periodic benefit cost:

Defined Benefit Plans

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Service cost	$	888	$	719	$	1,773	$	1,411
Interest cost		1,838		2,052		3,668		4,029
Expected return on plan assets		(1,377)		(1,496)		(2,750)		(2,937)
Amortization of prior service cost		4		4		7		7
Amortization of net loss		633		376		1,266		739
Net periodic benefit cost	$	1,986	$	1,655	$	3,964	$	3,249

6. Comprehensive (Loss) Income and Accumulated Other Comprehensive Loss

Comprehensive (loss) income for the three and six months ended June 30, 2012 and 2011 is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Net income (loss)	$	2,226	$	1,622	$	(5,296)	$	2,270
Foreign currency translation adjustments		(13,025)		6,039		(8,399)		12,477
Pension liability changes under Topic 715		578		(132)		90		(825)
Change in value of derivative instruments		(11)		-		(105)		-
Comprehensive (loss) income	$	(10,232)	$	7,529	$	(13,710)	$	13,922

The components of accumulated other comprehensive income (loss) are as follows:

	Foreign		Pension		Change in		Accumulated
	Currency		Liability		Value of		Other
	Translation		Changes Under		Derivative		Comprehensive
	Adjustment		Topic 715		Instruments		Income (Loss)
Balance at December 31, 2011	$	10,157	$	(41,183)	$	(520)	$	(31,546)
Current period change, net of tax		(8,399)		90		(105)		(8,414)
Balance at June 30, 2012	$	1,758	$	(41,093)	$	(625)	$	(39,960)

11

7. Restructuring Expense

During the six months ended June 30, 2012, the Company recorded restructuring expenses of approximately $5.1 million, primarily related to the transfer of certain equipment from a downsized location and the termination of a sales agency arrangement in Europe. The following table sets forth the significant components and activity under restructuring programs for the six months ended June 30, 2012 and 2011:

	Balance at										Balance at
	December 31,						Currency		Cash		June 30,
	2011		Charges		Write-offs		Effects		Payments		2012
Severance	$	800	$	705	$	-	$	4	$	(1,142)	$	367
Facility costs and other		452		4,398		-		(124)		(4,299)		427
Asset impairments		-		-		-		-		-		-
Total	$	1,252	$	5,103	$	-	$	(120)	$	(5,441)	$	794

	Balance at										Balance at
	December 31,						Currency		Cash		June 30,
	2010		Charges		Write-offs		Effects		Payments		2011
Severance	$	2,255	$	422	$	-	$	30	$	(1,152)	$	1,555
Facility costs and other		471		288		-		99		(293)		565
Asset impairments		-		-		-		-		-		-
Total	$	2,726	$	710	$	-	$	129	$	(1,445)	$	2,120

Restructuring expense by segment, which is not included in Segment Earnings (Loss) in Note 8, is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Clothing	$	1,007	$	148	$	4,766	$	313
Roll Covers		-		394		179		397
Corporate		122		-		158		-
Total	$	1,129	$	542	$	5,103	$	710

As previously reported, on July 2, 2012, the Company announced a voluntary redundancy program at its press felt facility in Buenos Aires, Argentina in connection with the relocation of its Huyck Wangner press felt capacity and initiated consultation proceedings with its works’ council at our rolls cover facility in Meyzieu, France regarding a proposal to cease operations there. In Argentina, the production of press felts and fiber cement felts will be transferred to its facilities in Brazil and the roll cover production of its facility in France will be assumed by its rolls facilities in Germany and Italy. The actions are expected to commence in the third quarter of 2012 and be completed over the next several months. As the redundancy program has just been initiated, the proceedings with the works’ council have just begun and there has been no formal evaluation of the affected assets, at this time, the Company is in the process of analyzing its estimate of the restructuring charges and asset impairments, if any, related to these redundancy programs.

8. Business Segment Information

The Company is a global manufacturer and supplier of consumable products used primarily in the production of paper and is organized into two reportable segments: Clothing and Roll Covers. The Clothing segment represents the manufacture and sale of synthetic textile belts used to transport paper along the length of papermaking machines. The Roll Covers segment primarily represents the manufacture and refurbishment of covers used on the steel rolls of papermaking machines. The Company manages each of these operating segments separately.

Management evaluates segment performance based on earnings before interest, taxes, depreciation and amortization and before allocation of corporate charges. Such measure is then adjusted to exclude items that are of an unusual nature and are not used in measuring segment performance or are not segment specific (“Segment Earnings (Loss)”). The accounting policies of these segments are the same as those for the Company as a whole. Inter-segment net sales and inter-segment eliminations are not material for any of the periods presented.

Summarized financial information for the Company’s reportable segments is presented in the tables that follow for the three and six months ended June 30, 2012 and 2011, respectively.

12

			Roll
	Clothing		Covers		Corporate		Total
Three Months Ended June 30, 2012:
Net Sales	$	88,115	$	48,263	$	-	$	136,378
Segment Earnings (Loss)		15,861		12,126		(2,591)
Three Months Ended June 30, 2011:
Net Sales	$	99,632	$	50,746	$	-	$	150,378
Segment Earnings (Loss)		22,479		10,236		(2,520)

			Roll
	Clothing		Covers		Corporate		Total
Six Months Ended June 30, 2012:
Net Sales	$	176,798	$	93,944	$	-	$	270,742
Segment Earnings (Loss)		30,622		20,016		(6,421)
Six Months Ended June 30, 2011:
Net Sales	$	193,571	$	99,973	$	-	$	293,544
Segment Earnings (Loss)		42,269		20,820		(6,749)

Provided below is a reconciliation of Segment earnings (loss) to income (loss) before provision for income taxes for the three and six months ended June 30, 2012 and 2011, respectively.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Segment Earnings (Loss):
Clothing	$	15,861	$	22,479	$	30,622	$	42,269
Roll Covers		12,126		10,236		20,016		20,820
Corporate		(2,591)		(2,520)		(6,421)		(6,749)
Non-cash compensation and related expenses		218		(831)		(754)		(2,081)
Legal fees related to term debt amendment		(85)		-		(85)		-
Non-recurring expenses related to CEO retirement		(695)		-		(1,496)		-
Net interest expense		(9,120)		(9,982)		(18,718)		(19,836)
Depreciation and amortization		(10,005)		(11,262)		(20,346)		(22,070)
Loss on debt extinguishment		-		(2,926)		-		(2,926)
Restructuring expense		(1,129)		(542)		(5,103)		(710)
Income (loss) before provision for income taxes	$	4,580	$	4,652	$	(2,285)	$	8,717

9. Commitments and Contingencies

The Company is involved in various legal matters which have arisen in the ordinary course of business as a result of various immaterial labor claims, taxing authority reviews and other legal matters. As of June 30, 2012, the Company accrued an immaterial amount in its financial statements for these matters for which the Company believed the possibility of loss was either probable, and was able to estimate the damages. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its financial position, results of operations or cash flow. See Note 4 for a discussion of Xerium Brazil’s proceeding with the FRD.

The Company believes that any additional liability in excess of amounts provided which may result from the resolution of legal matters will not have a material adverse effect on the financial condition, liquidity or cash flow of the Company.

13

10. Stock-Based Compensation and Stockholders’ Deficit

The Company records stock-based compensation expense in accordance with ASC Topic 718, Accounting for Stock Compensation and has used the straight-line attribution method to recognize expense for time-based RSUs and DSUs. The Company recorded stock-based compensation expense during the three and six months ended June 30, 2012 and 2011 as follows:

	Three Months Ended     June 30,				Six Months Ended     June 30,
	2012		2011		2012		2011
RSU and DSU Awards (1)	$	344	$	594	$	754	$	1,308
Management Incentive/Performance Award Programs (2)		(562)		237		-		773
Total	$	(218)	$	831	$	754	$	2,081

(1) Related to restricted stock units and deferred stock units awarded to certain employees and non-employee directors.

(2) For 2011, the amount represents the value of stock awards granted under the 2011 Management Incentive Compensation Program (the “2011 MIC”), which was approved by the Company’s Board of Directors in March of 2011. No amount has been recorded for the 2012 Management Incentive Compensation Program (the “2012 MIC”), as the performance targets are not projected to be met as of June 30, 2012. Therefore, all compensation expense related to the 2012 MIC recorded in 2012 was reversed in the second quarter of 2012.

Summary of Activity under the Long-Term Incentive Plans

On September 22, 2010, the Board approved the Company’s 2010-2012 Long-Term Incentive Plan (the “2010 LTIP”) under the 2010 Equity Incentive Plan (the “2010 Plan”). Awards under the 2010 LTIP are both time-based and performance-based. Awards will be paid in the form of restricted stock units or shares of common stock of the Company. Time-based awards under the 2010 LTIP were approved in the form of 131,010 time-based restricted stock units granted on October 29, 2010 under the Company’s 2010 Plan. As of June 30, 2012, 86,511 time-based restricted stock units had vested in accordance with the 2010 LTIP and were converted to common stock, with the remaining 44,499 time-based restricted stock units to vest on March 31, 2013. These will be converted into shares of common stock when they vest. Performance-based awards under the 2010 LTIP will vest upon meeting various criteria, as included in the Company’s 2011 Annual Report on Form 10-K.

On May 8, 2012, the Board approved the 2012 – 2014 Executive Long-Term Incentive Plan (the “2012 – 2014 Executive LTIP”) under the 2010 Plan. Awards under the 2012 – 2014 Executive LTIP are both time-based and performance-based. A specific target share award is set for each participant in the 2012 – 2014 Executive LTIP. Awards will be paid in the form of restricted stock units or shares of common stock of the Company. Time-based awards, or 50% of the total target award, were granted in the form of 54,750 time-based restricted stock units under the Company’s 2010 Plan and will vest in equal installments on March 31, 2013, March 31, 2014, and March 31, 2015. These will be converted into shares of common stock as they vest. Performance-based awards, which constitute 50% of the total award, will be determined based on the Company’s performance against a three-year cumulative Adjusted EBITDA metric, adjusted for currency fluctuations during the term of the 2012 – 2014 Executive LTIP. The performance-based awards will convert into shares of the Company’s common stock and be paid after the close of the three-year performance period. The amount of the payment will be based on a sliding scale ranging from 50% if the metric is achieved at 85% of the target up to 200% if the metric is achieved at or above 115% of the target.

Summary of Activity under the MIC Plans

On March 13, 2012, the Board approved the 2012 Management Incentive Compensation Program (the “2012 MIC”). Under the 2012 MIC, payouts will be determined by the Company’s performance against specified Adjusted EBITDA metrics for the 2012 fiscal year. The Adjusted EBITDA metrics will be adjusted for currency fluctuations. A specific target award is set for each participant in the 2012 MIC equal to a percentage of his or her current base cash compensation. Fifty percent (50%) of any 2012 MIC award earned will be paid in cash and fifty percent (50%) is expected to be paid in the form of shares of the Company’s common stock under the Company’s 2010 Equity Incentive Plan. The 2012 MIC awards will be paid out based on a sliding scale. A participant will receive an award equal to 20% of his or her target award if Adjusted EBITDA is achieved above a minimum target level, 90% of target award if Adjusted EBITDA is at budget performance, 100% of target award if the targeted metric is achieved and ranging up to 200% if Adjusted EBITDA is achieved at a maximum target level. As indicated above, management determined that the target amounts were not met at June 30, 2012. Therefore, no compensation expense has been recorded for the six months ended June 30, 2012.

14

11. Supplemental Guarantor Financial Information

On May 26, 2011, the Company closed on the sale of its Notes. The Notes are unsecured obligations of the Company and are fully and unconditionally guaranteed on a senior unsecured basis by all of the domestic wholly owned subsidiaries of the Company (the “Guarantors”). In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, the following condensed consolidating financial statements present the financial position, results of operations and cash flows of Xerium Technologies, Inc. (referred to as “Parent” for the purpose of this note only) on a stand-alone parent-only basis, the Guarantors on a Guarantors-only basis, the combined non-Guarantor subsidiaries and elimination entries necessary to arrive at the information for the Parent, the Guarantors and non-Guarantor subsidiaries on a consolidated basis.

In the second quarter of 2012, the Company determined that it had incorrectly presented the guarantor financial statements in accordance with the requirements of Rule 3-10 of Regulation S-X. Specifically, the Company incorrectly included the cumulative income (losses) of certain guarantor subsidiaries in the investment balances of the guarantor entities. The guarantor investment balances should only include cumulative income (losses) of non-guarantor investees which are owned by guarantor entities. As a result, the previously presented December 31, 2011 total guarantor investments and total stockholders’ (deficit) equity balances included in Note 16 to the Consolidated Financial Statements included in the 2011 Annual Report on Form 10-K were overstated by $33.7 million. This revision had no impact on the consolidated amounts included in Note 16, as other eliminations were overstated by the same amount in this period.

In addition, as a result of the above misstatement, the December 31, 2011 and 2010 guarantor equity in subsidiaries income and net income in Note 16 to the Company’s 2011 Annual Report on Form 10-K was understated by $0.5 million and overstated by $4.0 million, respectively, and the March 31, 2012 and 2011 guarantor equity in subsidiaries income and net income included in Note 11 to the Consolidated Financial Statements in the Company’s Form 10-Q was overstated by $1.6 million and $0.5 million, respectively. There was no impact to consolidated net income within Note 16 or Note 11 for any of these periods, as other eliminations were overstated/understated by the same amount in those periods, and there was no impact to operating cash flows for any of the periods presented.

The Company assessed the materiality of making these corrections in the current period under Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” (“SAB No. 108”) and has determined that this correction is immaterial to all of the above consolidated financial statements. Based on these facts, the Company has revised the December 31, 2011 Consolidated Balance Sheet in Note 11 within this Quarterly Report on Form 10-Q to reflect a decrease in total guarantor investments and total stockholders’ (deficit) equity of $33.7 million. Other eliminations of both the investments and total stockholders’ (deficit) equity have been adjusted by the same amount.

15

Xerium Technologies, Inc.

Consolidating Balance Sheet—(Unaudited)

At June 30, 2012

(Dollars in thousands)

			Total		Total Non		Other		The
	Parent		Guarantors		Guarantors		Eliminations		Company
ASSETS
Current assets:
Cash and cash equivalents	$	7,104	$	34	$	26,458	$	-	$	33,596
Accounts receivable, net		-		20,249		65,836		-		86,085
Intercompany receivable		(96,651)		103,133		(6,482)		-		-
Inventories, net		-		17,720		64,682		(1,106)		81,296
Prepaid expenses		(826)		2,303		8,570		-		10,047
Other current assets		-		3,298		11,207		-		14,505
Total current assets		(90,373)		146,737		170,271		(1,106)		225,529
Property and equipment, net		457		65,412		248,852		-		314,721
Investments		593,144		155,016		-		(748,160)		-
Goodwill		-		17,737		40,909		-		58,646
Intangible assets		11,300		5,882		4,268		-		21,450
Other assets		62		-		8,235		-		8,297
Total assets	$	514,590	$	390,784	$	472,535	$	(749,266)	$	628,643
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	609	$	8,273	$	25,387	$	-	$	34,269
Accrued expenses		6,230		6,358		35,994		-		48,582
Current maturities of long-term debt		1,250		-		1,102		-		2,352
Total current liabilities		8,089		14,631		62,483		-		85,203
Long-term debt, net of current maturities		351,263		-		98,229		-		449,492
Deferred and long-term taxes		-		2,378		15,620		-		17,998
Pension, other post-retirement and post-employment obligations		23,050		1,946		54,908		-		79,904
Other long-term liabilities		-		-		11,539		-		11,539
Intercompany loans		205,962		(319,185)		113,223		-		-
Total stockholders’ (deficit) equity		(73,774)		691,014		116,533		(749,266)		(15,493)
Total liabilities and stockholders’ equity	$	514,590	$	390,784	$	472,535	$	(749,266)	$	628,643

16

Xerium Technologies, Inc.

Consolidating Balance Sheet—(Unaudited)

At December 31, 2011

(Dollars in thousands)

			Total		Total Non		Other		The
	Parent		Guarantors		Guarantors		Eliminations		Company
ASSETS
Current assets:
Cash and cash equivalents	$	11,548	$	280	$	31,738	$	-	$	43,566
Accounts receivable, net		-		21,210		70,574		-		91,784
Intercompany receivable		(95,855)		102,653		(6,798)		-		-
Inventories, net		-		19,759		64,857		(1,299)		83,317
Prepaid expenses		272		1,546		4,359		-		6,177
Other current assets		-		4,716		10,335		-		15,051
Total current assets		(84,035)		150,164		175,065		(1,299)		239,895
Property and equipment, net		881		67,727		266,648		-		335,256
Investments		579,018		162,438		-		(741,456)		-
Goodwill		-		17,737		41,383		-		59,120
Intangible assets		11,484		6,986		4,170		-		22,640
Other assets		196		-		8,614		-		8,810
Total assets	$	507,544	$	405,052	$	495,880	$	(742,755)	$	665,721
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	679	$	10,257	$	28,807	$	-	$	39,743
Accrued expenses		6,563		5,722		35,520		-		47,805
Current maturities of long-term debt		1,250		-		2,298		-		3,548
Total current liabilities		8,492		15,979		66,625		-		91,096
Long-term debt, net of current maturities		358,116		-		107,390		-		465,506
Deferred and long-term taxes		-		2,378		16,204		-		18,582
Pension, other post-retirement and post-employment obligations		22,906		1,820		56,462		-		81,188
Other long-term liabilities		-		-		11,654		-		11,654
Intercompany loans		187,661		(307,813)		120,152		-		-
Total stockholders’ (deficit) equity		(69,631)		692,688		117,393		(742,755)		(2,305)
Total liabilities and stockholders’ equity	$	507,544	$	405,052	$	495,880	$	(742,755)	$	665,721

17

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the three months ended June 30, 2012

(Dollars in thousands)

	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
Restructuring		122		23		984		-		1,129
Research and development		-		2,083		786		-		2,869
		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		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)

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the three months ended June 30, 2011

(Dollars in thousands)

	Parent		Total Guarantors		Total  Non Guarantors		Other Eliminations		The Company
Net sales	$	-	$	47,316	$	116,367	$	(13,305)	$	150,378
Costs and expenses:
Cost of products sold		(642)		33,930		72,458		(13,239)		92,507
Selling		-		5,751		14,756		-		20,507
General and administrative		1,739		1,857		12,582		-		16,178
Restructuring		-		373		169		-		542
Research and development		-		1,985		940		-		2,925
		1,097		43,896		100,905		(13,239)		132,659
(Loss) income from operations		(1,097)		3,420		15,462		(66)		17,719
Interest (expense) income, net		(4,658)		1,917		(7,241)		-		(9,982)
Loss on extinguishment of debt		(2,903)		(6)		(17)		-		(2,926)
Foreign exchange gain (loss)		309		(45)		(423)		-		(159)
Equity in subsidiaries income		10,108		2,645		-		(12,753)		-
Income (loss) before provision for income taxes		1,759		7,931		7,781		(12,819)		4,652
Provision for income taxes		(137)		(40)		(2,853)		-		(3,030)
Net income (loss)	$	1,622	$	7,891	$	4,928	$	(12,819)	$	1,622
Comprehensive income (loss)	$	962	$	7,929	$	11,457	$	(12,819)	$	7,529

18

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the six months ended June 30, 2012

(Dollars in thousands)

	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
Restructuring		158		163		4,782		-		5,103
Research and development		-		4,153		1,678		-		5,831
		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		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)

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the six months ended June 30, 2011

(Dollars in thousands)

	Parent		Total Guarantors		Total Non Guarantors		Other Eliminations		The  Company
Net sales	$	-	$	90,970	$	227,856	$	(25,282)	$	293,544
Costs and expenses:
Cost of products sold		(1,153)		64,872		143,231		(25,192)		181,758
Selling		-		11,327		28,704		-		40,031
General and administrative		4,984		3,952		24,622		-		33,558
Restructuring		-		614		96		-		710
Research and development		(3)		4,068		1,948		-		6,013
		3,828		84,833		198,601		(25,192)		262,070
(Loss) income from operations		(3,828)		6,137		29,255		(90)		31,474
Interest (expense) income, net		(10,311)		3,788		(13,313)		-		(19,836)
Loss on extinguishment of debt		(2,903)		(6)		(17)		-		(2,926)
Foreign exchange gain (loss)		1,415		(1,477)		67		-		5
Equity in subsidiaries income		18,186		6,389		-		(24,575)		-
Income (loss) before provision for income taxes		2,559		14,831		15,992		(24,665)		8,717
Provision for income taxes		(288)		(109)		(6,050)		-		(6,447)
Net income (loss)	$	2,271	$	14,722	$	9,942	$	(24,665)	$	2,270
Comprehensive (loss) income	$	(726)	$	22,247	$	17,066	$	(24,665)	$	13,922

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Xerium Technologies, Inc.

Consolidating Statement of Cash Flows-(Unaudited)

For the six months ended June 30, 2012

(Dollars in thousands)

	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 provided by (used in) 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
Unrealized 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 provided by (used in) 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 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

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Xerium Technologies, Inc.

Consolidating Statement of Cash Flows-(Unaudited)

For the six months ended June 30, 2011

(Dollars in thousands)

	Parent		Total Guarantors		Total Non Guarantors		Other Eliminations		The Company
Operating activities
Net income	$	2,271	$	14,722	$	9,942	$	(24,665)	$	2,270
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation		2,081		-		-		-		2,081
Depreciation		119		3,954		16,845		-		20,918
Amortization of intangibles		-		1,106		46		-		1,152
Deferred financing cost amortization		(1,160)		204		1,558		-		602
Unrealized foreign exchange loss on revaluation of debt		-		-		(1,414)		-		(1,414)
Deferred taxes		-		-		1,209		-		1,209
Gain on disposition of property and equipment		-		(132)		(432)		-		(564)
Loss on extinguishment of debt		2,903		6		17		-		2,926
Provision for doubtful accounts		-		82		380		-		462
Undistributed equity in (earnings) loss of subsidiaries		(18,186)		(6,389)		-		24,575		-
Change in assets and liabilities which provided (used) cash:
Accounts receivable		9		700		(1,953)		-		(1,244)
Inventories		-		(1,334)		(10,787)		90		(12,031)
Prepaid expenses		387		(491)		(1,736)		-		(1,840)
Other current assets		621		(163)		(767)		-		(309)
Accounts payable and accrued expenses		2,346		(2,978)		(5,731)		-		(6,363)
Deferred and other long-term liabilities		(48)		(368)		(678)		-		(1,094)
Intercompany loans		5,494		3,702		(9,196)		-		-
Net cash provided by (used in) operating activities		(3,163)		12,621		(2,697)		-		6,761
Investing activities
Capital expenditures, gross		(189)		(1,896)		(9,930)		-		(12,015)
Intercompany property and equipment transfers, net		-		6		(6)		-		-
Proceeds from disposals of property and equipment		-		137		1,779		-		1,916
Restricted cash		13,701		-		-		-		13,701
Net cash provided by (used in) investing activities		13,512		(1,753)		(8,157)		-		3,602
Financing activities
Net decrease in borrowings (maturities of 90 days or less)		-		-		(181)		-		(181)
Proceeds from borrowings (maturities longer than 90 days)		365,000		-		124,810		-		489,810
Principal payments on debt		(257,599)		(51,016)		(181,060)		-		(489,675)
Payment of deferred financing fees		(71,905)		-		55,070		-		(16,835)
Intercompany loans		(44,575)		40,166		4,409		-		-
Net cash (used in) provided by financing activities		(9,079)		(10,850)		3,048		-		(16,881)
Effect of exchange rate changes on cash flows		-		3		2,305		-		2,308
Net increase (decrease) in cash		1,270		21		(5,501)		-		(4,210)
Cash and cash equivalents at beginning of period		6,345		33		32,323		-		38,701
Cash and cash equivalents at end of period	$	7,615	$	54	$	26,822	$	-	$	34,491

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to the safe harbor created by that Act. These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, forward-looking statements can be identified by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other comparable terminology. Undue reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors that are, in some cases, beyond our control and that could materially affect actual results, levels of activity, performance, or achievements. Factors that could materially affect our actual results, levels of activity, performance or achievements include the following items:

• we are subject to the risk of weaker paper industry and general economic conditions in the locations around the world where we conduct business, including the impact of price pressures and cost reduction strategies by our customers in the paper industry;

• 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;

• we may be required to incur significant costs to reorganize or restructure our operations in response to market changes in the paper industry;

• 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;

• our credit facility contains restrictive covenants, such as the covenants requiring compliance with minimum interest coverage and maximum leverage ratios, which become more restrictive over time, that may require us to increasingly improve our performance over time to remain compliant;

• 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.

Other factors that could materially affect our actual results, levels of activity, performance or achievements can be found in our “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on March 14, 2012 and our “Risk Factors” sections in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 filed with the SEC on May 9, 2012 and this Quarterly Report on Form 10-Q. 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 project. Any forward-looking statement in our Quarterly Report on Form 10-Q reflects our current views with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, growth strategy, and liquidity. 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, except as required by law.

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All references in this Quarterly Report to “Xerium”, “the Company”, “we”, “our” and “us” means Xerium Technologies, Inc. and its subsidiaries.

Company Overview

We are a leading global manufacturer and supplier of two types of consumable products used primarily in the production of paper—clothing and roll covers. Our operations are strategically located in the major paper-producing regions of North America, Europe, South America and Asia-Pacific.

Our products play key roles in the formation and processing of paper along the length of a paper-making machine. Paper producers rely on our products and services to help improve the quality of their paper, differentiate their paper products, operate their paper-making machines more efficiently and reduce production costs. Our products and services typically represent only a small percentage of a paper producer’s overall production costs, yet they can reduce costs by permitting the use of lower-cost raw materials and by reducing energy consumption. Paper producers must replace clothing and refurbish or replace roll covers periodically as these products wear down during the paper production process. Our products are designed to withstand high temperatures, chemicals, and high pressure conditions, and are the result of a substantial investment in research and development and highly sophisticated manufacturing processes.

We operate in two principal business segments: clothing and roll covers. In our clothing segment, we manufacture and sell highly engineered synthetic textile belts that transport paper as it is processed in a paper-making machine. Clothing plays a significant role in the forming, pressing and drying stages of paper production. Because paper-making processes and machine specifications vary widely, the clothing size, form, material and function is custom engineered to fit each individual paper-making machine and process. For the six months ended June 30, 2012, our clothing segment represented 65% of our net sales.

Our roll cover products provide a surface with the mechanical properties necessary to process the paper sheet in a cost-effective manner that delivers the sheet qualities desired by the paper producer. Roll covers are tailored to each individual paper-making machines and processes, using different materials, treatments and finishings. In addition to manufacturing and selling new roll covers, we also provide refurbishment services for previously installed roll covers and we manufacture new and rebuilt spreader rolls. We also provide various related products and services to our customers, both directly and through third party providers, as a growing part of our overall product offering through our roll covers sales channels. For the six months ended June 30, 2012, our roll cover segment represented 35% of our net sales.

Industry Trends and Outlook

Historically, demand for our products has been driven primarily by the volume (tonnage) of paper produced on a worldwide basis. Industry forecasters predict the growth of global paper production from 2012 to 2015 to be between 3% and 4% per annum. Generally, and over time, we expect growth in paper production to be greater in Asia-Pacific, South America and Eastern Europe than in the more mature North American and Western European regions where demand may decline. Between the second half of 2008 and 2009, the global paper industry experienced a sharp reduction in production levels, caused by the general slowdown in economic activity and related paper consumption during the same period. In 2010 and 2011, global paper and board production began to recover from the economic recession and show growth, particularly in developing countries, although growth slowed in the second half of 2011 and has continued to slow through the first half of 2012. We believe that our increase in net sales volume in 2010 and 2011 as compared with 2009 reflects this recovery as well as the success of our new products.

The profitability of paper producers has historically been highly cyclical due to wide swings in the price of paper, driven to a high degree by the oversupply of paper during periods when paper producers have more aggregate capacity than the market requires. A sustained downturn in the paper industry, either globally or in a particular region, can cause paper manufacturers to reduce production or cease operations, which could adversely affect our net sales and profitability. Since 2000, paper producers have taken actions that seek to structurally improve the balance between the supply of, and demand for, paper. As part of these efforts, they have permanently shut down many paper-making machines or entire manufacturing facilities. However, many paper producers continue to experience low levels of profitability. We believe that further consolidation among papermakers, reduction in the number of paper producers, and shutdowns of paper-making machines or facilities will continue in Europe and North America until there is a better balance between supply and demand for paper and the profit levels of paper producers improve. This rebalancing has been accelerated since the most recent global economic recession. Over a number of years, paper consumption growth, particularly in South America and Asia-Pacific, is expected to drive an increase in the global production rates required to maintain balance between supply and demand. It is highly likely, however, that the recession-led consumption slow-down and related effect on global paper production will continue in the near term. Also affecting machine curtailments are structural productivity gains from improved products that we and our competitors supply that enable paper producers to manufacture more paper with fewer machines.

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The impact of e-commerce and digitalization has resulted in a prolonged decline in specific paper grades, such as newsprint, printing and writing grades of paper. Fortunately, the decline has been partially offset by increases in the production of packaging grades, both as a consequence of globalization of manufacturing and as a result of the increase of tissue/personal care products which have increased as global GDP has risen, particularly in the developing world.

Global paper production growth would be moderated by the level of industry consolidation and paper-machine shutdown activity that is a continuing underlying trend in North America and Western Europe. We also believe that, in addition to industry consolidation and paper machine shutdown activity in North America and Western Europe, the trend towards new paper machine designs which have fewer rolls and market recognition of the extended life of our roll cover products has been and will continue to negatively impact demand for these products and their volume potential. Additionally, we are seeing a trend that paper producers are placing an increasing emphasis on maintenance cost reduction and, as a result, are extending the life of roll covers through additional maintenance cycles before replacing them. However, we believe volume declines would be at least partially offset by our introduction of new products with the extended life qualities that our customer’s desire and increasing market share of proprietary products such as our SmartRoll™.

We anticipate that pricing pressure for our products may continue with the consolidation among paper producers and as the shift of paper production growth in Asia-Pacific develops. In response to this pricing pressure, we expect to focus our research and development efforts on new products that deliver increased value to our customers and for which they will pay increased prices. In addition, we will continue to enhance and deploy our value added selling approach as part of our strategy to differentiate our products, while at the same time we remain focused on cost reduction and efficiency programs.

The negative paper industry trends described above are likely to continue. We believe that the paper industry will experience increased emphasis on cost reduction, continued paper-machine shutdown activity, and reduced availability of credit than would have been the case in the absence of the economic downturn. These industry dynamics could negatively impact our business, results of operations and financial condition.

Net Sales and Expenses

Net sales in both our clothing and roll covers segments are primarily driven by the following factors:

— 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;

— Our ability to provide products and services which reduce paper-making machine downtime while at the same time allowing the manufacture of high quality paper products;

— The mix of paper grades being produced; and

— The impact of currency fluctuations.

Net sales in our roll covers segment include our mechanical services business. We have expanded this business in response to demand from paper producers that we perform work on the internal mechanisms of their rolls while we refurbish or replace a roll cover. In our clothing segment, a small portion of our business has been conducted pursuant to consignment arrangements under which we do not recognize a sale of a product to a customer until the customer places the product into use, which typically occurs some period after the product is shipped to the customer or to a warehouse location near the customer’s facility. As part of the consignment agreement we deliver the goods to a location designated by the customer. In addition, we agree to a “sunset” date with the customer, which represents the date by which the customer must accept all risks and responsibilities of ownership of the product and payment terms begin. For consignment sales, revenue is recognized on the earlier of the actual product installation date or the “sunset” date.

Our operating cost levels are impacted by total sales volume, raw material costs, the impact of inflation, foreign currency fluctuations and the success of cost reduction programs.

The level of our cost of products sold is primarily attributable to labor costs, raw material costs, product shipping costs, plant utilization and depreciation, with labor costs constituting the largest component. We invest in facilities and equipment that enable innovative product development and improve production efficiency and costs. Recent examples of capital spending for such purposes include faster weaving looms and seaming machines with accurate electronic controls, automated compound mixing equipment and computer-controlled lathes and mills.

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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 $5.8 million and $6.0 million for the six months ended June 30, 2012 and 2011, respectively.

Foreign Exchange

We have a geographically diverse customer base. In the six months ended June 30, 2012, we generated approximately 38% of our net sales in North America, 31% in Europe, 9% in South America, 20% in Asia-Pacific and 2% in the rest of the world.

A substantial portion of our net sales is denominated in Euros or other currencies. As a result, changes in the relative values of U.S. Dollars, Euros and other currencies affect our reported levels of net sales and profitability as the results are translated into U.S. Dollars for reporting purposes. In particular, decreases in the value of the U.S. Dollar relative to the value of the Euro and these other currencies positively impact our levels of revenue and profitability because the translation of a certain number of Euros or units of such other currencies into U.S. Dollars for financial reporting purposes will represent more U.S. Dollars than it would have prior to the relative decrease in the value of the U.S. Dollar. Conversely, a decline in the value of the Euro will result in a lower number of U.S. Dollars for financial reporting purposes.

For certain transactions, our net sales are denominated in U.S. Dollars but all or a substantial portion of the associated costs are denominated in a different currency. As a result, changes in the relative values of U.S. Dollars, Euros and other currencies can affect the level of the profitability of these transactions. The largest proportion of such transactions consists of transactions in which the net sales are denominated in or indexed to the U.S. Dollar and all or a substantial portion of the associated costs are denominated in Brazilian Reals or other currencies.

Currency fluctuations have a greater effect on the level of our net sales than on the level of our income (loss) from operations. For example, in the six months ended June 30, 2012 as compared to the six months ended June 30, 2011, the change in the value of the U.S. Dollar against most of the currencies we conduct our business in resulted in net currency decreases in net sales of $10.2 million, yet only impacted income from operations by $1.4 million. Although the first six months of 2012 results reflect a period in which the value of the U.S. Dollar increased against the Euro as compared to the first six months of 2011, we would expect an opposite effect in a period in which the value of the U.S. Dollar decreases.

During the six months ended June 30, 2012, we conducted business in 9 foreign currencies. The following table provides the average exchange rate for the six months ended June 30, 2012 and the six months ended June 30, 2011 of the U.S. Dollar against each of the four foreign currencies in which we conduct the largest portion of our operations.

Currency	Average exchange rate of the U.S. Dollar in the six months ended June 30, 2012	Average exchange rate of the U.S. Dollar in the six months ended June 30, 2011
Euro	$1.30 = 1 Euro	$1.40 = 1 Euro
Brazilian Real	$0.54 = 1 Brazilian Real	$0.61 = 1 Brazilian Real
Canadian Dollar	$0.99 = 1 Canadian Dollar	$1.02 = 1 Canadian Dollar
Australian Dollar	$1.03 = 1 Australian dollar	$1.03 = 1 Australian dollar

In the six months ended June 30, 2012, we conducted approximately 35% of our operations in Euros, approximately 9% in the Australian Dollar, approximately 8% in the Brazilian Real (although a significant portion of Brazil net sales are in U.S. Dollars) and approximately 6% in the Canadian Dollar.

To mitigate the risk of transactions in which a sale is made in one currency and associated costs are denominated in a different currency, we may utilize forward currency contracts in certain circumstances to lock in exchange rates with the objective that the gain or loss on the forward contracts will approximate the loss or gain that results from the transaction or transactions being hedged. We determine whether to enter into hedging arrangements based upon the size of the underlying transaction or transactions, an assessment of the risk of adverse movements in the applicable currencies and the availability of a cost effective hedge strategy. To the extent we do not engage in hedging or such hedging is not effective, changes in the relative value of currencies can affect our profitability.

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Domestic and Foreign Operating Results:

The following is an analysis of our domestic and foreign operations during the three and six months ended June 30, 2012 and 2011 and a discussion of the results of operations during those periods:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Domestic income from Operations	$	2,997	$	2,323	$	397	$	2,309
Foreign		10,883		15,396		15,676		29,165
Total	$	13,880	$	17,719	$	16,073	$	31,474

During the three and six months ended June 30, 2012, domestic gross margins were lower than foreign gross margins, primarily due to product mix and market differences. Cash flows from the above foreign income from operations typically remains reinvested in the foreign subsidiaries. However, there is no legal restriction or material adverse consequence for repatriating the cash flows to the domestic subsidiaries to assist in debt repayment, capital expenditures and other expenses of our operations.

Cost Reduction Programs

An important part of our strategy is to seek to reduce our overall costs and improve our competitiveness. As a part of this effort, we engage in cost reduction programs, which are designed to improve the cost structure of our global operations in response to changing market conditions. These cost reduction programs include headcount reductions throughout the world as well as plant closures that have rationalized production among our facilities to better enable us to meet customer demands. Cost savings have been realized in labor costs and other production overhead, other components of costs of products sold, general and administrative expenses and facility costs. The majority of the cost savings are recognized at the time of the headcount reductions and plant closure, with the remaining cost savings recognized over subsequent periods. Cost savings from headcount reductions have not been offset by related increases in other expenses. Cost savings related to plant closures have been partially offset by the reduction of revenues associated with those closed facilities in subsequent periods and additional costs incurred in the facilities that assumed the operations of the closed facility.

During the six months ended June 30, 2012, we recorded restructuring expenses of approximately $5.1 million, primarily related to the transfer of certain equipment from a downsized location and the termination of a sales agency arrangement in Europe.

As previously reported, on July 2, 2012, we announced a voluntary redundancy program at our press felt facility in Buenos Aires, Argentina in connection with the relocation of our Huyck Wangner press felt capacity and initiated consultation proceedings with our works’ council at our rolls cover facility in Meyzieu, France regarding a proposal to cease operations there. In Argentina, the production of press felts and fiber cement felts will be transferred to our facilities in Brazil and the roll cover production of our facility in France will be assumed by our rolls facilities in Germany and Italy. The actions are expected to commence in the third quarter of 2012 and be completed over the next several months. As the redundancy program has just been initiated, the proceedings with the works’ council have just begun and there has been no formal evaluation of the affected assets, at this time, we are in the process of analyzing our estimate of the restructuring charges and asset impairments, if any, related to these redundancy programs.

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Results of Operations

The table that follows sets forth for the periods presented certain consolidated operating results.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
	(in thousands)				(in thousands)
Net sales	$	136,378	$	150,378	$	270,742	$	293,544
Cost of products sold		85,396		92,507		173,317		181,758
Selling expenses		19,070		20,507		38,558		40,031
General and administrative expenses		14,034		16,178		31,860		33,558
Restructuring and impairments expenses		1,129		542		5,103		710
Research and development expenses		2,869		2,925		5,831		6,013
Income from operations		13,880		17,719		16,073		31,474
Interest expense, net		(9,120)		(9,982)		(18,718)		(19,836)
Loss on extinguishment of debt		-		(2,926)		-		(2,926)
Foreign exchange (loss) gain		(180)		(159)		360		5
Income (loss) before provision for income taxes		4,580		4,652		(2,285)		8,717
Provision for income taxes		(2,354)		(3,030)		(3,011)		(6,447)
Net income (loss)	$	2,226	$	1,622	$	(5,296)	$	2,270
Comprehensive (loss) income	$	(10,232)	$	7,529	$	(13,710)	$	13,922

Three Months Ended June 30, 2012 Compared to the Three Months Ended June 30, 2011

Net Sales. Net sales for the three months ended June 30, 2012 decreased by $14.0 million, or 9.3%, to $136.4 million from $150.4 million for the three months ended June 30, 2011. For the three months ended June 30, 2012, approximately 65% of our net sales were in our clothing segment and approximately 35% were in our roll covers segment.

In our clothing segment, net sales for the three months ended June 30, 2012 decreased by $11.5 million, or 11.5%, to $88.1 million from $99.6 million for the three months ended June 30, 2011, primarily due to decreased sales volume of $5.1 million in Europe and $3.5 million in North and South America and unfavorable currency effects of $5.0 million. These decreases were partially offset by an increase in sales volume of $2.1 million in Asia Pacific.

In our roll covers segment, net sales for the three months ended June 30, 2012 decreased by $2.4 million or 4.7%, to $48.3 million from $50.7 million for the three months ended June 30, 2011. The decrease is primarily due to decreased sales volume of $2.7 million in Europe and unfavorable currency effects of $2.6 million, partially offset by an increase in sales volume of $1.6 million in Asia Pacific and $1.4 million in North America.

Cost of Products Sold. Cost of products sold for the three months ended June 30, 2012 decreased by $7.1 million, or 7.7%, to $85.4 million from $92.5 million for the three months ended June 30, 2011.

In our clothing segment, cost of products sold decreased $5.1 million in the current quarter compared to the second quarter of 2011 as a result of lower sales volume partially offset by higher cost of products sold as a percentage of sales. Cost of products sold, as a percentage of net sales increased by 2.1% to 62.5% in the three months ended June 30, 2012 from 60.4% in the three months ended June 30, 2011. The increase was primarily due to the reduction of inventory reserves in the prior year, unfavorable regional mix due to reduced volumes in Europe and unfavorable factory overhead absorption. These decreases were partially offset by favorable currency effects and improved material efficiencies in the second quarter of 2012.

In our roll covers segment, cost of products sold decreased $2.4 million in the current quarter compared to the second quarter of 2011 as a result of lower cost of products sold as a percentage of sales. The decrease of 7.3% in cost of products sold, as a percentage of net sales in the current quarter was as a result of favorable currency effects and improved material and labor efficiencies in the second quarter of 2012. Cost of products sold, as a percentage of net sales decreased by 1.6% to 63.4% in the three months ended June 30, 2012 from 65.0% in the three months ended June 30, 2011. The decrease was due to improved material efficiencies in the second quarter of 2012, partially offset by increased sales of products with lower margins.

Selling Expenses. For the three months ended June 30, 2012, selling expenses decreased by $1.4 million, or 6.8% to $19.1 million from $20.5 million for the three months ended June 30, 2011 primarily due to favorable currency effects in 2012.

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General and Administrative Expenses. For the three months ended June 30, 2012, general and administrative expenses decreased by $2.2 million, or 13.6% to $14.0 million from $16.2 million for the three months ended June 30, 2011. The decrease was primarily due to the decrease of $1.6 million related to the expected payout of the 2012 management incentive compensation program, the reversal of a $1.0 million contingent liability that was favorably resolved and favorable currency effects of $1.0 million. Partially offsetting these decreases was an increase resulting from the reversal of $1.1 million in 2011 related to a value added tax (“VAT”) in Brazil, as we had no such reversal in 2012, and an increase of $0.6 related to the incremental CEO transition costs in 2012.

Restructuring Expenses. For the three months ended June 30, 2012, we incurred restructuring expenses of $1.1 million primarily related to costs of $0.4 million incurred as a result of the transfer of certain equipment from a downsized location and $0.5 million primarily related to sales-force reductions made in 2012. In 2011, we incurred restructuring expenses of $0.5 million as a result of restructuring activity in our North America rolls facility.

Interest Expense, Net. Net interest expense for the three months ended June 30, 2012 decreased by $0.9 million or 9.0%, to $9.1 million from $10.0 million for the three months ended June 30, 2011. This decline in interest expense reflects lower current interest rates and debt balances and favorable currency effects, net of higher deferred financing cost amortization in the second quarter of 2012. The decrease in interest rates and the increase in deferred financing cost amortization are a result of the refinancing in May 2011.

Loss on Debt Extinguishment. The loss on debt extinguishment of $2.9 million in the three months ended June 30, 2011 represents the write-off of deferred financing costs resulting from the refinancing of debt that closed on May 26, 2011. (See Note 3 of the Condensed Consolidated Financial Statements and “Liquidity and Capital Resources-Credit Facilities and Notes” for further discussion on the refinancing).

Provision for Income Taxes. For the three months ended June 30, 2012 and 2011, the provision for income taxes was $2.4 million and $3.0 million, respectively. The decrease in income tax expense was primarily attributable to the geographic mix of earnings in the second quarter of 2012 as compared to the second quarter of 2011. Our provision for income taxes is primarily impacted by income we earn in tax paying jurisdictions relative to income we earn in non-tax paying jurisdictions. The majority of income recognized for purposes of computing our effective tax rate is earned in countries where the statutory income tax rates range from 25% to 41%; however, permanent income adjustments recorded against pre-tax earnings may result in an effective tax rate that is higher or lower than the statutory tax rate in these jurisdictions. We generate losses in certain jurisdictions for which we receive no tax benefit as the deferred tax assets in these jurisdictions (including net operating losses) are fully reserved in our valuation allowance. For this reason, we recognize minimal income tax expense or benefit in these jurisdictions, of which the most material jurisdictions are the United States, the United Kingdom and Australia. Due to these reserves, the geographic mix of our pre-tax earnings has a direct correlation with how high or low our annual effective tax rate is relative to consolidated earnings.

Six Months Ended June 30, 2012 Compared to the Six Months Ended June 30, 2011

Net Sales. Net sales for the six months ended June 30, 2012 decreased by $22.8 million, or 7.8%, to $270.7 million from $293.5 million for the six months ended June 30, 2011. For the six months ended June 30, 2012, approximately 65% of our net sales were in our clothing segment and approximately 35% were in our roll covers segment.

In our clothing segment, net sales for the six months ended June 30, 2012 decreased by $16.8 million, or 8.7%, to $176.8 million from $193.6 million for the six months ended June 30, 2011, primarily due to decreased sales volume of $8.7 million in Europe, $3.0 million in North America and $0.8 million in South America and unfavorable currency effects of $6.6 million. These decreases were partially offset by an increase in sales volume of $2.4 million in Asia Pacific.

In our roll covers segment, net sales for the six months ended June 30, 2012 decreased by $6.1 million or 6.1%, to $93.9 million from $100.0 million for the six months ended June 30, 2011. The decrease is primarily due to decreased sales volume of $7.0 million in Europe and $0.7 million in South America and unfavorable currency effects of $3.5 million, partially offset by an increase in sales volume of $1.9 million in North America and $3.3 million in Asia Pacific.

Cost of Products Sold. Cost of products sold for the six months ended June 30, 2012 decreased by $8.5 million, or 4.7%, to $173.3 million from $181.8 million for the six months ended June 30, 2011.

In our clothing segment, cost of products sold decreased $6.4 million in the six months ended June 30, 2012 compared to the six months ended June 30, 2011 as a result of favorable currency effects and lower sales volume partially offset by higher cost of products sold as a percentage of sales. Cost of products sold, as a percentage of net sales increased by 2.2% to 63.3% in the six months ended June 30, 2012 from 61.1% in the six months ended June 30, 2011. The increase was primarily due to the reduction of inventory reserves in the prior year, unfavorable regional mix due to reduced volumes in Europe and unfavorable factory overhead absorption. These increases were partially offset by a decrease in freight costs in the six months ended June 30, 2012.

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In our roll covers segment, cost of products sold decreased $2.4 million in the six months ended June 30, 2012 compared to the six months ended June 30, 2011 as a result of favorable currency effects and lower sales volume partially offset by higher cost of products sold as a percentage of sales. Cost of products sold, as a percentage of net sales, increased by 1.6% to 66.3% in the six months ended June 30, 2012 from 64.7% in the six months ended June 30, 2011. The increase was due to higher sales of products with lower margins, including mechanical services and new roll core sales and unfavorable absorption of production costs. These increases were partially offset by favorable direct labor costs in the second quarter of 2012.

Selling Expenses. For the six months ended June 30, 2012, selling expenses decreased by $1.4 million, or 3.5% to $38.6 million from $40.0 million for the six months ended June 30, 2011 primarily due to favorable currency effects in 2012.

General and Administrative Expenses. For the six months ended June 30, 2012, general and administrative expenses decreased by $1.7 million, or 5.1% to $31.9 million for the six months ended June 30, 2012 from $33.6 million for the six months ended June 30, 2011. The decrease was primarily related to the decrease of $2.0 million in expected payouts of the 2012 management incentive compensation, favorable currency effects of $1.3 million, and the reversal of a $1.0 million contingent liability that was favorably resolved. Partially offsetting these decreases was $1.1 million due to the incremental CEO transition costs in 2012, an increase resulting from the reversal of $1.1 million in 2011 related to a value added tax (“VAT”) in Brazil and $0.3 million in costs incurred to relocate an office facility.

Restructuring Expenses. For the six months ended June 30, 2012, we incurred restructuring expenses of $5.1 million, primarily related to $4.5 million in contract termination costs to exit a sales agency agreement and other sales-force reductions made in 2012 and $0.4 million incurred as a result of the transfer of certain equipment from a downsized location. In 2011, we incurred restructuring expenses of $0.7 million as a result of restructuring activity in our North America rolls facility.

Interest Expense, Net. Net interest expense for the six months ended June 30, 2012 decreased by $1.1 million or 5.6%, to $18.7 million from $19.8 million for the six months ended June 30, 2011. This decline in interest expense reflects lower current interest rates and debt balances and favorable currency effects, net of higher deferred financing cost amortization for the six months ended June 30, 2012. The decrease in interest rates and the increase in deferred financing cost amortization are a result of the refinancing in May 2011.

Loss on Debt Extinguishment. The loss on debt extinguishment of $2.9 million in the six months ended June 30, 2011 represents the write-off of deferred financing costs resulting from the refinancing of debt that closed on May 26, 2011. (See Note 3 of the Condensed Consolidated Financial Statements and “Liquidity and Capital Resources-Credit Facilities and Notes” for further discussion on the refinancing).

Provision for Income Taxes. For the six months ended June 30, 2012 and 2011, the provision for income taxes was $3.0 million and $6.4 million, respectively. The decrease in income tax expense was primarily attributable to the geographic mix of earnings in the six months ended June 30, 2012 as compared to the same period in 2011. Our provision for income taxes is primarily impacted by income we earn in tax paying jurisdictions relative to income we earn in non-tax paying jurisdictions. The majority of income recognized for purposes of computing our effective tax rate is earned in countries where the statutory income tax rates range from 25% to 41%; however, permanent income adjustments recorded against pre-tax earnings may result in an effective tax rate that is higher or lower than the statutory tax rate in these jurisdictions. We generate losses in certain jurisdictions for which we receive no tax benefit as the deferred tax assets in these jurisdictions (including net operating losses) are fully reserved in our valuation allowance. For this reason, we recognize minimal income tax expense or benefit in these jurisdictions, of which the most material jurisdictions are the United States, the United Kingdom and Australia. Due to these reserves, the geographic mix of our pre-tax earnings has a direct correlation with how high or low our annual effective tax rate is relative to consolidated earnings.

Liquidity and Capital Resources

Our principal liquidity requirements are for debt service, working capital and capital expenditures. We plan to use cash on hand, cash generated by operations and, should it become necessary, access to our revolving credit facility, as our primary sources of liquidity. Our operations are highly dependent upon the paper production industry and the degree to which the paper industry is affected by global economic conditions and the availability of credit. Demand for our products could decline if paper manufacturers are unable to obtain required financing or if economic conditions cause additional mill closures. In addition, the impact of the most recent global economic recession and the ensuing lack of availability of credit may affect our customers’ ability to pay their debts.

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Net cash provided by operating activities was $13.8 million for the six months ended June 30, 2012 and $6.8 million for the six months ended June 30, 2011. The $7.0 million increase is due to a decrease in working capital, partially offset by reduced cash earnings.

Net cash used in investing activities was $6.3 million for the six months ended June 30, 2012. Net cash provided by investing activities was $3.6 million for the six months ended June 30, 2011. The decrease of $9.9 million was primarily due to the release of $13.7 million in restricted cash reserves and the reduction in proceeds from disposals of property and equipment of $0.9 million, offset by the reduction in capital expenditures of $4.7 million.

Net cash used in financing activities was $16.6 million for the six months ended June 30, 2012 and $16.9 million for the six months ended June 30, 2011. The decrease of $0.3 million was primarily the result of the decrease of $15.1 million in deferred financing costs paid from 2011 to 2012, offset by the increase of $14.8 million in principal payments made on debt in 2012.

As of June 30, 2012, there was a $451.7 million balance of term loans outstanding under our Credit Facility and Notes. In addition, as of June 30, 2012, we had no outstanding borrowings under our current revolving lines of credit, including the revolving credit facility under our senior credit facility and lines of credit in various foreign countries that are used to facilitate local short-term operating needs, except that $12.4 million of the revolving credit facility is committed for letters of credit, leaving an aggregate of $17.6 million available for additional borrowings under these revolving lines of credit. We had cash and cash equivalents of $33.6 million at June 30, 2012 compared to $43.6 million at December 31, 2011.

Capital Expenditures

For the six months ended June 30, 2012, we had capital expenditures of $7.3 million consisting of growth capital expenditures of $2.1 million and maintenance capital expenditures of $5.2 million. For the six months ended June 30, 2011, we had capital expenditures of $12.0 million consisting of growth capital expenditures of $4.6 million and maintenance capital expenditures of $7.4 million.

Growth capital expenditures consist of items that are intended to increase the manufacturing, production and/or distribution capacity or efficiencies of our operations in conjunction with the execution of our business strategies. Maintenance capital expenditures are designed to sustain the current capacity or efficiency of our operations and include items relating to the renovation of existing manufacturing or service facilities, the purchase of machinery and equipment for safety and environmental needs and information technology.

We target capital expenditures for 2012 to be approximately $30.0 million. We analyze our planned capital expenditures based on investment opportunities available to us and our financial and operating performance, and accordingly, actual capital expenditures may be more or less than this amount.

See “Credit Facility and Notes” below for a description on limitations on capital expenditures imposed by our Credit Facility.

Credit Facility and Notes

On May 26, 2011, we completed a refinancing transaction, which replaced certain of our then outstanding indebtedness with $240 million aggregate principal amount of 8.875% senior unsecured notes (the “Notes”) and a new approximately $278 million multi-currency senior secured credit facility (the “Credit Facility”), comprised of approximately $248 million of senior secured term loans and a $30 million senior secured revolving credit facility. The interest rates under the Credit Facility are calculated, at our option, as the Alternate Base Rate as defined in the Credit Facility, LIBOR or EURIBOR, subject to a minimum of 2.25%, 1.25% and 1.25%, respectively, plus, in each case, a margin.

Notes

Interest on the Notes is payable semiannually in cash in arrears on June 15 and December 15 of each year, and commenced on December 15, 2011. The Notes are our senior unsecured obligations and are guaranteed by each of our direct and indirect wholly-owned domestic subsidiaries (the “Notes Guarantors”). They rank equal in right of payment with our existing and future senior indebtedness and senior in right of payment to any of our existing and future subordinated indebtedness. The Notes are effectively subordinated to all of our secured debt, including the Credit Facility and related guarantees, to the extent of the value of the assets securing such debt and structurally subordinated to all of the existing and future liabilities of our subsidiaries that do not guarantee the Notes. Subject to the terms of the Credit Facility, the Notes may be redeemed by the Company at specified redemption prices which vary depending on the timing of the redemption.

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The Notes contain customary covenants that, subject to certain exceptions, restrict the Company’s ability to enter into certain transactions. We believe we are in compliance with these covenants at June 30, 2012.

Credit Facility

The Credit Facility provides for (i) a six-year $125.0 million senior secured term loan facility, borrowed by us, the proceeds of which were used to refinance certain of our existing indebtedness; (ii) a six-year €87.0 million senior secured term loan facility, borrowed by Xerium Technologies Limited, a wholly-owned indirect subsidiary of ours organized under the laws of England and Wales, the proceeds of which were used to refinance certain of our existing indebtedness; (iii) a five-year $30.0 million senior secured revolving credit facility, available to us; and an uncommitted incremental amount of $10 million, the proceeds of which are used for working capital and general corporate purposes and include sub-limits available for letters of credit (the “Revolving Facility”); (iv) and an uncommitted incremental credit facility (the “Incremental Facility”) allowing for increases under the Revolving Facility and Term Loans with the same terms, and borrowing of new tranches of term loans, up to an aggregate principal amount not to exceed the greater of (i) $100.0 million and (ii) our Adjusted EBITDA over the prior 12-month period, provided that increases under the Revolving Facility shall not exceed $35.0 million.

The loans under the Credit Facility are required to be permanently repaid with 100% of the net proceeds of assets sales, dispositions, issuances of certain debt obligations and insurance, in each case, subject to certain exceptions and 50% of annual excess cash flow. The Credit Facility requires us to make annual payments (payable in quarterly installments) equal to 1% per annum with respect to the Term Loans with the remaining amount due at final maturity.

The obligations under the Credit Facility are guaranteed by all of our existing and future direct and indirect subsidiaries that are organized in the United States (subject to certain exceptions in the case of immaterial subsidiaries and joint ventures) and certain of our direct and indirect foreign subsidiaries, provided that non-U.S. guarantors are only liable for obligations of Xerium Technologies Limited and certain other non-U.S. guarantors. The loans are secured by a first-priority perfected security interest in substantially all of the assets.

Credit Facility Amendment

To facilitate the planned restructuring activities, on June 28, 2012, the Company entered into an amendment to its senior secured credit facility. Among other revisions to the credit facility, the amendment allows for additional add backs to Adjusted EBITDA annually though 2015 up to the lesser of $15.0 million or the unused portion of our allowed annual capital expenditure limit; increases the maximum leverage ratios between September of 2012 and December of 2013; amends the definition of the leverage ratio to reduce debt by unrestricted surplus cash held by the Company and increases the interest rate on the term loans by 0.75% annually for eighteen months. The Company paid $1.5 million in deferred financing costs related to the amendment.

Covenants

The Credit Facility contains customary covenants that, subject to certain exceptions, restrict the Company’s ability to enter into certain transactions and engage in certain activities. In addition, the Credit Facility includes specified financial covenants requiring us to maintain certain consolidated leverage and interest coverage ratios. The consolidated leverage ratio is calculated by dividing the total of our total gross debt, at average currency exchange rates for the last twelve months, less surplus cash by Adjusted EBITDA and is 4.70 to 1.00 at June 30, 2012. In order to be in compliance with this covenant, we must have a ratio of no more than 5.25 to 1.00 at June 30, 2012. For the remainder of 2012, this ratio increases to 5.50 pursuant to the Amendment. However, beginning in 2013, this ratio decreases in various periods between December 31, 2012 and December 31, 2017 by 25-50 basis points to a minimum of 3.25 at December 31, 2017. The interest coverage ratio is calculated by dividing Adjusted EBITDA by interest expense, net of mark to market movements on hedging instruments and amortization of deferred financing costs, and is 2.76 to 1.00 at June 30, 2012. In order to be in compliance with this covenant, we must have a ratio of at least 2.25 to 1.00 at June 30, 2012. In various periods subsequent to June 30, 2012, this ratio increases by increments of 25 basis points to 3.25 to 1.00 for the quarter ended March 31, 2017. Each of these covenants is calculated at the end of each quarter and is based on a rolling twelve month period. In addition, the terms of the Credit Facility limit our ability to make capital expenditures in excess of specified amounts. We believe we are in compliance with all of these covenants at June 30, 2012.

Critical Accounting Policies

The condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in conformity with GAAP requires

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management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from those estimates.

Our significant policies are described in the notes to the condensed consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2011. Judgments and estimates of uncertainties are required in applying our accounting policies in many areas. There have been no material changes to the critical accounting policies affecting the application of those accounting policies as noted in our Annual Report on Form 10-K for the year ended December 31, 2011.

Non-GAAP Financial Measures

We use EBITDA and Adjusted EBITDA (as defined in the Credit Facility) as supplementary non-GAAP liquidity measures to assist us in evaluating our liquidity and financial performance, specifically our ability to service indebtedness and to fund ongoing capital expenditures. The Credit Facility includes covenants based on Adjusted EBITDA. If our Adjusted EBITDA declines below certain levels, we may violate the covenants resulting in a default condition under the credit facility or be required to prepay the credit facility. Neither EBITDA nor Adjusted EBITDA should be considered in isolation or as a substitute for income (loss) from operations or cash flows (as determined in accordance with GAAP).

EBITDA is defined as net income (loss) before interest expense, income tax provision (benefit) and depreciation (including non-cash impairment charges) and amortization.

“Adjusted EBITDA”, under the Credit Facility means, with respect to any period, the total of (A) the consolidated net income for such period, plus (B) without duplication, to the extent that any of the following were deducted in computing such consolidated net income for such period: (i) provision for taxes based on income or profits, including, without limitation, federal, state, provincial, franchise and similar taxes, including any penalties and interest relating to any tax examinations, (ii) consolidated interest expense, (iii) consolidated depreciation and amortization expense, (iv) reserves for inventory in connection with plant closures, (v) consolidated operational restructuring costs, (vi) noncash charges or gains resulting from the application of purchase accounting, including push-down accounting, (vii) non-cash expenses resulting from the granting of common stock, stock options, restricted stock or restricted stock unit awards under equity compensation programs solely with respect to common stock, and cash expenses for compensation mandatorily applied to purchase common stock, (viii) non-cash items relating to a change in or adoption of accounting policies, (ix) non-cash expenses relating to pension or benefit arrangements, (x) expenses incurred as a result of the repurchase, redemption or retention of common stock earned under equity compensation programs solely in order to make withholding tax payments, (xi) amortization or write-offs of deferred financing costs, (xii) any non-cash losses resulting from mark to market hedging obligations (to the extent the cash impact resulting from such loss has not been realized in such period) and (xiii) other non-cash losses or charges (excluding, however, any non-cash loss or charge which represents an accrual of, or a reserve for, a cash disbursement in a future period), minus (C) without duplication, to the extent any of the following were included in computing consolidated net income for such period, (i) non-cash gains with respect to the items described in clauses (vi), (vii), (ix), (xi), (xii) and (xiii) (other than, in the case of clause (xiii), any such gain to the extent that it represents a reversal of an accrual of, or reserve for, a cash disbursement in a future period) of clause (B) above and (ii) provisions for tax benefits based on income or profits. Notwithstanding the foregoing, Adjusted EBITDA, as defined in the credit facility and calculated below, may not be comparable to similarly titled measurements used by other companies.

Consolidated net income is defined as net income (loss) determined on a consolidated basis in accordance with GAAP; provided, however, that the following, without duplication, shall be excluded in determining consolidated net income: (i) any net after-tax extraordinary or non-recurring gains, losses or expenses (less all fees and expenses relating thereto), (ii) the cumulative effect of changes in accounting principles, (iii) any fees and expenses incurred during such period in connection with the issuance or repayment of indebtedness, any refinancing transaction or amendment or modification of any debt instrument, in each case, as permitted under the Credit Facility and (iv) any gains resulting from the returned surplus assets of any pension plan.

The following table provides reconciliation from net (loss) income and operating cash flows, which are the most directly comparable GAAP financial measures, to EBITDA and Adjusted EBITDA.

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	Three Months Ended     June 30,				Six Months Ended June  30,
	2012		2011		2012		2011
Net income (loss)	$	2,226	$	1,622	$	(5,296)	$	2,270
Stock-based compensation		(218)		831		754		2,081
Depreciation		9,429		10,686		19,193		20,918
Amortization of intangibles		576		576		1,153		1,152
Deferred financing cost amortization		682		366		1,736		602
Unrealized foreign exchange loss (gain) on revaluation of debt		373		(804)		381		(1,414)
Deferred taxes		(179)		472		(360)		1,209
Gain on disposition of property and equipment		(170)		(25)		(617)		(564)
Loss on extinguishment of debt		-		2,926		-		2,926
Net change in operating assets and liabilities		(9,075)		(9,694)		(3,148)		(22,419)
Net cash provided by operating activities		3,644		6,956		13,796		6,761
Interest expense, excluding amortization		8,438		9,616		16,981		19,234
Net change in operating assets and liabilities		9,075		9,694		3,148		22,419
Current portion of income tax expense		2,533		2,558		3,371		5,238
Stock-based compensation		218		(831)		(754)		(2,081)
Unrealized foreign exchange (loss) gain on revaluation of debt		(373)		804		(381)		1,414
Gain on disposition of property and equipment		170		25		617		564
Loss on extinguishment of debt		-		(2,926)		-		(2,926)
EBITDA		23,705		25,896		36,778		50,623
Write-off of deferred financing costs		-		2,926		-		2,926
Stock-based compensation		(218)		831		754		2,081
Operational restructuring expenses		1,129		542		5,103		710
Legal fees related to term debt amendment		85		-		85		-
Non-recurring CEO retirement expenses		695		-		1,496		-
Adjusted EBITDA	$	25,396	$	30,195	$	44,216	$	56,340

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our foreign currency exposure and interest rate risks as of June 30, 2012 have not materially changed from December 31, 2011 (see Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011). As of June 30, 2012, we had outstanding long-term debt with a carrying amount of $451.8 million with an approximate fair value of $394.7 million.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. We have carried out an evaluation, as of June 30, 2012 under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934, as amended (the “Act”). Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms; and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures. No evaluation of disclosure controls and procedures can provide absolute assurance that these controls and procedures will operate effectively under all circumstances. However, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective at the reasonable assurance level as set forth above.

(b) Changes in Internal Control over Financial Reporting. No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Act) occurred during the quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material developments to the legal proceedings described in our Annual Report on Form 10-K for the year ended December 31, 2011. See Note 4 and 9 to our Unaudited Condensed Consolidated Financial Statements for a discussion of our Brazilian operating subsidiary’s proceedings before the Federal Reserve Department of Brazil and other routine litigation to which we are subject.

ITEM 1A. RISK FACTORS

The risks described in our Annual Report on Form 10-K for the year ended December 31, 2011 have not materially changed, except for the risk factor below.

Our common stock is currently listed on the NYSE. As previously disclosed in our press release dated August 3, 2012 filed with the Securities and Exchange Commission on August 3, 2012, the Company received a notice from the NYSE informing us that our market capitalization was less than $50 million over 30 consecutive trading days at the same time that our stockholders’ equity was less than $50 million as of the most recent balance sheet date. As of August 3, 2012 when our stock price closed at $3.34, our 30-day average market capitalization was $50.3 million and at June 30, 2012, our stockholders’ deficit was $15.5 million, as reflected on the balance sheet included in this quarterly report. However, during July and early August 2012, our 30-day average market capitalization dropped below $50 million for a period of time. There can be no assurance that our average market capitalization will remain above the required NYSE criteria. We intend to submit a plan to the NYSE advising it of definitive actions we propose to take that would bring us into compliance with the market capitalization listing standards within 18 months. If we are unable to regain compliance with this NYSE continued listing standard or after giving consideration to our proposed plan the NYSE decides to delist our stock, the delisting could negatively impact us and our stockholders by reducing the liquidity and market price of our common stock.

ITEM 6.    EXHIBITS

See the exhibit index following the signature page to this Quarterly Report on Form 10-Q.

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	XERIUM TECHNOLOGIES, INC.
	(Registrant)
Date: August 7, 2012	By:	/s/ Clifford E. Pietrafitta
		Clifford E. Pietrafitta
		Executive Vice President and CFO
		(Principal Financial Officer)

35

EXHIBIT INDEX

Exhibit   Number	Description of Exhibits
10.1	2012-2014 Executive LTIP
10.2	Amendment No. 1 to the Credit Facility, dated June 28, 2012 (1)
31.1	Certification Statement of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification Statement of 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
32.2	Certification Statement of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS(2)	XBRL Instance Document
101.SCH(2)	XBRL Taxonomy Extension Schema Document
101.CAL(2)	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB(2)	XBRL Taxonomy Extension Label Linkbase Document
101.PRE(2)	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF(2)	XBRL Taxonomy Extension Definition Linkbase Document

(1) Filed as Exhibit 10.1 to the Registrant’s Current report on Form 8-K filed on July 2, 2012, and incorporated by reference.

(2) Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibits 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

36

EX-10.1

Exhibit 10.1

XERIUM TECHNOLOGIES, INC.

EXECUTIVE LONG TERM INCENTIVE PLAN

This Xerium Technologies, Inc. Executive Long Term Incentive Plan (the “Executive LTIP”) contains rules supplemental to those set forth in the Xerium Technologies, Inc. 2010 Equity Incentive Plan (the “EIP”). The Executive LTIP provides for the grant of incentive award opportunities (each, an “Award”) under and subject to the terms of the EIP, which is incorporated herein by reference. In the event of any inconsistency between the Executive LTIP and applicable provisions of the EIP, the EIP shall control. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the EIP.

1. Administration; Eligibility. The Executive LTIP shall be administered by the Committee as described in the EIP. The Committee may in its discretion consult with outside advisors or internal Company resources for purposes of making any determinations in connection with its administration of the Program. Eligibility to participate in the Executive LTIP shall be limited to executive officers who are selected in accordance with the terms of the EIP to participate in the Executive LTIP from among those individuals who are eligible to participate in the EIP (each, a “Participant”). Participation in any Award shall not entitle a Participant to share in any future Awards or in any other future awards of the Company or its subsidiaries.

2. Determination of Number of Shares. The number of shares of Common Stock covered by an Award (the “LTIP Shares”) shall be as determined by the Committee and communicated to each Participant.

3. Determination of Time-Based Versus Performance-Based LTIP Shares. Participants will receive fifty percent (50%) of their LTIP Shares in the form of time-based Restricted Stock Units as described in Section 4 below (“Time-Based RSUs”) and have the remainder of their LTIP Shares (fifty percent (50%)) credited to them as Stock Units on the books of the Company on a one-for-one basis to be earned and vested subject to satisfaction of certain performance conditions (and to the extent the Award is intended to qualify for the performance-based compensation exception under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), to the further limitations of the EIP with respect thereto) as described in Section 5 below and Exhibit A (“Performance Units”).

4. Terms of Time-Based RSUs. Any LTIP Shares that are to be conveyed in the form of Time-Based RSUs will be granted as of May 11, 2012, substantially in the form of the Restricted Stock Units Agreement attached as Exhibit B hereto (the “Time-Based RSU Agreement”), which provides that the RSUs shall vest in three equal annual installments on March 31^st of 2013, 2014 and 2015 and settle in shares of Common Stock as soon as administratively possible after they vest.

5. Determination of Number of Performance Shares. The determination of the number of shares of Common Stock to be delivered at the end of the three-year performance period with respect to the Performance Units (the “Performance Shares”) shall be made in accordance with the provisions of Exhibit A applicable for such three-year performance period. Performance Shares will be delivered following the filing of the Form 10-K audited results for the last fiscal year of the three-year performance period but in no case later than March 31 of the calendar year following the close of the three-year performance period.

6. Tax Withholding. The minimum tax withholding amount with respect to any payments being made in RSUs shall be satisfied by means of share withholding at the time the RSUs are settled as provided in the Restricted Stock Units Agreement. The minimum tax withholding amount with respect to any payments being made in Performance Shares shall be satisfied by means of share withholding at the time Performance Shares are delivered.

7. Intent to be Exempt from Section 162(m). Awards for the three-year performance period beginning in 2012 are not intended to qualify for the performance-based compensation exception under Section 162(m) of the Code. In the case of any Award for a subsequent three-year performance period that is intended to so qualify, (i) the Exhibit A performance goals with respect to such Award shall be established by the Committee not later than ninety (90) days after the commencement of the three-year performance period (or by such earlier date as is required by Section 1.162-27(e)(2)(i) of the Treasury Regulations), (ii) the Exhibit A performance goals, as so established, shall be consistent with the eligible performance measures, if any, approved by the shareholders of the Company for use in respect of performance awards under the EIP and shall be objectively determinable in compliance with Section 1.162-27(e)(2) of the Treasury Regulations, and (iii) no portion of the Award shall be paid unless and until

the Committee has certified (as required by Section 1.162-27(e)(5) of the Treasury Regulations) that the performance goals have been achieved (or, if the performance goals are expressed in terms that admit of varying payout levels for different levels of performance, have been achieved at a level sufficient to support the payment).

8. Nature of Awards. Awards hereunder are intended to qualify as Stock Unit Awards under the EIP. The Executive LTIP is unfunded.

9. Termination of Employment. No Performance Shares shall be payable to or in respect of a Participant, except as the Committee shall otherwise expressly determine, unless the Participant is employed by the Company or a subsidiary on December 31 of the last year of the three-year performance period.

10. Availability of Stock. If, when Performance Shares become payable in respect of any three-year performance period, the number of shares of Stock needed exceeds the number of shares then available under the EIP, the Performance Shares shall be delivered when the shareholders approve an increase in the number of shares available under the EIP. If the shareholders do not approve such an increase so that all or part of the Performance Shares are not delivered, the Company will pay out the value of any Performance Shares that were not delivered in cash and determine their value by using the average of the per-share closing price of the Common Stock for the last twenty (20) trading days preceding the date the Performance Shares would have been delivered had there been a sufficient number available under the EIP.

11. Clawback. If a participant receives an Award payout under the Executive LTIP based on financial statements that are subsequently required to be restated in a way that would decrease the number of Performance Shares to which the Participant was entitled, the Participant will refund to the Company the difference between what the Participant received and what the Participant should have received; provided that no refund will be required for Performance Shares delivered more than three years prior to the date on which the Company is required to prepare the applicable restatement. The value of any difference to be refunded will be determined in a manner consistent with regulations the Securities and Exchange Commission may adopt pursuant to Section 945 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

12. Treatment of Awards Upon a Change of Control. If (a) the Company merges into or combines with any other entity and, immediately following such merger or combination, any Person or group of Persons acting in concert holds 50% or more of the voting power of the entity surviving such merger or combination (other than any Person or group of Persons which held 50% or more of the Company’s voting power immediately prior to such merger or combination or any Affiliated Person of any such Person or member of such group); (b) any Person or group of Persons acting in concert acquires 50% or more of the Company’s voting power; or (c) the Company sells all or substantially all of its assets or business for cash or for securities of another Person or group of Persons (other than to any Person or group of Persons which held 50% or more of the Company’s total voting power immediately prior to such sale or to any Affiliated Person of any such Person or any member of such group) (each of (a), (b), or (c) a “Change of Control”), then, unless the Committee provides for the continuation or assumption of Performance Units or for the grant of new awards in substitution therefore (which substitute awards, if any, may be payable in cash or other property or a combination thereof) by the surviving entity or acquirer, in each case on such terms and subject to such conditions as the Committee may determine, with respect to each Performance Unit not so assumed or continued:

(a) In the event such transaction occurs on or after the close of the three-year performance period with respect to the Performance Units, the Committee shall determine, acting in its sole and reasonable discretion, prior to the occurrence of the transaction, the extent to which the applicable performance metrics specified in Exhibit A have been satisfied. If financial statements or other relevant data are not available prior to the time of such determination, the Committee shall make such determination based upon the financial information and data then available to the Company.

(b) In the event such transaction occurs prior to the close of the three-year performance period with respect to the Performance Units, the applicable performance metrics specified in Exhibit A shall be determined as follows: (i) the three-year performance period shall be deemed to end on the effective date of such transaction; and (ii) the extent to which the applicable performance metrics specified in Exhibit A for the shortened three-year performance period described in clause (i) above have been achieved shall be determined by the Committee based upon the financial information available to the Company (it being understood that the Committee may, to the extent

it deems necessary, extrapolate performance through the effective date of the transaction based upon available data); (iii) the performance determined pursuant to clause (ii) shall then be adjusted by multiplying it by a fraction, the numerator of which is the number of days in the shortened three-year performance period and the denominator of which is 1,095, and the performance as so adjusted shall be the basis for determining the number of Performance Shares to be paid out with respect to the Performance Units, subject to proration in accordance with Section 12(c) below.

(c) If subsection (b) above applies, the number of Performance Shares initially determined under subsection (b) with respect to an Award shall be prorated by multiplying such initially determined amount by a fraction, the numerator of which is the number of days in the shortened three-year performance period and the denominator of which is 1,095.

For purposes of this Section 12, “Person” means any individual, partnership, limited liability company, corporation, association, trust, joint venture, unincorporated organization, or other entity or group, and “Affiliated Person” means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or is under common control with such Person.

13. Amendment. The Committee may amend the Executive LTIP at any time and from time to time, and may terminate the Program, in each case subject only to such limitations, if any, as the EIP may impose.

14. 409A. This Executive LTIP and the Time-Based RSUs and Performance Units granted thereunder shall be construed and administered consistent with the intent that they at all times be in compliance with or exempt from the requirements of Section 409A of the Code and the regulations promulgated thereunder.

XERIUM TECHNOLOGIES, INC.

EXECUTIVE LONG TERM INCENTIVE PLAN

Exhibit A (Applicable to 2012-2014 Performance Period)

Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with U.S. generally accepted accounting principles.

Performance Shares

One measure of performance will be used in determining the number of Performance Shares to be delivered, if any, with respect to Performance Units: Xerium Cumulative Bank Adjusted EBITDA.

i. Bank Adjusted EBITDA Metric and Cumulative Bank Adjusted EBITDA Metric

“Bank Adjusted EBITDA Metric” means “Adjusted EBITDA,” as such term is defined in the Credit and Guaranty Agreement (the “Credit Agreement”), dated as of May 26, 2011, entered into by and among the Company, certain subsidiaries of the Company, Citibank N.A., as administrative agent, and other agents and banks party thereto, as in effect for Xerium Technologies, Inc. for the year ended December 31, 2011.

“Cumulative Bank Adjusted EBITDA Metric” means the sum of Bank Adjusted EBITDA Metric for fiscal years 2012 through 2014. Cumulative Bank Adjusted EBITDA Metric will be determined once following the close of the three-year performance period. The Committee shall determine Cumulative Bank Adjusted EBITDA Metric relative to the target for such metric set forth below.

ii. Annual Currency Adjustments.

The final Bank Adjusted EBITDA Metric for each year in the three-year performance period will be adjusted to reflect currency fluctuations relative to the US$ in all markets. Any adjustments made for any year in the three-year performance period under the 2012-2014 Executive LTIP will be based on the following budgeted rates:

Foreign Exchange Rates
ARS	$	0.2323
AUD	$	1.0250
BRL	$	0.5367
CAD	$	0.9833
CHF	$	1.0665
CNY	$	0.1589
EUR	$	1.2972
GBP	$	1.5535
JPY	$	0.01299
MXN	$	0.07166
SEK	$	0.14543
VND	$	0.000047

iii. Cumulative Target Bank Adjusted EBITDA Metric

The target for Cumulative Bank Adjusted EBITDA Metric for the 2012-2014 performance period (the “Target Cumulative Bank Adjusted EBITDA Metric”) shall be such amount as is set and approved by the Compensation Committee; provided, however, that the amount may be adjusted by the Committee after the initial determination of the amount to reflect any material change of circumstance, including without limitation, the acquisition or disposition of any business by the Company or any of its subsidiaries.

iv. Determination of Number of Performance Shares

“X” below refers to the number of Performance Units credited to a Participant under an Award.

“Y” below refers to the Cumulative Target Bank Adjusted EBITDA Metric set forth above.

The number of Performance Shares payable with respect to an Award shall be determined after the close of the last year in the three-year performance period as follows:

Cumulative Bank Adjusted EBITDA Metric below .85Y: no payment

Cumulative Bank Adjusted EBITDA Metric at .85Y: bonus = 0.5X

Cumulative Bank Adjusted EBITDA Metric above .85Y but below Y: bonus = percentage of X determined based on straight line interpolation between 0.5X at .85Y and X at Y

Cumulative Bank Adjusted EBITDA Metric at Y: bonus = X

Cumulative Bank Adjusted EBITDA Metric above Y: bonus = percentage of X determined based on straight line interpolation between X at Y and 2.00X at 1.15Y

The number of Performance Shares payable with respect to Performance Units shall in all cases be capped at 2.00 times a Participant’s Performance Units (2.00X).

Exhibit B

XERIUM TECHNOLOGIES, INC.

TIME-BASED RESTRICTED STOCK UNITS AGREEMENT

(2012-2014 Executive LTIP)

Dated as of May 11, 2012

Pursuant to the terms of the Xerium Technologies, Inc. Long Term Incentive Plan effective for fiscal years 2012 through 2014 (the “2012-2012 Executive LTIP”) and the Xerium Technologies, Inc. 2010 Equity Incentive Plan (the “Plan”), Xerium Technologies, Inc. (the “Company”) hereby grants to (the “Employee”) the Restricted Stock Units Award described below.

1. The Restricted Stock Units Award. The Company hereby grants to the Employee Units, subject to the terms and conditions of this Agreement and the Plan. An Award shall be paid hereunder, only to the extent that such Award is Vested, as provided in this Agreement. The Employee’s rights to the Units are subject to the restrictions described in this Agreement and the Plan in addition to such other restrictions, if any, as may be imposed by law.

2. Definitions. The following definitions will apply for purposes of this Agreement. Capitalized terms not defined in the Agreement are used as defined in the Plan, including without limitation the following terms: “Affiliate”; “Committee”; and “Covered Transaction”.

(a) “Agreement” means this Restricted Stock Units Agreement granted by the Company and agreed to by the Employee.

(b) “Award” means the grant of Units in accordance with this Agreement.

(c) “Cause” has the meaning ascribed to it in the written employment agreement between the Company and the Employee (as in effect on the date hereof). If the Employee has no written employment agreement with the Company, “Cause” shall mean (i) the Employee’s conviction of or plea of nolo contendere to a felony or other crime involving moral turpitude; (ii) the Employee’s fraud, theft or embezzlement committed with respect to the Company or any of its subsidiaries; or (iii) the Employee’s willful and continued failure to perform his material duties to the Company and its Subsidiaries, where the Company has provided written notice to the Employee of the failure and the Employee shall not have remedied such failure within then (10) business days following the effectiveness of such notice.

(d) “Change of Control” has the meaning ascribed to it in Section 12 of the 2012-2014 Executive LTIP.

(e) “Change of Control Termination” means a termination of the Employee’s employment with the Company or a member of the Company Group that occurs within three (3) months prior to or two (2) years following a Change of Control as a result of (x) termination by a member of the Company Group without Cause or (y) a Good Reason Termination.

(f) “Common Stock” means the common stock of the Company, $0.01 par value.

(g) “Company Group” means the Company together with its Affiliates.

(h) “Fair Market Value” means, on the applicable date, or if the applicable date is not a date on which the NYSE is open the next preceding date on which the NYSE was open, the last sale price with respect to such Common Stock reported on the NYSE or, if on any such date such Common Stock is not quoted by NYSE, the average of the closing bid and asked prices with respect to such Common Stock, as furnished by a professional market maker making a market in such Common Stock selected by the Committee in good faith; or, if no such market maker is available, the fair market value of such Common Stock as of such day as determined in good faith by the Committee.

(i) “Good Reason Termination” shall mean a termination of employment by the Employee with “Good Reason,” as such term is defined in the written employment agreement between the Company and the Employee (as in effect on the date hereof), where the Employee provides notice of the Good Reason event within 90 days of its occurrence and provides the Company at least 30 days to cure such matter. If the Employee has no written employment agreement with the Company, “Good Reason” shall mean a

requirement that the Employee relocate more than fifty (50) miles from his then-current principal residence, it being understood that the Employee may be required to travel frequently and that prolonged periods spent away from Employee’s principal residence shall not constitute Good Reason.

(j) “Grant Date” means May 11, 2012.

(k) “NYSE” means the New York Stock Exchange.

(l) “Payment Date” means, as to Vested Units, within 30 days of the date on which the Units become Vested, provided that to the extent practicable such Payment Date shall be immediately preceding the Change of Control transaction with respect to Units that become Vested in connection with a Change of Control.

(m) “Pro Rata Portion” shall mean the product of (x) a fraction, the numerator of which is, as of the time of measurement, the number of months (rounded down to the nearest whole number) occurring since the most recently occurring annual anniversary of the Grant Date (or the Grant Date if such an anniversary has not yet occurred) and the denominator of which is 12 and (y) (i) if the time of measurement is prior to the first annual anniversary of the Grant Date, 33.33% of the Units not previously Vested; (ii) if the time of measurement is between the first and second annual anniversary of the Grant Date, 50% of the Units not previously Vested; or (iii) if the time of measurement is between the second and third annual anniversary of the Grant Date, 100% of the Units not previously Vested.

(n) “Unit” means a notional unit which is equivalent to a single share of Common Stock on the Grant Date, subject to Section 8(a).

(o) “Vested” means that portion of the Award to which the Employee has a nonforfeitable right.

(p) “Vesting Dates” means the dates set forth in Section 3(a) of this Agreement.

3. Vesting.

(a) The Award shall become Vested based on the following schedule:

Vesting Date	Percentage of Units (including any Units then credited to the Employee pursuant to Section 7) Vested on Vesting Date
March 31, 2013	33.33%
March 31, 2014	33.33%
March 31, 2015	33.34%

4. Payment of Award. Subject to Section 8(d) below, on the Payment Date, the Company shall issue to the Employee that number of shares of Common Stock as equals that number of Units which have become Vested.

5. Change of Control.

In the event of a Change of Control unless the Committee determines, in its sole discretion, to accelerate the vesting of the entire portion of the Award that is not then Vested, the Pro Rata Percentage shall become Vested upon the Change of Control and that portion of the Award that is not then Vested or and has not become Vested in accordance with this Section 5 or Section 6 shall be forfeited automatically and the Committee shall arrange for new rights of comparable value, granted by the Company or another entity, to be substituted for the portion of the Award that is not Vested after giving effect to the Change of Control (such rights being referred to herein as a “Replacement Award”). Notwithstanding the foregoing, if the Company is the surviving entity following the Change of Control, the Committee may elect to continue the portion of this Award that is not then Vested and does not become Vested upon the Change of Control in lieu of providing a Replacement Award.

6. Termination of Employment.

(a) Resignation or Termination by the Company. If the Employee ceases to be employed by the Company Group prior to a Vesting Date as a result of resignation, dismissal or any other reason, then the portion of the Award that has not previously Vested shall be forfeited automatically; provided that (i) in the event of a termination by a member of the Company Group without Cause or a Good Reason Termination, a portion of the Award equal to the Pro Rata Portion as of the time of termination shall Vest immediately prior to such termination and (ii) in the event that the Employee’s employment termination is a Change of Control

Termination, then the entire portion of the Award (or any Replacement Award) that is then not Vested shall become Vested on the date of termination.

(b) Meaning of termination of employment. If the Company or a member of the Company Group provides Employee a written notice of termination of employment but the termination of employment is not effective for a period of more than thirty (30) days due to applicable law or contractual arrangements between a member of the Company Group and the Employee, for the purposes of this Award, including without limitation Section 6(a) hereof, the Employee’s employment shall be deemed terminated and the Employee shall be deemed ceased to be employed by the Company Group on the date that is thirty (30) days from the date of such notice instead of the actual date of termination.

7. Dividends. On each date on which dividends are paid by the Company, the Employee shall be credited with that number of additional Units (including fractional Units) as is equal to the amount of the dividend that would have been paid on the Units then credited to the Employee under this Agreement (which shall not include any Vested Units following the Payment Date in respect of such Vested Units) had they been held in Common Stock on such date divided by the Fair Market Value of a share of Common Stock on such date.

8. Miscellaneous.

(a) Adjustments Based on Certain Changes in the Common Stock. In the event of any stock split, reverse stock split, stock dividend, recapitalization or similar change affecting the Common Stock, the Award shall be equitably adjusted.

(b) No Voting Rights. The Award shall not be interpreted to bestow upon the Employee any equity interest or ownership in the Company or any Affiliate prior to the applicable Payment Date, and then only with respect to the shares of Common Stock issued on such Payment Date.

(c) No Assignment. No right or benefit or payment under the Plan shall be subject to assignment or other transfer nor shall it be liable or subject in any manner to attachment, garnishment or execution.

(d) Withholding. The Employee is responsible for payment of any taxes required by law to be withheld by the Company with respect to an Award. To facilitate that payment, the Company will, to the extent permitted by law, retain from the number of shares of Common Stock issued to the Employee on the Payment Date that number of shares necessary for payment of the minimum tax withholding amount, valued at their Fair Market Value on the business day most immediately preceding the date of retention. To the extent the Company’s withholding obligation cannot be satisfied by means of share withholding, the Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind due to the Employee.

(e) Employment Rights. This Agreement shall not create any right of the Employee to continued employment with the Company or its Affiliates or limit the right of Company or its Affiliates to terminate the Employee’s employment at any time and shall not create any right of the Employee to employment with the Company or any of its Affiliates. Except to the extent required by applicable law that cannot be waived, the loss of the Award shall not constitute an element of damages in the event of termination of the Employee’s employment even if the termination is determined to be in violation of an obligation of the Company or its Affiliates to the Employee by contract or otherwise.

(f) Unfunded Status. The obligations of the Company hereunder shall be contractual only. The Employee shall rely solely on the unsecured promise of the Company and nothing herein shall be construed to give the Employee or any other person or persons any right, title, interest or claim in or to any specific asset, fund, reserve, account or property of any kind whatsoever owned by the Company or any Affiliate.

(g) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. In the event that any provision hereof would, under applicable law, be invalid or unenforceable in any respect, such provision will be construed by modifying or limiting it so as to be valid and enforceable to the maximum extent compatible with, and possible under, applicable law.

(h) Governing Law. This Agreement and all actions arising in whole or in part under or in connection herewith, will be governed by and construed in accordance with the domestic substantive laws of the State

of Delaware, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.

(i) 409A. The Award shall be construed and administered consistent with the intent that it be at all times in compliance with, or exempt from, the requirements of Section 409A of the Internal Revenue Code and the regulations thereunder.

(j) Section 162(m). The Award shall be construed and administered consistent with the intent that it qualify to the maximum extent possible as qualifying performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code and the regulations thereunder.

(k) Amendment. This Agreement may be amended only by mutual written agreement of the parties.

IN WITNESS WHEREOF, Xerium Technologies, Inc. has executed this Restricted Stock Units Agreement as of the date first written above.

Xerium Technologies, Inc.
By:
Name: Title:	Stephen R. Light Chairman, CEO

Acknowledged and agreed:

EMPLOYEE

By:

Name:

Number of LTIP Shares Granted

Number of Time-Based RSUs	Number of Performance Shares
_______	_______

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Stephen R. Light, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Xerium Technologies, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2012

/s/ Stephen R. Light

Stephen R. Light

President, Chief Executive Officer and Chairman

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Clifford E. Pietrafitta, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Xerium Technologies, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2012

/s/ Clifford E. Pietrafitta

Clifford E. Pietrafitta

Executive Vice President and CFO

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as principal executive officer of Xerium Technologies, Inc. (the “Company”), does hereby certify that, to his knowledge:

1) the Company’s Form 10-Q for the period ended June 30, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Company’s Form 10-Q for the period ended June 30, 2012, fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen R. Light

Stephen R. Light

President, Chief Executive Officer and Chairman

(Principal Executive Officer)

August 7, 2012

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as principal financial officer of Xerium Technologies, Inc. (the “Company”), does hereby certify that, to his knowledge:

1) the Company’s Form 10-Q for the period ended June 30, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) the information contained in the Company’s Form 10-Q for the period ended June 30, 2012, fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Clifford E. Pietrafitta

Clifford E. Pietrafitta

Executive Vice President and CFO

(Principal Financial Officer)

August 7, 2012

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Approximate Matching Contribution Expense (Detail) (Matching Contributions To Plan, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Matching Contributions To Plan
Defined Contribution Plan Disclosure [Line Items]
Matching contribution expense	$ 434	$ 446	$ 878	$ 889

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Stock-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2012		Jun. 30, 2011		Jun. 30, 2012		Jun. 30, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ (218)		$ 831		$ 754		$ 2,081
RSU And DSU Awards
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	344	[1]	594	[1]	754	[1]	1,308	[1]
Management Incentive/Performance Award Programs
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ (562)	[2]	$ 237	[2]			$ 773	[2]

[1] Related to restricted stock units and deferred stock units awarded to certain employees and non-employee directors.

[2] For 2011, the amount represents the value of stock awards granted under the 2011 Management Incentive Compensation Program (the "2011 MIC"), which was approved by the Company's Board of Directors in March of 2011. No amount has been recorded for the 2012 Management Incentive Compensation Program (the "2012 MIC"), as the performance targets are not projected to be met as of June 30, 2012. Therefore, all compensation expense related to the 2012 MIC recorded in 2012 was reversed in the second quarter of 2012.

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Summarized Financial Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Segment Reporting Information [Line Items]
Net sales	$ 136,378	$ 150,378	$ 270,742	$ 293,544
Segment Earnings (Loss)	13,880	17,719	16,073	31,474
Clothing
Segment Reporting Information [Line Items]
Net sales	88,115	99,632	176,798	193,571
Segment Earnings (Loss)	15,861	22,479	30,622	42,269
Roll Covers
Segment Reporting Information [Line Items]
Net sales	48,263	50,746	93,944	99,973
Segment Earnings (Loss)	12,126	10,236	20,016	20,820
Corporate
Segment Reporting Information [Line Items]
Segment Earnings (Loss)	$ (2,591)	$ (2,520)	$ (6,421)	$ (6,749)

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Notional Amounts of Outstanding Foreign Exchange Forward Contracts (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Derivatives Sold
Derivative [Line Items]
Non-designated hedges of foreign exchange risk	$ 31,754
Derivatives Purchased
Derivative [Line Items]
Non-designated hedges of foreign exchange risk	$ (5,900)

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Stock-Based Compensation and Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation Expense

The Company recorded stock-based compensation expense during the three and six months ended June 30, 2012 and 2011 as follows:

	Three Months Ended     June 30,				Six Months Ended     June 30,
	2012		2011		2012		2011
RSU and DSU Awards (1)	$	344	$	594	$	754	$	1,308
Management Incentive/Performance Award Programs (2)		(562)		237		-		773
Total	$	(218)	$	831	$	754	$	2,081

(1) Related to restricted stock units and deferred stock units awarded to certain employees and non-employee directors.

(2) For 2011, the amount represents the value of stock awards granted under the 2011 Management Incentive Compensation Program (the “2011 MIC”), which was approved by the Company’s Board of Directors in March of 2011. No amount has been recorded for the 2012 Management Incentive Compensation Program (the “2012 MIC”), as the performance targets are not projected to be met as of June 30, 2012. Therefore, all compensation expense related to the 2012 MIC recorded in 2012 was reversed in the second quarter of 2012.

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Supplemental Guarantor Financial Information - Additional Information (Detail) (Total Guarantors, USD $) In Millions, unless otherwise specified	6 Months Ended	12 Months Ended	3 Months Ended		12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011 Understatement	Mar. 31, 2012 Overstatement	Mar. 31, 2011 Overstatement	Dec. 31, 2010 Overstatement
Condensed Financial Statements, Captions [Line Items]
Equity in Subsidiaries Income and Net Income		$ 0.5	$ 1.6	$ 0.5	$ 4.0
Decrease in guarantor investment balance	$ 33.7

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Components Of Accumulated Other Comprehensive Income (Loss) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Comprehensive Income (Loss) And Accumulated Other Comprehensive Income (Loss) [Abstract]
Foreign Currency Translation Adjustment, Beginning Balance			$ 10,157
Foreign Currency Translation Adjustment, Current period change, net of tax	(13,025)	6,039	(8,399)	12,477
Foreign Currency Translation Adjustment, Ending Balance	1,758		1,758
Pension Liability Changes Under Topic 715, Beginning Balance			(41,183)
Pension Liability Changes Under Topic 715, Current period change, net of tax	578	(132)	90	(825)
Pension Liability Changes Under Topic 715, Ending Balance	(41,093)		(41,093)
Change in Value of Derivative Instruments, Beginning Balance			(520)
Change in Value of Derivative Instruments, Current period change, net of tax	(11)		(105)
Change in Value of Derivative Instruments, Ending Balance	(625)		(625)
Accumulated Other Comprehensive Income Gain (Loss), Beginning Balance			(31,546)
Accumulated Other Comprehensive Income Gain (Loss), Current period change, net of tax			(8,414)
Accumulated Other Comprehensive Income Gain (Loss), Ending Balance	$ (39,960)		$ (39,960)

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Income Taxes - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Income Taxes [Line Items]
Provision for income taxes	$ 2,354,000	$ 3,030,000	$ 3,011,000	$ 6,447,000
Gross unrecognized tax benefit	8,282,000		8,282,000
Unrecognized tax benefit decreased			338,000
Tax, penalties and interest			$ 42,500,000
Minimum
Income Taxes [Line Items]
Statutory income tax rate in foreign countries			25.00%
Tax years open to examination			2000
Maximum
Income Taxes [Line Items]
Statutory income tax rate in foreign countries			41.00%
Tax years open to examination			2011

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Consolidating Statement Of Operation and Comprehensive (Loss) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Schedule of Condensed Consolidating Statement of Operations [Line Items]
Net sales	$ 136,378	$ 150,378	$ 270,742	$ 293,544
Costs and expenses:
Cost of products sold	85,396	92,507	173,317	181,758
Selling	19,070	20,507	38,558	40,031
General and administrative	14,034	16,178	31,860	33,558
Restructuring	1,129	542	5,103	710
Research and development	2,869	2,925	5,831	6,013
Operating Costs and Expenses, Total	122,498	132,659	254,669	262,070
(Loss) income from operations	13,880	17,719	16,073	31,474
Interest (expense) income, net	(9,120)	(9,982)	(18,718)	(19,836)
Foreign exchange (loss) gain	(180)	(159)	360	5
(Loss) income before provision for income taxes	4,580	4,652	(2,285)	8,717
Provision for income taxes	(2,354)	(3,030)	(3,011)	(6,447)
Net (loss) income	2,226	1,622	(5,296)	2,270
Comprehensive (loss) income	(10,232)	7,529	(13,710)	13,922
Parent
Costs and expenses:
Cost of products sold	(336)	(642)	(808)	(1,153)
General and administrative	1,151	1,739	5,264	4,984
Restructuring	122		158
Research and development				(3)
Operating Costs and Expenses, Total	937	1,097	4,614	3,828
(Loss) income from operations	(937)	(1,097)	(4,614)	(3,828)
Interest (expense) income, net	(7,092)	(4,658)	(14,447)	(10,311)
Loss on extinguishment of debt		(2,903)		(2,903)
Foreign exchange (loss) gain	(154)	309	(308)	1,415
Equity in subsidiaries income	10,435	10,108	14,128	18,186
(Loss) income before provision for income taxes	2,252	1,759	(5,241)	2,559
Provision for income taxes	(26)	(137)	(54)	(288)
Net (loss) income	2,226	1,622	(5,295)	2,271
Comprehensive (loss) income	3,505	962	(4,663)	(726)
Total Guarantors
Schedule of Condensed Consolidating Statement of Operations [Line Items]
Net sales	45,787	47,316	89,850	90,970
Costs and expenses:
Cost of products sold	32,009	33,930	65,424	64,872
Selling	5,609	5,751	11,332	11,327
General and administrative	2,129	1,857	3,767	3,952
Restructuring	23	373	163	614
Research and development	2,083	1,985	4,153	4,068
Operating Costs and Expenses, Total	41,853	43,896	84,839	84,833
(Loss) income from operations	3,934	3,420	5,011	6,137
Interest (expense) income, net	1,766	1,917	3,545	3,788
Loss on extinguishment of debt		(6)		(6)
Foreign exchange (loss) gain	3	(45)	(3)	(1,477)
Equity in subsidiaries income	3,078	2,645	2,388	6,389
(Loss) income before provision for income taxes	8,781	7,931	10,941	14,831
Provision for income taxes	(33)	(40)	(73)	(109)
Net (loss) income	8,748	7,891	10,868	14,722
Comprehensive (loss) income	8,834	7,929	11,396	22,247
Total Non-Guarantors
Schedule of Condensed Consolidating Statement of Operations [Line Items]
Net sales	102,122	116,367	204,798	227,856
Costs and expenses:
Cost of products sold	65,350	72,458	132,849	143,231
Selling	13,461	14,756	27,226	28,704
General and administrative	10,754	12,582	22,829	24,622
Restructuring	984	169	4,782	96
Research and development	786	940	1,678	1,948
Operating Costs and Expenses, Total	91,335	100,905	189,364	198,601
(Loss) income from operations	10,787	15,462	15,434	29,255
Interest (expense) income, net	(3,794)	(7,241)	(7,816)	(13,313)
Loss on extinguishment of debt		(17)		(17)
Foreign exchange (loss) gain	(29)	(423)	671	67
(Loss) income before provision for income taxes	6,964	7,781	8,289	15,992
Provision for income taxes	(2,295)	(2,853)	(2,884)	(6,050)
Net (loss) income	4,669	4,928	5,405	9,942
Comprehensive (loss) income	(9,154)	11,457	(4,169)	17,066
Other Eliminations
Schedule of Condensed Consolidating Statement of Operations [Line Items]
Net sales	(11,531)	(13,305)	(23,906)	(25,282)
Costs and expenses:
Cost of products sold	(11,627)	(13,239)	(24,148)	(25,192)
Operating Costs and Expenses, Total	(11,627)	(13,239)	(24,148)	(25,192)
(Loss) income from operations	96	(66)	242	(90)
Equity in subsidiaries income	(13,513)	(12,753)	(16,516)	(24,575)
(Loss) income before provision for income taxes	(13,417)	(12,819)	(16,274)	(24,665)
Net (loss) income	(13,417)	(12,819)	(16,274)	(24,665)
Comprehensive (loss) income	(13,417)	(12,819)	(16,274)	(24,665)
The Company
Schedule of Condensed Consolidating Statement of Operations [Line Items]
Net sales	136,378	150,378	270,742	293,544
Costs and expenses:
Cost of products sold	85,396	92,507	173,317	181,758
Selling	19,070	20,507	38,558	40,031
General and administrative	14,034	16,178	31,860	33,558
Restructuring	1,129	542	5,103	710
Research and development	2,869	2,925	5,831	6,013
Operating Costs and Expenses, Total	122,498	132,659	254,669	262,070
(Loss) income from operations	13,880	17,719	16,073	31,474
Interest (expense) income, net	(9,120)	(9,982)	(18,718)	(19,836)
Loss on extinguishment of debt		(2,926)		(2,926)
Foreign exchange (loss) gain	(180)	(159)	360	5
(Loss) income before provision for income taxes	4,580	4,652	(2,285)	8,717
Provision for income taxes	(2,354)	(3,030)	(3,011)	(6,447)
Net (loss) income	2,226	1,622	(5,296)	2,270
Comprehensive (loss) income	$ (10,232)	$ 7,529	$ (13,710)	$ 13,922

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Reconciliation Of Segment Earnings (Loss) To Income Before Provision For Income Taxes (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Segment Earnings (Loss):
Segment Earnings (Loss)	$ 13,880	$ 17,719	$ 16,073	$ 31,474
Non-cash compensation and related expenses	218	(831)	(754)	(2,081)
Legal fees related to term debt amendment	(85)		(85)
Net interest expense	(9,120)	(9,982)	(18,718)	(19,836)
Depreciation and amortization	(10,005)	(11,262)	(20,346)	(22,070)
Loss on debt extinguishment		(2,926)		(2,926)
Restructuring expense	(1,129)	(542)	(5,103)	(710)
Income (loss) before provision for income taxes	4,580	4,652	(2,285)	8,717
Chief Executive Officer
Segment Earnings (Loss):
Non-recurring expenses related to CEO retirement	(695)		(1,496)
Clothing
Segment Earnings (Loss):
Segment Earnings (Loss)	15,861	22,479	30,622	42,269
Roll Covers
Segment Earnings (Loss):
Segment Earnings (Loss)	12,126	10,236	20,016	20,820
Corporate
Segment Earnings (Loss):
Segment Earnings (Loss)	$ (2,591)	$ (2,520)	$ (6,421)	$ (6,749)

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes

4. Income Taxes

The Company utilizes the asset and liability method for accounting for income taxes in accordance with ASC Topic 740, Income Taxes (“Topic 740”). Under Topic 740, deferred tax assets and liabilities are determined based on the difference between their financial reporting and tax basis. The assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company reduces its deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In making this determination, the Company evaluates all available information including the Company’s financial position and results of operations for the current and preceding years, as well as any available projected information for future years.

For the three and six months ended June 30, 2012, the provision for income taxes was $2,354 and $3,011, respectively, as compared with $3,030 and $6,447 for the three and six months ended June 30, 2011. The decrease in tax expense was primarily attributable to the geographic mix of earnings in the first half of 2012 as compared with the first half of 2011. The provision for income taxes is primarily impacted by income earned in tax paying jurisdictions relative to income earned in non-tax paying jurisdictions. The majority of income recognized for purposes of computing the effective tax rate is earned in countries where the statutory income tax rates range from 25% to 41%; however, permanent income adjustments recorded against pre-tax earnings may result in an effective tax rate that is higher or lower than the statutory tax rate in these jurisdictions. The Company generates losses in certain jurisdictions for which no tax benefit is received, as the deferred tax assets in these jurisdictions (including the net operating losses) are fully reserved in the valuation allowance. For this reason, the Company recognizes minimal income tax expense or benefit in these jurisdictions, of which the most material jurisdictions are the United States, the United Kingdom and Australia. Due to these reserves, the geographic mix of the Company’s pre-tax earnings has a direct correlation with how high or low its annual effective tax rate is relative to consolidated earnings.

As of June 30, 2012, the Company had a gross unrecognized tax benefit of $8,282. The unrecognized tax benefit decreased by approximately $338 during the six months ended June 30, 2012, as a result of foreign currency effects, statute expirations and ongoing changes in currently reserved positions. The Company’s policy is to recognize interest and penalties related to income tax matters as income tax expense, which were immaterial for the six months ended June 30, 2012 and 2011. The tax years 2000 through 2011 remain open to examination in a number of the major taxing jurisdictions to which the Company and its subsidiaries are subject.

In November of 2011, the Federal Revenue Department of the Ministry of Finance of Brazil (“FRD”) issued a tax assessment against the Company’s indirect subsidiary, Xerium Technologies Brasil Indústria e Comércio S.A. (“Xerium Brazil”), challenging the goodwill recorded in the 2005 acquisition of Wangner Itelpa and Huyck Indústria e Comércio S.A. by Robec Brasil Participações Ltda., a predecessor to Xerium Brazil. This assessment denies the amortization of that goodwill against net income for the years 2006 through 2010. As of June 30, 2012, the Company would be required to pay approximately $42.5 million (subject to currency exchange rates) in tax, penalties and interest in the event the Company was unable to overturn this assessment. The Company believes the transactions in question (i) complied with Brazilian tax and accounting rules, (ii) were effected for a legitimate business purpose, to consolidate the Company’s operating activities in Brazil into one legal entity, and (iii) were properly documented and declared to Brazilian tax and corporate authorities. Based on the foregoing, Xerium Brazil filed a response disputing the tax assessment at the first administrative level of appeal within the FRD in December 2011.

Although there can be no assurances, as of June 30, 2012, the Company believes it was more likely than not that it would prevail on every tax position under examination and therefore it did not accrue any amounts related to this assessment as of June 30, 2012. Because this dispute is at a preliminary stage for resolution with the FRD, the Company cannot assure a favorable outcome and cannot currently estimate the timing of the final resolution of this matter. The Company believes it has meritorious defenses and will vigorously contest this matter. However, if the FRD’s initial position is sustained, the amount assessed would result in a material adjustment to the Company’s consolidated financial statements and would adversely impact the Company’s financial condition and results of operations.

The Company believes that it has made adequate provisions for all income tax uncertainties.

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Restructuring Expense - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Restructuring and Impairment Costs [Line Items]
Restructuring expense	$ 1,129	$ 542	$ 5,103	$ 710

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Changes In Warranty Liability (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Class of Warrant or Right [Line Items]
Beginning balance	$ 2,121
Charged to Cost of Sales	697
Effect of Foreign Currency Translation	(46)
Settlements	(679)
Ending balance	$ 2,093

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Components of Inventories (Parenthetical) (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Inventory Disclosure [Line Items]
Consigned inventory	$ 11,686	$ 12,953

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Restructuring Programs (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Restructuring Cost and Reserve [Line Items]
Beginning Balance			$ 1,252	$ 2,726
Charges	1,129	542	5,103	710
Write-offs
Currency Effects			(120)	129
Cash Payments			(5,441)	(1,445)
Ending Balance	794	2,120	794	2,120
Severance
Restructuring Cost and Reserve [Line Items]
Beginning Balance			800	2,255
Charges			705	422
Write-offs
Currency Effects			4	30
Cash Payments			(1,142)	(1,152)
Ending Balance	367	1,555	367	1,555
Facility Costs And Other
Restructuring Cost and Reserve [Line Items]
Beginning Balance			452	471
Charges			4,398	288
Write-offs
Currency Effects			(124)	99
Cash Payments			(4,299)	(293)
Ending Balance	427	565	427	565
Asset Impairment
Restructuring Cost and Reserve [Line Items]
Write-offs

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Net Income (Loss) Per Common Share (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Weighted Average Shares Used In Computing Earnings Per Share [Line Items]
Weighted-average common shares outstanding-basic	15,226,995	15,051,860	15,194,432	15,020,696
Dilutive effect of stock-based compensation awards outstanding	9,656	237,547		237,547
Weighted-average common shares outstanding-diluted	15,236,651	15,289,407	15,194,432	15,258,243

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Description of Business and Significant Accounting Policies - Additional Information (Detail) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Product Information [Line Items]
Dilutive securities outstanding, not included in the computation	1.8

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Long-term Debt

6 Months Ended

Jun. 30, 2012

Long-term Debt

3. Long-term Debt

At June 30, 2012 and December 31, 2011, long-term debt consisted of the following:

	June 30, 2012		December 31, 2011
Senior Bank Debt (Secured):
First lien debt, payable quarterly, U.S. Dollar denominated–LIBOR (minimum 1.25%) plus 5.00% (6.25%) as of June 30, 2012	$	112,513	$	119,366
First lien debt, payable quarterly, Euro denominated–EURIBOR (minimum 1.25%) plus 5.00% (6.25%) as of June 30, 2012		99,200		107,771
		211,713		227,137
Senior Notes (Unsecured), payable semi-annually–U.S. Dollar denominated interest rate fixed at 8.875%, matures June of 2018		240,000		240,000
Other Long-Term Debt:
Unsecured, interest rate fixed at 2.00%, Euro denominated		131		228
Unsecured, interest rate fixed at 1.31% to 3.40%, Yen denominated		-		1,689
		451,844		469,054
Less current maturities		2,352		3,548
Total	$	449,492	$	465,506

On May 26, 2011, the Company completed a refinancing transaction, which replaced certain of its then outstanding indebtedness with $240 million aggregate principal amount of 8.875% senior unsecured notes (the “Notes”) and a new approximately $278 million multi-currency senior secured credit facility (the “Credit Facility”), comprised of approximately $248 million of senior secured term loans and a $30 million senior secured revolving credit facility. The interest rates under the Credit Facility are calculated, at the Company’s option, as the Alternate Base Rate as defined in the Credit Facility, LIBOR or EURIBOR, subject to a minimum of 2.25%, 1.25% and 1.25%, respectively, plus, in each case, a margin. The Credit Facility and Notes contain customary covenants that, subject to certain exceptions, restrict the Company’s ability to enter into certain transactions and engage in certain activities. In addition, the Credit Facility includes specified financial covenants, requiring the Company to maintain certain consolidated leverage and interest coverage ratios and limiting its ability to make capital expenditures in excess of specified amounts. These covenants are included in Note 7 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2011. Management believes the Company is in compliance with all covenants under the Notes and Credit Facility at June 30, 2012.

To facilitate the planned restructuring activities, on June 28, 2012, the Company entered into an amendment to its senior secured credit facility. Among other revisions to the credit facility, the amendment allows for additional add backs to Adjusted EBITDA annually though 2015 up to the lesser of $15.0 million or the unused portion of the allowed annual capital expenditure limit; increases the maximum leverage ratios between September of 2012 and December of 2013; amends the definition of the leverage ratio to reduce debt by unrestricted surplus cash held by the Company and increases the interest rate on the term loans by 0.75% annually for eighteen months. The Company paid $1.5 million in deferred financing costs related to the amendment. This amount is classified as an intangible asset in the Condensed Consolidated Balance Sheets at June 30, 2012.

As of June 30, 2012, an aggregate of $17.6 million is available for additional borrowings under the Credit Facility. This availability represents the $30.0 million revolving facility less $12.4 million of that facility committed for letters of credit. Additionally, at June 30, 2012, the Company had $5.0 million available for borrowings under other small lines of credit.

As of June 30, 2012 and December 31, 2011, the carrying value of the Company’s long-term debt was $451.8 million and $469.1 million, respectively, and exceeded its fair value of approximately $394.7 million and $439.1 million, respectively. The Company determined the fair value of its debt utilizing significant other observable inputs (Level 2 of the fair value hierarchy).

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Derivatives And Hedging - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Aug. 08, 2011
Derivative [Line Items]
Number of interest rate cap agreements						2
Interest rate cap agreements with notional amounts totaling	$ 99,600		$ 99,600			$ 114,400
Derivatives interest cap rate	3.00%		3.00%
Fair value of the interest rate caps	60		60		175
Unrecognized loss recorded in other comprehensive income			625		520
Fair value contracts included in foreign exchange gain (loss)	168	887	283	1,479
Not Designated as Hedging Instrument | Foreign Exchange Contract
Derivative [Line Items]
Derivatives fair value of other assets (liabilities)	$ 105		$ 105		$ 123

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Components Of Net Periodic Benefit Cost (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Pensions, Other Post-Retirement And Post-Employment Benefits [Abstract]
Service cost	$ 888	$ 719	$ 1,773	$ 1,411
Interest cost	1,838	2,052	3,668	4,029
Expected return on plan assets	(1,377)	(1,496)	(2,750)	(2,937)
Amortization of prior service cost	4	4	7	7
Amortization of net loss	633	376	1,266	739
Net periodic benefit cost	$ 1,986	$ 1,655	$ 3,964	$ 3,249

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Consolidating Statement Of Cash Flows (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating activities
Net (loss) income	$ (5,296)	$ 2,270
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Stock-based compensation	754	2,081
Depreciation	19,193	20,918
Amortization of intangibles	1,153	1,152
Deferred financing cost amortization	1,736	602
Unrealized foreign exchange loss on revaluation of debt	381	(1,414)
Deferred taxes	(360)	1,209
Gain on disposition of property and equipment	(617)	(564)
Provision for doubtful accounts	193	462
Change in assets and liabilities which provided (used) cash:
Accounts receivable	3,861	(1,244)
Inventories	230	(12,031)
Prepaid expenses	(4,076)	(1,840)
Other current assets	603	(309)
Accounts payable and accrued expenses	(3,609)	(6,363)
Deferred and other long-term liabilities	(350)	(1,094)
Net cash provided by (used in) operating activities	13,796	6,761
Investing activities
Capital expenditures, gross	(7,330)	(12,015)
Proceeds from disposals of property and equipment	981	1,916
Restricted cash		13,701
Net cash (used in) provided by investing activities	(6,349)	3,602
Financing activities
Net decrease in borrowings (maturities of 90 days or less)		(181)
Principal payments on debt	(14,875)	(489,675)
Payment of deferred financing fees	(1,762)	(16,835)
Net cash (used in) provided by financing activities	(16,637)	(16,881)
Effect of exchange rate changes on cash flows	(780)	2,308
Net decrease in cash	(9,970)	(4,210)
Cash and cash equivalents at beginning of period	43,566	38,701
Cash and cash equivalents at end of period	33,596	34,491
Parent
Operating activities
Net (loss) income	(5,295)	2,271
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Stock-based compensation	754	2,081
Depreciation	97	119
Deferred financing cost amortization	1,211	(1,160)
Loss on extinguishment of debt		2,903
Undistributed equity in (earnings) loss of subsidiaries	(14,128)	(18,186)
Change in assets and liabilities which provided (used) cash:
Accounts receivable	5	9
Prepaid expenses	1,097	387
Other current assets		621
Accounts payable and accrued expenses	(640)	2,346
Deferred and other long-term liabilities	195	(48)
Intercompany loans	796	5,494
Net cash provided by (used in) operating activities	(15,908)	(3,163)
Investing activities
Capital expenditures, gross	(15)	(189)
Intercompany property and equipment transfers, net	343
Restricted cash		13,701
Net cash (used in) provided by investing activities	328	13,512
Financing activities
Proceeds from borrowings (maturities longer than 90 days)		365,000
Principal payments on debt	(6,854)	(257,599)
Payment of deferred financing fees	(1,027)	(71,905)
Intercompany loans	19,017	(44,575)
Net cash (used in) provided by financing activities	11,136	(9,079)
Net decrease in cash	(4,444)	1,270
Cash and cash equivalents at beginning of period	11,548	6,345
Cash and cash equivalents at end of period	7,104	7,615
Total Guarantors
Operating activities
Net (loss) income	10,868	14,722
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation	3,943	3,954
Amortization of intangibles	1,106	1,106
Deferred financing cost amortization		204
Gain on disposition of property and equipment	(4)	(132)
Loss on extinguishment of debt		6
Provision for doubtful accounts	(66)	82
Undistributed equity in (earnings) loss of subsidiaries	(2,388)	(6,389)
Change in assets and liabilities which provided (used) cash:
Accounts receivable	1,027	700
Inventories	2,038	(1,334)
Prepaid expenses	(757)	(491)
Other current assets	1,419	(163)
Accounts payable and accrued expenses	(1,346)	(2,978)
Deferred and other long-term liabilities	127	(368)
Intercompany loans	(484)	3,702
Net cash provided by (used in) operating activities	15,483	12,621
Investing activities
Capital expenditures, gross	(1,293)	(1,896)
Intercompany property and equipment transfers, net	(337)	6
Proceeds from disposals of property and equipment	3	137
Net cash (used in) provided by investing activities	(1,627)	(1,753)
Financing activities
Principal payments on debt		(51,016)
Intercompany loans	(14,105)	40,166
Net cash (used in) provided by financing activities	(14,105)	(10,850)
Effect of exchange rate changes on cash flows	3	3
Net decrease in cash	(246)	21
Cash and cash equivalents at beginning of period	280	33
Cash and cash equivalents at end of period	34	54
Total Non-Guarantors
Operating activities
Net (loss) income	5,405	9,942
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation	15,153	16,845
Amortization of intangibles	47	46
Deferred financing cost amortization	525	1,558
Unrealized foreign exchange loss on revaluation of debt	381	(1,414)
Deferred taxes	(360)	1,209
Gain on disposition of property and equipment	(613)	(432)
Loss on extinguishment of debt		17
Provision for doubtful accounts	259	380
Change in assets and liabilities which provided (used) cash:
Accounts receivable	2,829	(1,953)
Inventories	(1,566)	(10,787)
Prepaid expenses	(4,416)	(1,736)
Other current assets	(816)	(767)
Accounts payable and accrued expenses	(1,623)	(5,731)
Deferred and other long-term liabilities	(672)	(678)
Intercompany loans	(312)	(9,196)
Net cash provided by (used in) operating activities	14,221	(2,697)
Investing activities
Capital expenditures, gross	(6,022)	(9,930)
Intercompany property and equipment transfers, net	(6)	(6)
Proceeds from disposals of property and equipment	978	1,779
Net cash (used in) provided by investing activities	(5,050)	(8,157)
Financing activities
Net decrease in borrowings (maturities of 90 days or less)		(181)
Proceeds from borrowings (maturities longer than 90 days)		124,810
Principal payments on debt	(8,021)	(181,060)
Payment of deferred financing fees	(735)	55,070
Intercompany loans	(4,912)	4,409
Net cash (used in) provided by financing activities	(13,668)	3,048
Effect of exchange rate changes on cash flows	(783)	2,305
Net decrease in cash	(5,280)	(5,501)
Cash and cash equivalents at beginning of period	31,738	32,323
Cash and cash equivalents at end of period	26,458	26,822
Other Eliminations
Operating activities
Net (loss) income	(16,274)	(24,665)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Undistributed equity in (earnings) loss of subsidiaries	16,516	24,575
Change in assets and liabilities which provided (used) cash:
Inventories	(242)	90
The Company
Operating activities
Net (loss) income	(5,296)	2,270
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Stock-based compensation	754	2,081
Depreciation	19,193	20,918
Amortization of intangibles	1,153	1,152
Deferred financing cost amortization	1,736	602
Unrealized foreign exchange loss on revaluation of debt	381	(1,414)
Deferred taxes	(360)	1,209
Gain on disposition of property and equipment	(617)	(564)
Loss on extinguishment of debt		2,926
Provision for doubtful accounts	193	462
Change in assets and liabilities which provided (used) cash:
Accounts receivable	3,861	(1,244)
Inventories	230	(12,031)
Prepaid expenses	(4,076)	(1,840)
Other current assets	603	(309)
Accounts payable and accrued expenses	(3,609)	(6,363)
Deferred and other long-term liabilities	(350)	(1,094)
Net cash provided by (used in) operating activities	13,796	6,761
Investing activities
Capital expenditures, gross	(7,330)	(12,015)
Proceeds from disposals of property and equipment	981	1,916
Restricted cash		13,701
Net cash (used in) provided by investing activities	(6,349)	3,602
Financing activities
Net decrease in borrowings (maturities of 90 days or less)		(181)
Proceeds from borrowings (maturities longer than 90 days)		489,810
Principal payments on debt	(14,875)	(489,675)
Payment of deferred financing fees	(1,762)	(16,835)
Net cash (used in) provided by financing activities	(16,637)	(16,881)
Effect of exchange rate changes on cash flows	(780)	2,308
Net decrease in cash	(9,970)	(4,210)
Cash and cash equivalents at beginning of period	43,566	38,701
Cash and cash equivalents at end of period	$ 33,596	$ 34,491

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 33,596	$ 43,566
Accounts receivable, net	86,085	91,784
Inventories, net	81,296	83,317
Prepaid expenses	10,047	6,177
Other current assets	14,505	15,051
Total current assets	225,529	239,895
Property and equipment, net	314,721	335,256
Goodwill	58,646	59,120
Intangible assets	21,450	22,640
Other assets	8,297	8,810
Total assets	628,643	665,721
Current liabilities:
Accounts payable	34,269	39,743
Accrued expenses	48,582	47,805
Current maturities of long-term debt	2,352	3,548
Total current liabilities	85,203	91,096
Long-term debt, net of current maturities	449,492	465,506
Deferred and long-term taxes	17,998	18,582
Pension, other post-retirement and post-employment obligations	79,904	81,188
Other long-term liabilities	11,539	11,654
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, 2012 and December 31, 2011
Common stock, $0.001 par value, 20,000,000 shares authorized; 15,245,620 and 15,145,451 shares outstanding as of June 30, 2012 and December 31, 2011, respectively	15	15
Stock warrants	13,532	13,532
Paid-in capital	412,020	411,498
Accumulated deficit	(401,100)	(395,804)
Accumulated other comprehensive loss	(39,960)	(31,546)
Total stockholders' deficit	(15,493)	(2,305)
Total liabilities and stockholders' deficit	$ 628,643	$ 665,721

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Restructuring And Impairments Expense By Segment (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Restructuring Cost and Reserve [Line Items]
Restructuring and impairments expense	$ 1,129	$ 542	$ 5,103	$ 710
Clothing
Restructuring Cost and Reserve [Line Items]
Restructuring and impairments expense	1,007	148	4,766	313
Roll Covers
Restructuring Cost and Reserve [Line Items]
Restructuring and impairments expense		394	179	397
Corporate
Restructuring Cost and Reserve [Line Items]
Restructuring and impairments expense	$ 122		$ 158

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Description of Business and Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Description of Business and Significant Accounting Policies

1. Description of Business and Significant Accounting Policies

Description of Business

Xerium Technologies, Inc. (the “Company”) is a leading global manufacturer and supplier of two types of consumable products used primarily in the production of paper – clothing and roll covers. Its operations are strategically located in the major paper-making regions of the world, including North America, Europe, South America and Asia-Pacific.

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements at June 30, 2012 and for the three and six months ended June 30, 2012 and 2011 include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, such financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. The interim results presented herein are not necessarily indicative of the results to be expected for the entire year. In management’s opinion, these unaudited condensed consolidated interim financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation of the financial statements for the interim periods presented. These unaudited consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2011 as reported on Form 10-K filed on March 14, 2012.

Accounting Policies

Inventories, net

Inventories are generally valued at the lower of cost or market using the first-in, first-out (FIFO) method. Raw materials are valued principally on a weighted average cost basis. The Company’s work in process and finished goods are specifically identified and valued based on actual inputs to production. Provisions are recorded as appropriate to write-down obsolete and excess inventory to estimated net realizable value. The process for evaluating obsolete and excess inventory often requires management to make subjective judgments and estimates concerning future sales levels, quantities and prices at which such inventory will be able to be sold in the normal course of business, while considering the general aging of inventory and factoring in any new business conditions.

The components of inventories are as follows at:

	June 30,     2012		December 31,   2011
Raw materials	$	16,906	$	19,872
Work in process		24,634		26,326
Finished goods (includes consigned inventory of $11,686 in 2012 and $12,953 in 2011)		39,756		37,119
	$	81,296	$	83,317

Goodwill

The Company accounts for goodwill and other intangible assets in accordance with ASC Topic 350, Intangibles—Goodwill and Other Intangible Assets (“Topic 350”). Topic 350 requires that goodwill and intangible assets that have indefinite lives not be amortized, but instead, must be tested for impairment at least annually or whenever events or business conditions warrant. During the six months ended June 30, 2012, the Company evaluated events and business conditions to determine if a test for an impairment of goodwill was warranted. No such events or business conditions took place during this period, therefore no test was determined to be warranted at June 30, 2012.

Warranties

The Company offers warranties on certain products that it sells. The specific terms and conditions of these warranties vary depending on the product sold, the country in which the product is sold and arrangements with the customer. The Company estimates the costs that may be incurred under its warranties and records a liability for such costs. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims, cost per claim and new product introduction. The Company periodically assesses the adequacy of its recorded warranty claims and adjusts the amounts as necessary. The table below represents the changes in the Company’s warranty liability for the six months ended June 30, 2012:

	Balance at December 31, 2011		Charged to Revenue or Cost of Sales		Effect of Foreign Currency Translation		Deduction from Reserves		Balance at June 30, 2012
For the six months ended June 30, 2012	$	2,121	$	697	$	(46)	$	(679)	$	2,093

Net Income (Loss) Per Common Share

Net income (loss) per common share has been computed and presented pursuant to the provisions of ASC Topic 260, Earnings per Share (“Topic 260”). Net income (loss) per share is based on the weighted-average number of shares outstanding during the period. As of June 30, 2012 and 2011, the Company had outstanding restricted stock units (“RSUs”), deferred stock units (“DSUs”), warrants and options.

The following table sets forth the computation of basic and diluted weighted-average shares:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Weighted-average common shares outstanding–basic		15,226,995		15,051,860		15,194,432		15,020,696
Dilutive effect of stock-based compensation awards outstanding		9,656		237,547		-		237,547
Weighted-average common shares outstanding–diluted		15,236,651		15,289,407		15,194,432		15,258,243

Dilutive securities aggregating approximately 1.8 million were outstanding for the six months ended June 30, 2012, respectively, but were not included in the computation of diluted earnings per share because the impact of including such shares would be anti-dilutive to the earnings per share calculations.

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Schedule Of Long-Term Debt (Parenthetical) (Detail)	6 Months Ended
	Jun. 30, 2012 First Lien Debt Payable Quarterly Us Dollar Denominated London Interbank Offer Rate Six Point Two Five Percentage As Of June Thirty Two Thousand Twelve	Jun. 30, 2012 First Lien Debt Payable Quarterly Euro Denominated Euribor Six Point Two Five Percentage As Of June Thirty Two Thousand Twelve	Jun. 30, 2012 Senior Notes Unsecured Payable Semi Annually Us Dollar Denominated Interest Rate Fixed At Eight Point Eight Seven Five Percentage Matures June Of Two Thousand Eighteen	Jun. 30, 2012 Unsecured Interest Rate Fixed At Two Percentage To Two Point Five Percentage Euro Denominated Primarily Short Term	Dec. 31, 2011 Unsecured Interest Rate Fixed At Two Percentage To Two Point Five Percentage Euro Denominated Primarily Short Term	Jun. 30, 2012 Unsecured Interest Rate Fixed At One Point Three One Percentage To Three Point Four Zero Percentage Yen Denominated Primarily Short Term Minimum	Dec. 31, 2011 Unsecured Interest Rate Fixed At One Point Three One Percentage To Three Point Four Zero Percentage Yen Denominated Primarily Short Term Minimum	Jun. 30, 2012 Unsecured Interest Rate Fixed At One Point Three One Percentage To Three Point Four Zero Percentage Yen Denominated Primarily Short Term Maximum	Dec. 31, 2011 Unsecured Interest Rate Fixed At One Point Three One Percentage To Three Point Four Zero Percentage Yen Denominated Primarily Short Term Maximum
Debt Disclosure [Line Items]
LIBOR rate, minimum	1.25%	1.25%
Interest rate Percentage above LIBOR rate	5.00%	5.00%
Debt instrument interest rate	6.25%	6.25%
Debt instrument fixed interest rate			8.875%	2.00%	2.00%	1.31%	1.31%	3.40%	3.40%
Debt instrument maturity			Jun. 01, 2018

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Comprehensive (Loss) Income and Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2012

Components Of Comprehensive Income (Loss)

Comprehensive (loss) income for the three and six months ended June 30, 2012 and 2011 is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Net income (loss)	$	2,226	$	1,622	$	(5,296)	$	2,270
Foreign currency translation adjustments		(13,025)		6,039		(8,399)		12,477
Pension liability changes under Topic 715		578		(132)		90		(825)
Change in value of derivative instruments		(11)		-		(105)		-
Comprehensive (loss) income	$	(10,232)	$	7,529	$	(13,710)	$	13,922

Components Of Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss) are as follows:

	Foreign		Pension		Change in		Accumulated
	Currency		Liability		Value of		Other
	Translation		Changes Under		Derivative		Comprehensive
	Adjustment		Topic 715		Instruments		Income (Loss)
Balance at December 31, 2011	$	10,157	$	(41,183)	$	(520)	$	(31,546)
Current period change, net of tax		(8,399)		90		(105)		(8,414)
Balance at June 30, 2012	$	1,758	$	(41,093)	$	(625)	$	(39,960)

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Long-term Debt - Additional Information (Detail) (USD $)	1 Months Ended	6 Months Ended
	Jun. 28, 2012	Jun. 30, 2012	Dec. 31, 2011
Debt Disclosure [Line Items]
Credit facility amendment description	Among other revisions to the credit facility, the amendment allows for additional add backs to Adjusted EBITDA annually though 2015 up to the lesser of $15.0 million or the unused portion of the allowed annual capital expenditure limit; increases the maximum leverage ratios between September of 2012 and December of 2013; amends the definition of the leverage ratio to reduce debt by unrestricted surplus cash held by the Company and increases the interest rate on the term loans by 0.75% annually for eighteen months. The Company paid $1.5 million in deferred financing costs related to the amendment
Adjusted EBITDA	$ 15,000,000
Deferred financing costs related to the amendment		1,500,000
Additional borrowings under small lines of credit		5,000,000
Carrying value of long-term debt		451,844,000	469,054,000
Fair value of long-term debt		394,700,000	439,100,000
Letter of Credit
Debt Disclosure [Line Items]
Credit facility		12,400,000
Eight Point Eight Seven Five Percentage Of Senior Unsecured Notes Due On Two Thousand Eighteen
Debt Disclosure [Line Items]
Refinancing transaction, outstanding indebtedness		240,000,000
Debt instrument percentage		8.875%
Multi Currency Senior Secured Credit Facility
Debt Disclosure [Line Items]
Credit facility		278,000,000
Senior Secured Term Loans
Debt Disclosure [Line Items]
Senior secured term loans		248,000,000
Senior Secured Revolving Credit Facility
Debt Disclosure [Line Items]
Credit facility		30,000,000
Alternate Base Rate New Credit Facility
Debt Disclosure [Line Items]
Minimum interest rate under New Credit Facility		2.25%
Alternate Base Rate London Interbank Offer Rate
Debt Disclosure [Line Items]
Minimum interest rate under New Credit Facility		1.25%
Alternate Base Rate Euro Interbank Offered Rate
Debt Disclosure [Line Items]
Minimum interest rate under New Credit Facility		1.25%
New Credit Facility
Debt Disclosure [Line Items]
Additional borrowings under the Credit Facility		$ 17,600,000

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Business Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Summarized Financial Information

Summarized financial information for the Company’s reportable segments is presented in the tables that follow for the three and six months ended June 30, 2012 and 2011, respectively.

			Roll
	Clothing		Covers		Corporate		Total
Three Months Ended June 30, 2012:
Net Sales	$	88,115	$	48,263	$	-	$	136,378
Segment Earnings (Loss)		15,861		12,126		(2,591)
Three Months Ended June 30, 2011:
Net Sales	$	99,632	$	50,746	$	-	$	150,378
Segment Earnings (Loss)		22,479		10,236		(2,520)

			Roll
	Clothing		Covers		Corporate		Total
Six Months Ended June 30, 2012:
Net Sales	$	176,798	$	93,944	$	-	$	270,742
Segment Earnings (Loss)		30,622		20,016		(6,421)
Six Months Ended June 30, 2011:
Net Sales	$	193,571	$	99,973	$	-	$	293,544
Segment Earnings (Loss)		42,269		20,820		(6,749)

Reconciliation of Segment Earnings (Loss) to Income Before Provision for Income Taxes

Provided below is a reconciliation of Segment earnings (loss) to income (loss) before provision for income taxes for the three and six months ended June 30, 2012 and 2011, respectively.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Segment Earnings (Loss):
Clothing	$	15,861	$	22,479	$	30,622	$	42,269
Roll Covers		12,126		10,236		20,016		20,820
Corporate		(2,591)		(2,520)		(6,421)		(6,749)
Non-cash compensation and related expenses		218		(831)		(754)		(2,081)
Legal fees related to term debt amendment		(85)		-		(85)		-
Non-recurring expenses related to CEO retirement		(695)		-		(1,496)		-
Net interest expense		(9,120)		(9,982)		(18,718)		(19,836)
Depreciation and amortization		(10,005)		(11,262)		(20,346)		(22,070)
Loss on debt extinguishment		-		(2,926)		-		(2,926)
Restructuring expense		(1,129)		(542)		(5,103)		(710)
Income (loss) before provision for income taxes	$	4,580	$	4,652	$	(2,285)	$	8,717

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Derivatives and Hedging

6 Months Ended

Jun. 30, 2012

Derivatives and Hedging

2. Derivatives and Hedging

As required by ASC Topic 815, Derivatives and Hedging (“Topic 815”), the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives may also be designated as hedges of the foreign currency exposure of a net investment in a foreign operation. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. From time to time, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known cash amounts, the value of which are determined by interest rates or foreign exchange rates.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate caps as part of its interest rate risk management strategy. Interest rate caps designated as cash flow hedges protect the Company from increases in interest rates above the strike rate of the interest rate cap. However, the Company’s financial statements are exposed to the effects of interest rate fluctuations below the strike rate negotiated in the interest rate cap agreements, which could have a material impact on its results of operations.

On August 8, 2011, the Company entered into two interest rate cap agreements with certain financial institutions, with notional amounts totaling $114,400, whereby the Company limits its variable interest rate exposure to the strike rate of the interest rate cap agreements. At June 30, 2012, these agreements had notional amounts of $99,600. Under the terms of the interest rate cap agreements, the Company will receive payments based on the spread in rates if the three-month LIBOR rate increases above the negotiated cap rates of 3.0%. The interest rate caps are considered designated hedging instruments, classified as Level 2 in the fair value hierarchy. Changes in fair value will be deferred in accumulated other comprehensive loss and the cap purchase price will be reclassified from accumulated comprehensive loss into earnings as interest expense over the life of the agreements. The fair value of the interest rate caps was $60 at June 30, 2012 and $175 at December 31, 2011. These amounts are included in other assets in the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011. Unrecognized losses of ($625) and ($520) were recorded in accumulated other comprehensive income at June 30, 2012 and December 31, 2011, respectively.

Non-designated Hedges of Foreign Exchange Risk

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to foreign exchange rates, but do not meet the strict hedge accounting requirements of Topic 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly to earnings.

The Company, from time to time, may enter into foreign exchange forward contracts to fix currencies at specified rates based on expected future cash flows to protect against the fluctuations in cash flows resulting from sales denominated in foreign currencies. Additionally, to manage its exposure to fluctuations in foreign currency on intercompany balances and certain purchase commitments, the Company from time to time may use foreign exchange forward contracts.

As of June 30, 2012 and December 31, 2011, the Company had outstanding derivatives that were not designated as hedges in qualifying hedging relationships. The value of these contracts is recognized at fair value based on market exchange forward rates and is recorded in other assets or other liabilities on the Condensed Consolidated Balance Sheets. The fair value of these derivatives at June 30, 2012 and December 31, 2011 was ($105) and $123, respectively. The change in fair value of these contracts is included in foreign exchange (loss) gain and was ($168) and ($887) for the three months ended June 30, 2012 and 2011, respectively and $283 and ($1,479) for the six months ended June 30, 2012 and 2011, respectively.

The following represents the notional amounts of foreign exchange forward contracts at June 30, 2012:

Foreign Currency Derivative (as of June 30, 2012)	Notional Sold		Notional Purchased
Non-designated hedges of foreign exchange risk	$	31,754	$	(5,900)

Fair Value of Derivatives Under ASC Topic 820

ASC Topic 820, Fair Value Measurements and Disclosures (“Topic 820”), emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, Topic 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs including fair value of investments that do not have the ability to redeem at net asset value as of the measurement date, or during the first quarter following the measurement date. The derivative assets or liabilities are typically based on an entity’s own assumptions, as there is little, if any, market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and the Company considers factors specific to the asset or liability. The Company determined that its derivative valuations, which are based on market exchange forward rates, fall within Level 2 of the fair value hierarchy.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	20,000,000	20,000,000
Common stock, shares outstanding	15,245,620	15,145,451

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Description of Business and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Inventories, net

Inventories, net

Inventories are generally valued at the lower of cost or market using the first-in, first-out (FIFO) method. Raw materials are valued principally on a weighted average cost basis. The Company’s work in process and finished goods are specifically identified and valued based on actual inputs to production. Provisions are recorded as appropriate to write-down obsolete and excess inventory to estimated net realizable value. The process for evaluating obsolete and excess inventory often requires management to make subjective judgments and estimates concerning future sales levels, quantities and prices at which such inventory will be able to be sold in the normal course of business, while considering the general aging of inventory and factoring in any new business conditions.

The components of inventories are as follows at:

	June 30,     2012		December 31,   2011
Raw materials	$	16,906	$	19,872
Work in process		24,634		26,326
Finished goods (includes consigned inventory of $11,686 in 2012 and $12,953 in 2011)		39,756		37,119
	$	81,296	$	83,317

Goodwill

Goodwill

The Company accounts for goodwill and other intangible assets in accordance with ASC Topic 350, Intangibles—Goodwill and Other Intangible Assets (“Topic 350”). Topic 350 requires that goodwill and intangible assets that have indefinite lives not be amortized, but instead, must be tested for impairment at least annually or whenever events or business conditions warrant. During the six months ended June 30, 2012, the Company evaluated events and business conditions to determine if a test for an impairment of goodwill was warranted. No such events or business conditions took place during this period, therefore no test was determined to be warranted at June 30, 2012.

Warranties

Warranties

The Company offers warranties on certain products that it sells. The specific terms and conditions of these warranties vary depending on the product sold, the country in which the product is sold and arrangements with the customer. The Company estimates the costs that may be incurred under its warranties and records a liability for such costs. Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rates of warranty claims, cost per claim and new product introduction. The Company periodically assesses the adequacy of its recorded warranty claims and adjusts the amounts as necessary. The table below represents the changes in the Company’s warranty liability for the six months ended June 30, 2012:

	Balance at December 31, 2011		Charged to Revenue or Cost of Sales		Effect of Foreign Currency Translation		Deduction from Reserves		Balance at June 30, 2012
For the six months ended June 30, 2012	$	2,121	$	697	$	(46)	$	(679)	$	2,093

Net (Loss) Income Per Common Share

Net Income (Loss) Per Common Share

Net income (loss) per common share has been computed and presented pursuant to the provisions of ASC Topic 260, Earnings per Share (“Topic 260”). Net income (loss) per share is based on the weighted-average number of shares outstanding during the period. As of June 30, 2012 and 2011, the Company had outstanding restricted stock units (“RSUs”), deferred stock units (“DSUs”), warrants and options.

The following table sets forth the computation of basic and diluted weighted-average shares:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Weighted-average common shares outstanding–basic		15,226,995		15,051,860		15,194,432		15,020,696
Dilutive effect of stock-based compensation awards outstanding		9,656		237,547		-		237,547
Weighted-average common shares outstanding–diluted		15,236,651		15,289,407		15,194,432		15,258,243

Dilutive securities aggregating approximately 1.8 million were outstanding for the six months ended June 30, 2012, respectively, but were not included in the computation of diluted earnings per share because the impact of including such shares would be anti-dilutive to the earnings per share calculations.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 01, 2012
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Trading Symbol	XRM
Entity Registrant Name	XERIUM TECHNOLOGIES INC
Entity Central Index Key	0001287151
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		15,245,620

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Description of Business and Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2012

Components of Inventories

The components of inventories are as follows at:

	June 30,     2012		December 31,   2011
Raw materials	$	16,906	$	19,872
Work in process		24,634		26,326
Finished goods (includes consigned inventory of $11,686 in 2012 and $12,953 in 2011)		39,756		37,119
	$	81,296	$	83,317

Changes In Warranty Liability

The table below represents the changes in the Company’s warranty liability for the six months ended June 30, 2012:

	Balance at December 31, 2011		Charged to Revenue or Cost of Sales		Effect of Foreign Currency Translation		Deduction from Reserves		Balance at June 30, 2012
For the six months ended June 30, 2012	$	2,121	$	697	$	(46)	$	(679)	$	2,093

Computation of Basic and Diluted Weighted-Average Shares

The following table sets forth the computation of basic and diluted weighted-average shares:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Weighted-average common shares outstanding–basic		15,226,995		15,051,860		15,194,432		15,020,696
Dilutive effect of stock-based compensation awards outstanding		9,656		237,547		-		237,547
Weighted-average common shares outstanding–diluted		15,236,651		15,289,407		15,194,432		15,258,243

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Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net sales	$ 136,378	$ 150,378	$ 270,742	$ 293,544
Costs and expenses:
Cost of products sold	85,396	92,507	173,317	181,758
Selling	19,070	20,507	38,558	40,031
General and administrative	14,034	16,178	31,860	33,558
Restructuring	1,129	542	5,103	710
Research and development	2,869	2,925	5,831	6,013
Operating Costs and Expenses, Total	122,498	132,659	254,669	262,070
Income from operations	13,880	17,719	16,073	31,474
Interest expense, net	(9,120)	(9,982)	(18,718)	(19,836)
Loss on extinguishment of debt		(2,926)		(2,926)
Foreign exchange (loss) gain	(180)	(159)	360	5
(Loss) income before provision for income taxes	4,580	4,652	(2,285)	8,717
Provision for income taxes	(2,354)	(3,030)	(3,011)	(6,447)
Net income (loss)	2,226	1,622	(5,296)	2,270
Comprehensive (loss) income	$ (10,232)	$ 7,529	$ (13,710)	$ 13,922
Net income (loss) per share:
Basic	$ 0.15	$ 0.11	$ (0.35)	$ 0.15
Diluted	$ 0.15	$ 0.11	$ (0.35)	$ 0.15
Shares used in computing net income (loss) per share:
Basic	15,226,995	15,051,860	15,194,432	15,020,696
Diluted	15,236,651	15,289,407	15,194,432	15,258,243

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Restructuring Expense

6 Months Ended

Jun. 30, 2012

Restructuring Expense

7. Restructuring Expense

During the six months ended June 30, 2012, the Company recorded restructuring expenses of approximately $5.1 million, primarily related to the transfer of certain equipment from a downsized location and the termination of a sales agency arrangement in Europe. The following table sets forth the significant components and activity under restructuring programs for the six months ended June 30, 2012 and 2011:

	Balance at										Balance at
	December 31,						Currency		Cash		June 30,
	2011		Charges		Write-offs		Effects		Payments		2012
Severance	$	800	$	705	$	-	$	4	$	(1,142)	$	367
Facility costs and other		452		4,398		-		(124)		(4,299)		427
Asset impairments		-		-		-		-		-		-
Total	$	1,252	$	5,103	$	-	$	(120)	$	(5,441)	$	794

	Balance at										Balance at
	December 31,						Currency		Cash		June 30,
	2010		Charges		Write-offs		Effects		Payments		2011
Severance	$	2,255	$	422	$	-	$	30	$	(1,152)	$	1,555
Facility costs and other		471		288		-		99		(293)		565
Asset impairments		-		-		-		-		-		-
Total	$	2,726	$	710	$	-	$	129	$	(1,445)	$	2,120

Restructuring expense by segment, which is not included in Segment Earnings (Loss) in Note 8, is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Clothing	$	1,007	$	148	$	4,766	$	313
Roll Covers		-		394		179		397
Corporate		122		-		158		-
Total	$	1,129	$	542	$	5,103	$	710

As previously reported, on July 2, 2012, the Company announced a voluntary redundancy program at its press felt facility in Buenos Aires, Argentina in connection with the relocation of its Huyck Wangner press felt capacity and initiated consultation proceedings with its works’ council at our rolls cover facility in Meyzieu, France regarding a proposal to cease operations there. In Argentina, the production of press felts and fiber cement felts will be transferred to its facilities in Brazil and the roll cover production of its facility in France will be assumed by its rolls facilities in Germany and Italy. The actions are expected to commence in the third quarter of 2012 and be completed over the next several months. As the redundancy program has just been initiated, the proceedings with the works’ council have just begun and there has been no formal evaluation of the affected assets, at this time, the Company is in the process of analyzing its estimate of the restructuring charges and asset impairments, if any, related to these redundancy programs.

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Comprehensive (Loss) Income and Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2012

Comprehensive (Loss) Income and Accumulated Other Comprehensive Loss

6. Comprehensive (Loss) Income and Accumulated Other Comprehensive Loss

Comprehensive (loss) income for the three and six months ended June 30, 2012 and 2011 is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Net income (loss)	$	2,226	$	1,622	$	(5,296)	$	2,270
Foreign currency translation adjustments		(13,025)		6,039		(8,399)		12,477
Pension liability changes under Topic 715		578		(132)		90		(825)
Change in value of derivative instruments		(11)		-		(105)		-
Comprehensive (loss) income	$	(10,232)	$	7,529	$	(13,710)	$	13,922

The components of accumulated other comprehensive income (loss) are as follows:

	Foreign		Pension		Change in		Accumulated
	Currency		Liability		Value of		Other
	Translation		Changes Under		Derivative		Comprehensive
	Adjustment		Topic 715		Instruments		Income (Loss)
Balance at December 31, 2011	$	10,157	$	(41,183)	$	(520)	$	(31,546)
Current period change, net of tax		(8,399)		90		(105)		(8,414)
Balance at June 30, 2012	$	1,758	$	(41,093)	$	(625)	$	(39,960)

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Restructuring Expense (Tables)

6 Months Ended

Jun. 30, 2012

Restructuring Programs

The following table sets forth the significant components and activity under restructuring programs for the six months ended June 30, 2012 and 2011:

	Balance at										Balance at
	December 31,						Currency		Cash		June 30,
	2011		Charges		Write-offs		Effects		Payments		2012
Severance	$	800	$	705	$	-	$	4	$	(1,142)	$	367
Facility costs and other		452		4,398		-		(124)		(4,299)		427
Asset impairments		-		-		-		-		-		-
Total	$	1,252	$	5,103	$	-	$	(120)	$	(5,441)	$	794

	Balance at										Balance at
	December 31,						Currency		Cash		June 30,
	2010		Charges		Write-offs		Effects		Payments		2011
Severance	$	2,255	$	422	$	-	$	30	$	(1,152)	$	1,555
Facility costs and other		471		288		-		99		(293)		565
Asset impairments		-		-		-		-		-		-
Total	$	2,726	$	710	$	-	$	129	$	(1,445)	$	2,120

Restructuring And Impairments Expense By Segment

Restructuring expense by segment, which is not included in Segment Earnings (Loss) in Note 8, is as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Clothing	$	1,007	$	148	$	4,766	$	313
Roll Covers		-		394		179		397
Corporate		122		-		158		-
Total	$	1,129	$	542	$	5,103	$	710

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Derivatives and Hedging (Tables)

6 Months Ended

Jun. 30, 2012

Notional Amounts Sold and Purchased

The following represents the notional amounts of foreign exchange forward contracts at June 30, 2012:

Foreign Currency Derivative (as of June 30, 2012)	Notional Sold		Notional Purchased
Non-designated hedges of foreign exchange risk	$	31,754	$	(5,900)

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Stock-Based Compensation and Stockholders' Equity

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation and Stockholders' Equity

10. Stock-Based Compensation and Stockholders’ Deficit

The Company records stock-based compensation expense in accordance with ASC Topic 718, Accounting for Stock Compensation and has used the straight-line attribution method to recognize expense for time-based RSUs and DSUs. The Company recorded stock-based compensation expense during the three and six months ended June 30, 2012 and 2011 as follows:

	Three Months Ended     June 30,				Six Months Ended     June 30,
	2012		2011		2012		2011
RSU and DSU Awards (1)	$	344	$	594	$	754	$	1,308
Management Incentive/Performance Award Programs (2)		(562)		237		-		773
Total	$	(218)	$	831	$	754	$	2,081

(1) Related to restricted stock units and deferred stock units awarded to certain employees and non-employee directors.

(2) For 2011, the amount represents the value of stock awards granted under the 2011 Management Incentive Compensation Program (the “2011 MIC”), which was approved by the Company’s Board of Directors in March of 2011. No amount has been recorded for the 2012 Management Incentive Compensation Program (the “2012 MIC”), as the performance targets are not projected to be met as of June 30, 2012. Therefore, all compensation expense related to the 2012 MIC recorded in 2012 was reversed in the second quarter of 2012.

Summary of Activity under the Long-Term Incentive Plans

On September 22, 2010, the Board approved the Company’s 2010-2012 Long-Term Incentive Plan (the “2010 LTIP”) under the 2010 Equity Incentive Plan (the “2010 Plan”). Awards under the 2010 LTIP are both time-based and performance-based. Awards will be paid in the form of restricted stock units or shares of common stock of the Company. Time-based awards under the 2010 LTIP were approved in the form of 131,010 time-based restricted stock units granted on October 29, 2010 under the Company’s 2010 Plan. As of June 30, 2012, 86,511 time-based restricted stock units had vested in accordance with the 2010 LTIP and were converted to common stock, with the remaining 44,499 time-based restricted stock units to vest on March 31, 2013. These will be converted into shares of common stock when they vest. Performance-based awards under the 2010 LTIP will vest upon meeting various criteria, as included in the Company’s 2011 Annual Report on Form 10-K.

On May 8, 2012, the Board approved the 2012 – 2014 Executive Long-Term Incentive Plan (the “2012 – 2014 Executive LTIP”) under the 2010 Plan. Awards under the 2012 – 2014 Executive LTIP are both time-based and performance-based. A specific target share award is set for each participant in the 2012 – 2014 Executive LTIP. Awards will be paid in the form of restricted stock units or shares of common stock of the Company. Time-based awards, or 50% of the total target award, were granted in the form of 54,750 time-based restricted stock units under the Company’s 2010 Plan and will vest in equal installments on March 31, 2013, March 31, 2014, and March 31, 2015. These will be converted into shares of common stock as they vest. Performance-based awards, which constitute 50% of the total award, will be determined based on the Company’s performance against a three-year cumulative Adjusted EBITDA metric, adjusted for currency fluctuations during the term of the 2012 – 2014 Executive LTIP. The performance-based awards will convert into shares of the Company’s common stock and be paid after the close of the three-year performance period. The amount of the payment will be based on a sliding scale ranging from 50% if the metric is achieved at 85% of the target up to 200% if the metric is achieved at or above 115% of the target.

Summary of Activity under the MIC Plans

On March 13, 2012, the Board approved the 2012 Management Incentive Compensation Program (the “2012 MIC”). Under the 2012 MIC, payouts will be determined by the Company’s performance against specified Adjusted EBITDA metrics for the 2012 fiscal year. The Adjusted EBITDA metrics will be adjusted for currency fluctuations. A specific target award is set for each participant in the 2012 MIC equal to a percentage of his or her current base cash compensation. Fifty percent (50%) of any 2012 MIC award earned will be paid in cash and fifty percent (50%) is expected to be paid in the form of shares of the Company’s common stock under the Company’s 2010 Equity Incentive Plan. The 2012 MIC awards will be paid out based on a sliding scale. A participant will receive an award equal to 20% of his or her target award if Adjusted EBITDA is achieved above a minimum target level, 90% of target award if Adjusted EBITDA is at budget performance, 100% of target award if the targeted metric is achieved and ranging up to 200% if Adjusted EBITDA is achieved at a maximum target level. As indicated above, management determined that the target amounts were not met at June 30, 2012. Therefore, no compensation expense has been recorded for the six months ended June 30, 2012.

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Business Segment Information

6 Months Ended

Jun. 30, 2012

Business Segment Information

8. Business Segment Information

The Company is a global manufacturer and supplier of consumable products used primarily in the production of paper and is organized into two reportable segments: Clothing and Roll Covers. The Clothing segment represents the manufacture and sale of synthetic textile belts used to transport paper along the length of papermaking machines. The Roll Covers segment primarily represents the manufacture and refurbishment of covers used on the steel rolls of papermaking machines. The Company manages each of these operating segments separately.

Management evaluates segment performance based on earnings before interest, taxes, depreciation and amortization and before allocation of corporate charges. Such measure is then adjusted to exclude items that are of an unusual nature and are not used in measuring segment performance or are not segment specific (“Segment Earnings (Loss)”). The accounting policies of these segments are the same as those for the Company as a whole. Inter-segment net sales and inter-segment eliminations are not material for any of the periods presented.

Summarized financial information for the Company’s reportable segments is presented in the tables that follow for the three and six months ended June 30, 2012 and 2011, respectively.

			Roll
	Clothing		Covers		Corporate		Total
Three Months Ended June 30, 2012:
Net Sales	$	88,115	$	48,263	$	-	$	136,378
Segment Earnings (Loss)		15,861		12,126		(2,591)
Three Months Ended June 30, 2011:
Net Sales	$	99,632	$	50,746	$	-	$	150,378
Segment Earnings (Loss)		22,479		10,236		(2,520)

			Roll
	Clothing		Covers		Corporate		Total
Six Months Ended June 30, 2012:
Net Sales	$	176,798	$	93,944	$	-	$	270,742
Segment Earnings (Loss)		30,622		20,016		(6,421)
Six Months Ended June 30, 2011:
Net Sales	$	193,571	$	99,973	$	-	$	293,544
Segment Earnings (Loss)		42,269		20,820		(6,749)

Provided below is a reconciliation of Segment earnings (loss) to income (loss) before provision for income taxes for the three and six months ended June 30, 2012 and 2011, respectively.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Segment Earnings (Loss):
Clothing	$	15,861	$	22,479	$	30,622	$	42,269
Roll Covers		12,126		10,236		20,016		20,820
Corporate		(2,591)		(2,520)		(6,421)		(6,749)
Non-cash compensation and related expenses		218		(831)		(754)		(2,081)
Legal fees related to term debt amendment		(85)		-		(85)		-
Non-recurring expenses related to CEO retirement		(695)		-		(1,496)		-
Net interest expense		(9,120)		(9,982)		(18,718)		(19,836)
Depreciation and amortization		(10,005)		(11,262)		(20,346)		(22,070)
Loss on debt extinguishment		-		(2,926)		-		(2,926)
Restructuring expense		(1,129)		(542)		(5,103)		(710)
Income (loss) before provision for income taxes	$	4,580	$	4,652	$	(2,285)	$	8,717

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies

9. Commitments and Contingencies

The Company is involved in various legal matters which have arisen in the ordinary course of business as a result of various immaterial labor claims, taxing authority reviews and other legal matters. As of June 30, 2012, the Company accrued an immaterial amount in its financial statements for these matters for which the Company believed the possibility of loss was either probable, and was able to estimate the damages. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its financial position, results of operations or cash flow. See Note 4 for a discussion of Xerium Brazil’s proceeding with the FRD.

The Company believes that any additional liability in excess of amounts provided which may result from the resolution of legal matters will not have a material adverse effect on the financial condition, liquidity or cash flow of the Company.

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Supplemental Guarantor Financial Information

6 Months Ended

Jun. 30, 2012

Supplemental Guarantor Financial Information

11. Supplemental Guarantor Financial Information

On May 26, 2011, the Company closed on the sale of its Notes. The Notes are unsecured obligations of the Company and are fully and unconditionally guaranteed on a senior unsecured basis by all of the domestic wholly owned subsidiaries of the Company (the “Guarantors”). In accordance with Rule 3-10 of Regulation S-X promulgated under the Securities Act of 1933, the following condensed consolidating financial statements present the financial position, results of operations and cash flows of Xerium Technologies, Inc. (referred to as “Parent” for the purpose of this note only) on a stand-alone parent-only basis, the Guarantors on a Guarantors-only basis, the combined non-Guarantor subsidiaries and elimination entries necessary to arrive at the information for the Parent, the Guarantors and non-Guarantor subsidiaries on a consolidated basis.

In the second quarter of 2012, the Company determined that it had incorrectly presented the guarantor financial statements in accordance with the requirements of Rule 3-10 of Regulation S-X. Specifically, the Company incorrectly included the cumulative income (losses) of certain guarantor subsidiaries in the investment balances of the guarantor entities. The guarantor investment balances should only include cumulative income (losses) of non-guarantor investees which are owned by guarantor entities. As a result, the previously presented December 31, 2011 total guarantor investments and total stockholders’ (deficit) equity balances included in Note 16 to the Consolidated Financial Statements included in the 2011 Annual Report on Form 10-K were overstated by $33.7 million. This revision had no impact on the consolidated amounts included in Note 16, as other eliminations were overstated by the same amount in this period.

In addition, as a result of the above misstatement, the December 31, 2011 and 2010 guarantor equity in subsidiaries income and net income in Note 16 to the Company’s 2011 Annual Report on Form 10-K was understated by $0.5 million and overstated by $4.0 million, respectively, and the March 31, 2012 and 2011 guarantor equity in subsidiaries income and net income included in Note 11 to the Consolidated Financial Statements in the Company’s Form 10-Q was overstated by $1.6 million and $0.5 million, respectively. There was no impact to consolidated net income within Note 16 or Note 11 for any of these periods, as other eliminations were overstated/understated by the same amount in those periods, and there was no impact to operating cash flows for any of the periods presented.

The Company assessed the materiality of making these corrections in the current period under Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” (“SAB No. 108”) and has determined that this correction is immaterial to all of the above consolidated financial statements. Based on these facts, the Company has revised the December 31, 2011 Consolidated Balance Sheet in Note 11 within this Quarterly Report on Form 10-Q to reflect a decrease in total guarantor investments and total stockholders’ (deficit) equity of $33.7 million. Other eliminations of both the investments and total stockholders’ (deficit) equity have been adjusted by the same amount.

Xerium Technologies, Inc.

Consolidating Balance Sheet—(Unaudited)

At June 30, 2012

(Dollars in thousands)

			Total		Total Non		Other		The
	Parent		Guarantors		Guarantors		Eliminations		Company
ASSETS
Current assets:
Cash and cash equivalents	$	7,104	$	34	$	26,458	$	-	$	33,596
Accounts receivable, net		-		20,249		65,836		-		86,085
Intercompany receivable		(96,651)		103,133		(6,482)		-		-
Inventories, net		-		17,720		64,682		(1,106)		81,296
Prepaid expenses		(826)		2,303		8,570		-		10,047
Other current assets		-		3,298		11,207		-		14,505
Total current assets		(90,373)		146,737		170,271		(1,106)		225,529
Property and equipment, net		457		65,412		248,852		-		314,721
Investments		593,144		155,016		-		(748,160)		-
Goodwill		-		17,737		40,909		-		58,646
Intangible assets		11,300		5,882		4,268		-		21,450
Other assets		62		-		8,235		-		8,297
Total assets	$	514,590	$	390,784	$	472,535	$	(749,266)	$	628,643
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	609	$	8,273	$	25,387	$	-	$	34,269
Accrued expenses		6,230		6,358		35,994		-		48,582
Current maturities of long-term debt		1,250		-		1,102		-		2,352
Total current liabilities		8,089		14,631		62,483		-		85,203
Long-term debt, net of current maturities		351,263		-		98,229		-		449,492
Deferred and long-term taxes		-		2,378		15,620		-		17,998
Pension, other post-retirement and post-employment obligations		23,050		1,946		54,908		-		79,904
Other long-term liabilities		-		-		11,539		-		11,539
Intercompany loans		205,962		(319,185)		113,223		-		-
Total stockholders’ (deficit) equity		(73,774)		691,014		116,533		(749,266)		(15,493)
Total liabilities and stockholders’ equity	$	514,590	$	390,784	$	472,535	$	(749,266)	$	628,643

Xerium Technologies, Inc.

Consolidating Balance Sheet—(Unaudited)

At December 31, 2011

(Dollars in thousands)

			Total		Total Non		Other		The
	Parent		Guarantors		Guarantors		Eliminations		Company
ASSETS
Current assets:
Cash and cash equivalents	$	11,548	$	280	$	31,738	$	-	$	43,566
Accounts receivable, net		-		21,210		70,574		-		91,784
Intercompany receivable		(95,855)		102,653		(6,798)		-		-
Inventories, net		-		19,759		64,857		(1,299)		83,317
Prepaid expenses		272		1,546		4,359		-		6,177
Other current assets		-		4,716		10,335		-		15,051
Total current assets		(84,035)		150,164		175,065		(1,299)		239,895
Property and equipment, net		881		67,727		266,648		-		335,256
Investments		579,018		162,438		-		(741,456)		-
Goodwill		-		17,737		41,383		-		59,120
Intangible assets		11,484		6,986		4,170		-		22,640
Other assets		196		-		8,614		-		8,810
Total assets	$	507,544	$	405,052	$	495,880	$	(742,755)	$	665,721
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	679	$	10,257	$	28,807	$	-	$	39,743
Accrued expenses		6,563		5,722		35,520		-		47,805
Current maturities of long-term debt		1,250		-		2,298		-		3,548
Total current liabilities		8,492		15,979		66,625		-		91,096
Long-term debt, net of current maturities		358,116		-		107,390		-		465,506
Deferred and long-term taxes		-		2,378		16,204		-		18,582
Pension, other post-retirement and post-employment obligations		22,906		1,820		56,462		-		81,188
Other long-term liabilities		-		-		11,654		-		11,654
Intercompany loans		187,661		(307,813)		120,152		-		-
Total stockholders’ (deficit) equity		(69,631)		692,688		117,393		(742,755)		(2,305)
Total liabilities and stockholders’ equity	$	507,544	$	405,052	$	495,880	$	(742,755)	$	665,721

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the three months ended June 30, 2012

(Dollars in thousands)

	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
Restructuring		122		23		984		-		1,129
Research and development		-		2,083		786		-		2,869
		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		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)

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the three months ended June 30, 2011

(Dollars in thousands)

	Parent		Total Guarantors		Total  Non Guarantors		Other Eliminations		The Company
Net sales	$	-	$	47,316	$	116,367	$	(13,305)	$	150,378
Costs and expenses:
Cost of products sold		(642)		33,930		72,458		(13,239)		92,507
Selling		-		5,751		14,756		-		20,507
General and administrative		1,739		1,857		12,582		-		16,178
Restructuring		-		373		169		-		542
Research and development		-		1,985		940		-		2,925
		1,097		43,896		100,905		(13,239)		132,659
(Loss) income from operations		(1,097)		3,420		15,462		(66)		17,719
Interest (expense) income, net		(4,658)		1,917		(7,241)		-		(9,982)
Loss on extinguishment of debt		(2,903)		(6)		(17)		-		(2,926)
Foreign exchange gain (loss)		309		(45)		(423)		-		(159)
Equity in subsidiaries income		10,108		2,645		-		(12,753)		-
Income (loss) before provision for income taxes		1,759		7,931		7,781		(12,819)		4,652
Provision for income taxes		(137)		(40)		(2,853)		-		(3,030)
Net income (loss)	$	1,622	$	7,891	$	4,928	$	(12,819)	$	1,622
Comprehensive income (loss)	$	962	$	7,929	$	11,457	$	(12,819)	$	7,529

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the six months ended June 30, 2012

(Dollars in thousands)

	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
Restructuring		158		163		4,782		-		5,103
Research and development		-		4,153		1,678		-		5,831
		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		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)

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the six months ended June 30, 2011

(Dollars in thousands)

	Parent		Total Guarantors		Total Non Guarantors		Other Eliminations		The  Company
Net sales	$	-	$	90,970	$	227,856	$	(25,282)	$	293,544
Costs and expenses:
Cost of products sold		(1,153)		64,872		143,231		(25,192)		181,758
Selling		-		11,327		28,704		-		40,031
General and administrative		4,984		3,952		24,622		-		33,558
Restructuring		-		614		96		-		710
Research and development		(3)		4,068		1,948		-		6,013
		3,828		84,833		198,601		(25,192)		262,070
(Loss) income from operations		(3,828)		6,137		29,255		(90)		31,474
Interest (expense) income, net		(10,311)		3,788		(13,313)		-		(19,836)
Loss on extinguishment of debt		(2,903)		(6)		(17)		-		(2,926)
Foreign exchange gain (loss)		1,415		(1,477)		67		-		5
Equity in subsidiaries income		18,186		6,389		-		(24,575)		-
Income (loss) before provision for income taxes		2,559		14,831		15,992		(24,665)		8,717
Provision for income taxes		(288)		(109)		(6,050)		-		(6,447)
Net income (loss)	$	2,271	$	14,722	$	9,942	$	(24,665)	$	2,270
Comprehensive (loss) income	$	(726)	$	22,247	$	17,066	$	(24,665)	$	13,922

Xerium Technologies, Inc.

Consolidating Statement of Cash Flows-(Unaudited)

For the six months ended June 30, 2012

(Dollars in thousands)

	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 provided by (used in) 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
Unrealized 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 provided by (used in) 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 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

Xerium Technologies, Inc.

Consolidating Statement of Cash Flows-(Unaudited)

For the six months ended June 30, 2011

(Dollars in thousands)

	Parent		Total Guarantors		Total Non Guarantors		Other Eliminations		The Company
Operating activities
Net income	$	2,271	$	14,722	$	9,942	$	(24,665)	$	2,270
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation		2,081		-		-		-		2,081
Depreciation		119		3,954		16,845		-		20,918
Amortization of intangibles		-		1,106		46		-		1,152
Deferred financing cost amortization		(1,160)		204		1,558		-		602
Unrealized foreign exchange loss on revaluation of debt		-		-		(1,414)		-		(1,414)
Deferred taxes		-		-		1,209		-		1,209
Gain on disposition of property and equipment		-		(132)		(432)		-		(564)
Loss on extinguishment of debt		2,903		6		17		-		2,926
Provision for doubtful accounts		-		82		380		-		462
Undistributed equity in (earnings) loss of subsidiaries		(18,186)		(6,389)		-		24,575		-
Change in assets and liabilities which provided (used) cash:
Accounts receivable		9		700		(1,953)		-		(1,244)
Inventories		-		(1,334)		(10,787)		90		(12,031)
Prepaid expenses		387		(491)		(1,736)		-		(1,840)
Other current assets		621		(163)		(767)		-		(309)
Accounts payable and accrued expenses		2,346		(2,978)		(5,731)		-		(6,363)
Deferred and other long-term liabilities		(48)		(368)		(678)		-		(1,094)
Intercompany loans		5,494		3,702		(9,196)		-		-
Net cash provided by (used in) operating activities		(3,163)		12,621		(2,697)		-		6,761
Investing activities
Capital expenditures, gross		(189)		(1,896)		(9,930)		-		(12,015)
Intercompany property and equipment transfers, net		-		6		(6)		-		-
Proceeds from disposals of property and equipment		-		137		1,779		-		1,916
Restricted cash		13,701		-		-		-		13,701
Net cash provided by (used in) investing activities		13,512		(1,753)		(8,157)		-		3,602
Financing activities
Net decrease in borrowings (maturities of 90 days or less)		-		-		(181)		-		(181)
Proceeds from borrowings (maturities longer than 90 days)		365,000		-		124,810		-		489,810
Principal payments on debt		(257,599)		(51,016)		(181,060)		-		(489,675)
Payment of deferred financing fees		(71,905)		-		55,070		-		(16,835)
Intercompany loans		(44,575)		40,166		4,409		-		-
Net cash (used in) provided by financing activities		(9,079)		(10,850)		3,048		-		(16,881)
Effect of exchange rate changes on cash flows		-		3		2,305		-		2,308
Net increase (decrease) in cash		1,270		21		(5,501)		-		(4,210)
Cash and cash equivalents at beginning of period		6,345		33		32,323		-		38,701
Cash and cash equivalents at end of period	$	7,615	$	54	$	26,822	$	-	$	34,491

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Schedule Of Long-Term Debt (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Senior Bank Debt (Secured):
Senior Bank Debt (Secured)	$ 211,713	$ 227,137
Other Long-Term Debt:
Carrying value of long-term debt	451,844	469,054
Less current maturities	2,352	3,548
Total	449,492	465,506
First Lien Debt Payable Quarterly Us Dollar Denominated London Interbank Offer Rate Six Point Two Five Percentage As Of June Thirty Two Thousand Twelve
Senior Bank Debt (Secured):
Senior Bank Debt (Secured)	112,513	119,366
First Lien Debt Payable Quarterly Euro Denominated Euribor Six Point Two Five Percentage As Of June Thirty Two Thousand Twelve
Senior Bank Debt (Secured):
Senior Bank Debt (Secured)	99,200	107,771
Senior Notes Unsecured Payable Semi Annually Us Dollar Denominated Interest Rate Fixed At Eight Point Eight Seven Five Percentage Matures June Of Two Thousand Eighteen
Senior Bank Debt (Secured):
Senior Notes (Unsecured), payable semi-annually-U.S. Dollar denominated interest rate fixed at 8.875%, matures June of 2018	240,000	240,000
Unsecured Interest Rate Fixed At Two Percentage To Two Point Five Percentage Euro Denominated Primarily Short Term
Other Long-Term Debt:
Unsecured, interest rate fixed at 1.31% to 3.40%, Yen denominated	131	228
Unsecured Interest Rate Fixed At One Point Three One Percentage To Three Point Four Zero Percentage Yen Denominated Primarily Short Term
Other Long-Term Debt:
Unsecured, interest rate fixed at 1.31% to 3.40%, Yen denominated		$ 1,689

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Condensed Consolidated Balance Sheet (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 33,596	$ 43,566	$ 34,491	$ 38,701
Accounts receivable, net	86,085	91,784
Inventories, net	81,296	83,317
Prepaid expenses	10,047	6,177
Other current assets	14,505	15,051
Total current assets	225,529	239,895
Property and equipment, net	314,721	335,256
Goodwill	58,646	59,120
Intangible assets	21,450	22,640
Other assets	8,297	8,810
Total assets	628,643	665,721
Current liabilities:
Accounts payable	34,269	39,743
Accrued expenses	48,582	47,805
Current maturities of long-term debt	2,352	3,548
Total current liabilities	85,203	91,096
Long-term debt, net of current maturities	449,492	465,506
Deferred and long-term taxes	17,998	18,582
Pension, other post-retirement and post-employment obligations	79,904	81,188
Other long-term liabilities	11,539	11,654
Total stockholders' (deficit) equity	(15,493)	(2,305)
Total liabilities and stockholders' deficit	628,643	665,721
Parent
Current assets:
Cash and cash equivalents	7,104	11,548	7,615	6,345
Intercompany receivable	(96,651)	(95,855)
Prepaid expenses	(826)	272
Total current assets	(90,373)	(84,035)
Property and equipment, net	457	881
Investments	593,144	579,018
Intangible assets	11,300	11,484
Other assets	62	196
Total assets	514,590	507,544
Current liabilities:
Accounts payable	609	679
Accrued expenses	6,230	6,563
Current maturities of long-term debt	1,250	1,250
Total current liabilities	8,089	8,492
Long-term debt, net of current maturities	351,263	358,116
Pension, other post-retirement and post-employment obligations	23,050	22,906
Intercompany loans	205,962	187,661
Total stockholders' (deficit) equity	(73,774)	(69,631)
Total liabilities and stockholders' deficit	514,590	507,544
Total Guarantors
Current assets:
Cash and cash equivalents	34	280	54	33
Accounts receivable, net	20,249	21,210
Intercompany receivable	103,133	102,653
Inventories, net	17,720	19,759
Prepaid expenses	2,303	1,546
Other current assets	3,298	4,716
Total current assets	146,737	150,164
Property and equipment, net	65,412	67,727
Investments	155,016	162,438
Goodwill	17,737	17,737
Intangible assets	5,882	6,986
Total assets	390,784	405,052
Current liabilities:
Accounts payable	8,273	10,257
Accrued expenses	6,358	5,722
Total current liabilities	14,631	15,979
Deferred and long-term taxes	2,378	2,378
Pension, other post-retirement and post-employment obligations	1,946	1,820
Intercompany loans	(319,185)	(307,813)
Total stockholders' (deficit) equity	691,014	692,688
Total liabilities and stockholders' deficit	390,784	405,052
Total Non-Guarantors
Current assets:
Cash and cash equivalents	26,458	31,738	26,822	32,323
Accounts receivable, net	65,836	70,574
Intercompany receivable	(6,482)	(6,798)
Inventories, net	64,682	64,857
Prepaid expenses	8,570	4,359
Other current assets	11,207	10,335
Total current assets	170,271	175,065
Property and equipment, net	248,852	266,648
Goodwill	40,909	41,383
Intangible assets	4,268	4,170
Other assets	8,235	8,614
Total assets	472,535	495,880
Current liabilities:
Accounts payable	25,387	28,807
Accrued expenses	35,994	35,520
Current maturities of long-term debt	1,102	2,298
Total current liabilities	62,483	66,625
Long-term debt, net of current maturities	98,229	107,390
Deferred and long-term taxes	15,620	16,204
Pension, other post-retirement and post-employment obligations	54,908	56,462
Other long-term liabilities	11,539	11,654
Intercompany loans	113,223	120,152
Total stockholders' (deficit) equity	116,533	117,393
Total liabilities and stockholders' deficit	472,535	495,880
Other Eliminations
Current assets:
Inventories, net	(1,106)	(1,299)
Total current assets	(1,106)	(1,299)
Investments	(748,160)	(741,456)
Total assets	(749,266)	(742,755)
Current liabilities:
Total stockholders' (deficit) equity	(749,266)	(742,755)
Total liabilities and stockholders' deficit	(749,266)	(742,755)
The Company
Current assets:
Cash and cash equivalents	33,596	43,566	34,491	38,701
Accounts receivable, net	86,085	91,784
Inventories, net	81,296	83,317
Prepaid expenses	10,047	6,177
Other current assets	14,505	15,051
Total current assets	225,529	239,895
Property and equipment, net	314,721	335,256
Goodwill	58,646	59,120
Intangible assets	21,450	22,640
Other assets	8,297	8,810
Total assets	628,643	665,721
Current liabilities:
Accounts payable	34,269	39,743
Accrued expenses	48,582	47,805
Current maturities of long-term debt	2,352	3,548
Total current liabilities	85,203	91,096
Long-term debt, net of current maturities	449,492	465,506
Deferred and long-term taxes	17,998	18,582
Pension, other post-retirement and post-employment obligations	79,904	81,188
Other long-term liabilities	11,539	11,654
Total stockholders' (deficit) equity	(15,493)	(2,305)
Total liabilities and stockholders' deficit	$ 628,643	$ 665,721

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Pensions, Other Post-retirement and Post-employment Benefits (Tables)

6 Months Ended

Jun. 30, 2012

Approximate Matching Contribution Expense

The following represents the approximate matching contribution expense for the three and six months ended June 30, 2012 and 2011:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Matching contribution expense	$	434	$	446	$	878	$	889

Components Of Net Periodic Benefit Cost

As required by Topic 715, the following tables summarize the components of net periodic benefit cost:

Defined Benefit Plans

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Service cost	$	888	$	719	$	1,773	$	1,411
Interest cost		1,838		2,052		3,668		4,029
Expected return on plan assets		(1,377)		(1,496)		(2,750)		(2,937)
Amortization of prior service cost		4		4		7		7
Amortization of net loss		633		376		1,266		739
Net periodic benefit cost	$	1,986	$	1,655	$	3,964	$	3,249

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Supplemental Guarantor Financial Information (Tables)

6 Months Ended

Jun. 30, 2012

Consolidating Balance Sheet

Xerium Technologies, Inc.

Consolidating Balance Sheet—(Unaudited)

At June 30, 2012

(Dollars in thousands)

			Total		Total Non		Other		The
	Parent		Guarantors		Guarantors		Eliminations		Company
ASSETS
Current assets:
Cash and cash equivalents	$	7,104	$	34	$	26,458	$	-	$	33,596
Accounts receivable, net		-		20,249		65,836		-		86,085
Intercompany receivable		(96,651)		103,133		(6,482)		-		-
Inventories, net		-		17,720		64,682		(1,106)		81,296
Prepaid expenses		(826)		2,303		8,570		-		10,047
Other current assets		-		3,298		11,207		-		14,505
Total current assets		(90,373)		146,737		170,271		(1,106)		225,529
Property and equipment, net		457		65,412		248,852		-		314,721
Investments		593,144		155,016		-		(748,160)		-
Goodwill		-		17,737		40,909		-		58,646
Intangible assets		11,300		5,882		4,268		-		21,450
Other assets		62		-		8,235		-		8,297
Total assets	$	514,590	$	390,784	$	472,535	$	(749,266)	$	628,643
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	609	$	8,273	$	25,387	$	-	$	34,269
Accrued expenses		6,230		6,358		35,994		-		48,582
Current maturities of long-term debt		1,250		-		1,102		-		2,352
Total current liabilities		8,089		14,631		62,483		-		85,203
Long-term debt, net of current maturities		351,263		-		98,229		-		449,492
Deferred and long-term taxes		-		2,378		15,620		-		17,998
Pension, other post-retirement and post-employment obligations		23,050		1,946		54,908		-		79,904
Other long-term liabilities		-		-		11,539		-		11,539
Intercompany loans		205,962		(319,185)		113,223		-		-
Total stockholders’ (deficit) equity		(73,774)		691,014		116,533		(749,266)		(15,493)
Total liabilities and stockholders’ equity	$	514,590	$	390,784	$	472,535	$	(749,266)	$	628,643

Xerium Technologies, Inc.

Consolidating Balance Sheet—(Unaudited)

At December 31, 2011

(Dollars in thousands)

			Total		Total Non		Other		The
	Parent		Guarantors		Guarantors		Eliminations		Company
ASSETS
Current assets:
Cash and cash equivalents	$	11,548	$	280	$	31,738	$	-	$	43,566
Accounts receivable, net		-		21,210		70,574		-		91,784
Intercompany receivable		(95,855)		102,653		(6,798)		-		-
Inventories, net		-		19,759		64,857		(1,299)		83,317
Prepaid expenses		272		1,546		4,359		-		6,177
Other current assets		-		4,716		10,335		-		15,051
Total current assets		(84,035)		150,164		175,065		(1,299)		239,895
Property and equipment, net		881		67,727		266,648		-		335,256
Investments		579,018		162,438		-		(741,456)		-
Goodwill		-		17,737		41,383		-		59,120
Intangible assets		11,484		6,986		4,170		-		22,640
Other assets		196		-		8,614		-		8,810
Total assets	$	507,544	$	405,052	$	495,880	$	(742,755)	$	665,721
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	679	$	10,257	$	28,807	$	-	$	39,743
Accrued expenses		6,563		5,722		35,520		-		47,805
Current maturities of long-term debt		1,250		-		2,298		-		3,548
Total current liabilities		8,492		15,979		66,625		-		91,096
Long-term debt, net of current maturities		358,116		-		107,390		-		465,506
Deferred and long-term taxes		-		2,378		16,204		-		18,582
Pension, other post-retirement and post-employment obligations		22,906		1,820		56,462		-		81,188
Other long-term liabilities		-		-		11,654		-		11,654
Intercompany loans		187,661		(307,813)		120,152		-		-
Total stockholders’ (deficit) equity		(69,631)		692,688		117,393		(742,755)		(2,305)
Total liabilities and stockholders’ equity	$	507,544	$	405,052	$	495,880	$	(742,755)	$	665,721

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the three months ended June 30, 2012

(Dollars in thousands)

	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
Restructuring		122		23		984		-		1,129
Research and development		-		2,083		786		-		2,869
		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		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)

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the three months ended June 30, 2011

(Dollars in thousands)

	Parent		Total Guarantors		Total  Non Guarantors		Other Eliminations		The Company
Net sales	$	-	$	47,316	$	116,367	$	(13,305)	$	150,378
Costs and expenses:
Cost of products sold		(642)		33,930		72,458		(13,239)		92,507
Selling		-		5,751		14,756		-		20,507
General and administrative		1,739		1,857		12,582		-		16,178
Restructuring		-		373		169		-		542
Research and development		-		1,985		940		-		2,925
		1,097		43,896		100,905		(13,239)		132,659
(Loss) income from operations		(1,097)		3,420		15,462		(66)		17,719
Interest (expense) income, net		(4,658)		1,917		(7,241)		-		(9,982)
Loss on extinguishment of debt		(2,903)		(6)		(17)		-		(2,926)
Foreign exchange gain (loss)		309		(45)		(423)		-		(159)
Equity in subsidiaries income		10,108		2,645		-		(12,753)		-
Income (loss) before provision for income taxes		1,759		7,931		7,781		(12,819)		4,652
Provision for income taxes		(137)		(40)		(2,853)		-		(3,030)
Net income (loss)	$	1,622	$	7,891	$	4,928	$	(12,819)	$	1,622
Comprehensive income (loss)	$	962	$	7,929	$	11,457	$	(12,819)	$	7,529

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the six months ended June 30, 2012

(Dollars in thousands)

	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
Restructuring		158		163		4,782		-		5,103
Research and development		-		4,153		1,678		-		5,831
		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		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)

Xerium Technologies, Inc.

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income-(Unaudited)

For the six months ended June 30, 2011

(Dollars in thousands)

	Parent		Total Guarantors		Total Non Guarantors		Other Eliminations		The  Company
Net sales	$	-	$	90,970	$	227,856	$	(25,282)	$	293,544
Costs and expenses:
Cost of products sold		(1,153)		64,872		143,231		(25,192)		181,758
Selling		-		11,327		28,704		-		40,031
General and administrative		4,984		3,952		24,622		-		33,558
Restructuring		-		614		96		-		710
Research and development		(3)		4,068		1,948		-		6,013
		3,828		84,833		198,601		(25,192)		262,070
(Loss) income from operations		(3,828)		6,137		29,255		(90)		31,474
Interest (expense) income, net		(10,311)		3,788		(13,313)		-		(19,836)
Loss on extinguishment of debt		(2,903)		(6)		(17)		-		(2,926)
Foreign exchange gain (loss)		1,415		(1,477)		67		-		5
Equity in subsidiaries income		18,186		6,389		-		(24,575)		-
Income (loss) before provision for income taxes		2,559		14,831		15,992		(24,665)		8,717
Provision for income taxes		(288)		(109)		(6,050)		-		(6,447)
Net income (loss)	$	2,271	$	14,722	$	9,942	$	(24,665)	$	2,270
Comprehensive (loss) income	$	(726)	$	22,247	$	17,066	$	(24,665)	$	13,922

Consolidating Statement of Cash Flows

Xerium Technologies, Inc.

Consolidating Statement of Cash Flows-(Unaudited)

For the six months ended June 30, 2012

(Dollars in thousands)

	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 provided by (used in) 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
Unrealized 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 provided by (used in) 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 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

Xerium Technologies, Inc.

Consolidating Statement of Cash Flows-(Unaudited)

For the six months ended June 30, 2011

(Dollars in thousands)

	Parent		Total Guarantors		Total Non Guarantors		Other Eliminations		The Company
Operating activities
Net income	$	2,271	$	14,722	$	9,942	$	(24,665)	$	2,270
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation		2,081		-		-		-		2,081
Depreciation		119		3,954		16,845		-		20,918
Amortization of intangibles		-		1,106		46		-		1,152
Deferred financing cost amortization		(1,160)		204		1,558		-		602
Unrealized foreign exchange loss on revaluation of debt		-		-		(1,414)		-		(1,414)
Deferred taxes		-		-		1,209		-		1,209
Gain on disposition of property and equipment		-		(132)		(432)		-		(564)
Loss on extinguishment of debt		2,903		6		17		-		2,926
Provision for doubtful accounts		-		82		380		-		462
Undistributed equity in (earnings) loss of subsidiaries		(18,186)		(6,389)		-		24,575		-
Change in assets and liabilities which provided (used) cash:
Accounts receivable		9		700		(1,953)		-		(1,244)
Inventories		-		(1,334)		(10,787)		90		(12,031)
Prepaid expenses		387		(491)		(1,736)		-		(1,840)
Other current assets		621		(163)		(767)		-		(309)
Accounts payable and accrued expenses		2,346		(2,978)		(5,731)		-		(6,363)
Deferred and other long-term liabilities		(48)		(368)		(678)		-		(1,094)
Intercompany loans		5,494		3,702		(9,196)		-		-
Net cash provided by (used in) operating activities		(3,163)		12,621		(2,697)		-		6,761
Investing activities
Capital expenditures, gross		(189)		(1,896)		(9,930)		-		(12,015)
Intercompany property and equipment transfers, net		-		6		(6)		-		-
Proceeds from disposals of property and equipment		-		137		1,779		-		1,916
Restricted cash		13,701		-		-		-		13,701
Net cash provided by (used in) investing activities		13,512		(1,753)		(8,157)		-		3,602
Financing activities
Net decrease in borrowings (maturities of 90 days or less)		-		-		(181)		-		(181)
Proceeds from borrowings (maturities longer than 90 days)		365,000		-		124,810		-		489,810
Principal payments on debt		(257,599)		(51,016)		(181,060)		-		(489,675)
Payment of deferred financing fees		(71,905)		-		55,070		-		(16,835)
Intercompany loans		(44,575)		40,166		4,409		-		-
Net cash (used in) provided by financing activities		(9,079)		(10,850)		3,048		-		(16,881)
Effect of exchange rate changes on cash flows		-		3		2,305		-		2,308
Net increase (decrease) in cash		1,270		21		(5,501)		-		(4,210)
Cash and cash equivalents at beginning of period		6,345		33		32,323		-		38,701
Cash and cash equivalents at end of period	$	7,615	$	54	$	26,822	$	-	$	34,491

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Stock-Based Compensation And Stockholders' Deficit - Additional Information (Detail)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2010
2012 MIC
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of award paid in cash	50.00%
Percentage of award paid in shares	50.00%
2012 MIC | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of payout based on company performance	20.00%
Percentage of fall in company result influencing vesting of performance-based awards	100.00%
2012 MIC | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of award on sliding scale	200.00%
Percentage of payout based on company performance	90.00%
2010-2012 Long-Term Incentive Plan | Time Based Restricted Stock Units (RSU)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock units granted		131,010
Stock units vested	86,511
Stock units expected to vest	44,499
2012-2014 Executive Long-Term Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock units granted	54,750
2012-2014 Executive Long-Term Incentive Plan | Time Based Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Incentive plan description	Time-based awards, or 50% of the total target award, were granted in the form of 54,750 time-based restricted stock units under the Company’s 2010 Plan and will vest in equal installments on March 31, 2013, March 31, 2014, and March 31, 2015.
2012-2014 Executive Long-Term Incentive Plan | Performance Based Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Incentive plan description	Performance-based awards, which constitute 50% of the total award, will be determined based on the Company’s performance against a three-year cumulative Adjusted EBITDA metric, adjusted for currency fluctuations during the term of the 2012 – 2014 Executive LTIP.
2012-2014 Executive Long-Term Incentive Plan | Performance Based Awards | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of award on sliding scale	50.00%
Percentage of payout based on company performance	85.00%
2012-2014 Executive Long-Term Incentive Plan | Performance Based Awards | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of award on sliding scale	200.00%
Percentage of payout based on company performance	115.00%

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Components Of Comprehensive Income (Loss) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Comprehensive Income (Loss) And Accumulated Other Comprehensive Income (Loss) [Abstract]
Net income (loss)	$ 2,226	$ 1,622	$ (5,296)	$ 2,270
Foreign currency translation adjustments	(13,025)	6,039	(8,399)	12,477
Pension liability changes under Topic 715	578	(132)	90	(825)
Change in value of derivative instruments	(11)		(105)
Comprehensive (loss) income	$ (10,232)	$ 7,529	$ (13,710)	$ 13,922

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating activities
Net (loss) income	$ (5,296)	$ 2,270
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Stock-based compensation	754	2,081
Depreciation	19,193	20,918
Amortization of intangibles	1,153	1,152
Deferred financing cost amortization	1,736	602
Unrealized foreign exchange loss (gain) on revaluation of debt	381	(1,414)
Deferred taxes	(360)	1,209
Gain on disposition of property and equipment	(617)	(564)
Loss on extinguishment of debt		2,926
Provision for doubtful accounts	193	462
Change in assets and liabilities which provided (used) cash:
Accounts receivable	3,861	(1,244)
Inventories	230	(12,031)
Prepaid expenses	(4,076)	(1,840)
Other current assets	603	(309)
Accounts payable and accrued expenses	(3,609)	(6,363)
Deferred and other long-term liabilities	(350)	(1,094)
Net cash provided by (used in) operating activities	13,796	6,761
Investing activities
Capital expenditures, gross	(7,330)	(12,015)
Proceeds from disposals of property and equipment	981	1,916
Restricted cash		13,701
Net cash (used in) provided by investing activities	(6,349)	3,602
Financing activities
Net decrease in borrowings (maturities of 90 days or less)		(181)
Proceeds from borrowings (maturities longer than 90 days)		489,810
Principal payments on debt	(14,875)	(489,675)
Payment of deferred financing fees	(1,762)	(16,835)
Net cash (used in) provided by financing activities	(16,637)	(16,881)
Effect of exchange rate changes on cash flows	(780)	2,308
Net decrease in cash	(9,970)	(4,210)
Cash and cash equivalents at beginning of period	43,566	38,701
Cash and cash equivalents at end of period	$ 33,596	$ 34,491

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Pensions, Other Post-retirement and Post-employment Benefits

6 Months Ended

Jun. 30, 2012

Pensions, Other Post-retirement and Post-employment Benefits

5. Pensions, Other Post-retirement and Post-employment Benefits

The Company accounts for its pensions, other post-retirement and post-employment benefit plans in accordance with ASC Topic 715, Compensation—Retirement Benefits (“Topic 715”). The Company has defined benefit pension plans covering substantially all of its U.S. and Canadian employees and employees of certain subsidiaries in other countries. Benefits are generally based on the employee’s years of service and compensation. These plans are funded in conformity with the funding requirements of applicable government regulations. The Company does not fund certain plans, as funding is not required. The Company plans to continue to fund its U.S. defined benefit plans to comply with the Pension Protection Act of 2006. In addition, the Company also intends to fund its UK and Canadian defined benefit plans in accordance with local regulations.

The Company sponsors various unfunded defined contribution plans that provide for retirement benefits to employees, some in accordance with local government requirements. The Company also maintains a funded retirement savings plan for U.S. employees which is qualified under Section 401(k) of the U.S. Internal Revenue Code. The plan allows eligible employees to contribute up to 15% of their compensation (plus catch-up contributions for participants over age 50), with the Company matching 200% of the first 1% of employee compensation and 100% of the next 4% of employee compensation. The following represents the approximate matching contribution expense for the three and six months ended June 30, 2012 and 2011:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Matching contribution expense	$	434	$	446	$	878	$	889

As required by Topic 715, the following tables summarize the components of net periodic benefit cost:

Defined Benefit Plans

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
Service cost	$	888	$	719	$	1,773	$	1,411
Interest cost		1,838		2,052		3,668		4,029
Expected return on plan assets		(1,377)		(1,496)		(2,750)		(2,937)
Amortization of prior service cost		4		4		7		7
Amortization of net loss		633		376		1,266		739
Net periodic benefit cost	$	1,986	$	1,655	$	3,964	$	3,249

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Components of Inventories (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Inventories, Net [Abstract]
Raw materials	$ 16,906	$ 19,872
Work in process	24,634	26,326
Finished goods (includes consigned inventory of $11,686 in 2012 and $12,953 in 2011)	39,756	37,119
Inventories, net	$ 81,296	$ 83,317

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Pensions, Other Post-retirement and Post-employment Benefits - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2012 Year
Pension and Other Postretirement Benefits Disclosure [Line Items]
Percentage contribution of compensation by eligible employees	15.00%
Minimum age limit for catch up contributions	50
Percentage of employer contribution matching first 1% of employee compensation	200.00%
Percentage of employee compensation for which employer matches 200%	1.00%
Percentage of employer contribution matching next 4% of employee compensation	100.00%
Percentage of employee compensation for which employer matches 100%	4.00%

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Long-term Debt (Tables)

6 Months Ended

Jun. 30, 2012

Schedule Of Long-Term Debt

At June 30, 2012 and December 31, 2011, long-term debt consisted of the following:

	June 30, 2012		December 31, 2011
Senior Bank Debt (Secured):
First lien debt, payable quarterly, U.S. Dollar denominated–LIBOR (minimum 1.25%) plus 5.00% (6.25%) as of June 30, 2012	$	112,513	$	119,366
First lien debt, payable quarterly, Euro denominated–EURIBOR (minimum 1.25%) plus 5.00% (6.25%) as of June 30, 2012		99,200		107,771
		211,713		227,137
Senior Notes (Unsecured), payable semi-annually–U.S. Dollar denominated interest rate fixed at 8.875%, matures June of 2018		240,000		240,000
Other Long-Term Debt:
Unsecured, interest rate fixed at 2.00%, Euro denominated		131		228
Unsecured, interest rate fixed at 1.31% to 3.40%, Yen denominated		-		1,689
		451,844		469,054
Less current maturities		2,352		3,548
Total	$	449,492	$	465,506