1287151--4/8/2008--XERIUM_TECHNOLOGIES

related topics

{debt, indebtedness, cash}

{product, market, service}

{stock, price, share}

{cost, contract, operation}

{product, liability, claim}

{operation, international, foreign}

{condition, economic, financial}

{acquisition, growth, future}

{cost, operation, labor}

{cost, regulation, environmental}

{property, intellectual, protect}

{customer, product, revenue}

{capital, credit, financial}

If we do not enter into amendments to our credit facility prior to the expiration of the temporary waiver, we expect to be in default of various financial covenants at May 31, 2008, which could have a material adverse effect on our ability to continue operating as a going concern. Risks Relating to our Business and the Industry A sustained downturn in the paper industry could adversely affect our revenues and profitability. We may be required to reorganize our operations in response to changing conditions in the paper industry, and such actions may require significant expenditures and may not be successful. Fluctuations in currency exchange rates could adversely affect our revenues, profitability and compliance with our debt covenants. Increased price competition in our industry could adversely affect our gross margins and net sales. Our industry is competitive and our future success will depend on our ability to effectively develop and market competitive products. Because we have substantial operations outside the United States, we are subject to the economic and political conditions of foreign nations. We must continue to innovate and improve our products to maintain our competitive advantage. We believe that market recognition of the extended life of our roll cover products and the trend towards new paper machine designs which have fewer rolls has been and will continue to negatively impact the demand for our roll cover products. We expect our capital expenditures in 2008 to be less than those in 2007 and capital expenditures in 2009 to be lower than in 2008; this planned reduction in capital expenditures could negatively impact our ability to take advantage of growth opportunities. The loss of our major customers could have a material adverse effect on our sales and profitability. We may fail to adequately protect our proprietary technology, which would allow competitors or others to take advantage of our research and development efforts. We may be liable for product defects or other claims relating to our products. We could incur substantial costs as a result of violations of or liabilities under laws protecting the environment and human health. Adverse labor relations could harm our operations and reduce our profitability. We may not be able to successfully integrate businesses we have acquired or may acquire in the future into our operations and/or the expected benefits of such acquisitions may not be realized. Risks Relating to our Capital Structure We do not anticipate paying a dividend on our common stock in the foreseeable future, which may adversely affect the market price of our common stock. In the event that we successfully negotiate an amendment to our credit facility or refinance our credit facility or complete any strategic alternatives, our borrowing costs are likely to increase and any additional equity that we raise is likely to be highly dilutive to existing stockholders. Our current credit facility difficulties could have an adverse impact on our business and increase our operating costs. If we cannot meet the New York Stock Exchange ( NYSE ) continued listing requirements, the NYSE may delist our common stock which would have an adverse impact on the liquidity and market price of our common stock. In the event that we successfully negotiate an amendment to our credit facility or otherwise refinance our credit facility, we are likely to remain subject to restrictive debt covenants that limit our business flexibility by imposing operating and financial restrictions on our operations. In the event that we successfully negotiate an amendment to our credit facility or otherwise refinance our credit facility, we will remain highly leveraged even if we issue equity or other securities to repay a portion of our debt, which could impact our financing options and liquidity position. In the event that we successfully negotiate an amendment to our credit facility, otherwise refinance our credit facility, or raise additional equity, we will continue to require a significant amount of cash, which may not be available to us, to service our debt and to fund our liquidity needs. The market price of our common stock has been volatile since our initial public offering and may continue to be volatile. As of December 31, 2007, entities associated with Apax Europe IV GP Co. Ltd. ( Apax ) own approximately 54% of our common stock and will therefore have significant influence over our business and significant transactions. In the event that we issue equity or other securities to repay a portion of our outstanding debt, one or more new investors may obtain significant influence over our business and significant transactions.

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1287151--4/8/2008--XERIUM_TECHNOLOGIES_INC