Dresser-Rand Reports Second Quarter 2014 Diluted EPS of $0.38

HOUSTON, Aug. 4, 2014 /PRNewswire/ --

Dresser-Rand Group Inc. ("Dresser-Rand" or the "Company") (NYSE: DRC), a global supplier of rotating equipment and aftermarket parts and services, reported net income attributable to Dresser-Rand of $29.1 million, or $0.38 per diluted share, for the second quarter 2014, compared with net income attributable to Dresser-Rand of $53.3 million, or $0.69 per diluted share, for the second quarter 2013.    

Vincent R. Volpe Jr., President and Chief Executive Officer of Dresser-Rand, said, "Our second quarter operating performance was in-line with our guidance as we generated operating income of $66 million.  For the first six months of 2014, we generated cash from operating activities of approximately $95 million, which represents an improvement of approximately $129 million over the corresponding period last year. 

"As anticipated, New Unit bookings for the second quarter increased over the first quarter 2014 as we are starting to see some improvement in upstream project activity, including a major award to supply equipment for two large floating production, storage and offloading (FPSO) vessels to be located offshore West Africa.  Activity continued to improve in July as we booked an order to supply gas turbine power generation equipment for a semi-submersible production unit destined for the Gulf of Mexico. We believe new unit bookings will be strong in both the third and fourth quarters, and as such we are revising our full year guidance for new unit bookings to be at least 10% higher than 2013.

"Aftermarket bookings of $348 million were in-line with our expectations but were lower than last year's level as a result of the adverse impact of the recently published Spanish ministerial order on our six cogeneration facilities in Spain, a reduction in bookings from a Latin American national oil company, and a large contract renewal in the second quarter of 2013 for certain energy assets in Brazil.  Apart from these impacts, second quarter 2014 aftermarket bookings were approximately 6% higher compared to the corresponding period in 2013. This is a result of our efforts to increase the sales of parts and services for the installed base of Dresser-Rand equipment as well as applying our technology to non-Dresser-Rand equipment in our class. We anticipate a strong level of aftermarket activity in the third quarter. For the full year, we expect aftermarket bookings, adjusting for the impact of shutting down the cogeneration facilities in Spain, to increase approximately 5% from 2013 levels.

"Based on the pickup in bookings so far this year as well as the progress we have been making on our operational excellence initiatives, especially cycle time reduction, we are maintaining our guidance for overall bookings and operating income for the full year."

Summary of Results

Bookings of $691.0 million for the second quarter 2014 were 20.4% lower than the $868.4 million for the second quarter 2013. The backlog at June 30, 2014, of $2,782.6 million was 5.5% lower than the $2,945.4 million backlog at June 30, 2013. The backlog at June 30, 2014, increased from the end of first quarter 2014, which represents the first reported increase in backlog since the third quarter of 2013.

Revenues for the second quarter 2014 of $628.4 million were $176.9 million or 22.0% lower than the second quarter 2013 of $805.3 million. The decrease was a result of lower volume primarily due to previous delays (12 to 18 months prior) by the Company's end-user clients in placing equipment orders for major projects, mostly for upstream applications.

Total operating income for the second quarter 2014 was $66.3 million, compared to operating income of $87.2 million for the second quarter 2013.  In addition to lower volume, operating income was adversely affected by nonrecurring severance and asset impairments of approximately $5.2 million associated with the shutdown of six cogeneration facilities in Spain and the planned consolidation of operations in Germany. As a percentage of revenues, operating income for the second quarter 2014, adjusted for the nonrecurring items, was 11.4%, compared to 10.8% for the corresponding period in 2013. 

The provision for income taxes was $21.1 million for the second quarter 2014, compared to $21.4 million for the second quarter 2013. The effective tax rate for the second quarter 2014 was 42.3% compared to 28.2% for the second quarter 2013. The increase in the effective tax rate for the three months ended June 30, 2014, as compared to the three months ended June 30, 2013, is principally due to a comparably larger amount of net operating losses in certain jurisdictions for which we could not record benefits under U.S. GAAP.  The full year effective tax rate is anticipated to fall generally in-line with previous guidance of approximately 34%.

Net income attributable to Dresser-Rand was $29.1 million or $0.38 per diluted share, for the second quarter 2014, compared to net income attributable to Dresser-Rand of $53.3 million, or $0.69 per diluted share, for the second quarter 2013. 

New Units Segment

New unit bookings of $342.7 million for the second quarter 2014 were 20.7% lower than bookings of $432.0 million for the corresponding period in 2013.  The backlog for new units at June 30, 2014, of $2,056.3 million was 8.8% lower than the $2,254.3 million backlog at June 30, 2013.

New unit revenues were $302.7 million for the second quarter 2014 compared to $420.2 million for second quarter 2013, a decrease of $117.5 million or 28.0%.  The decrease in second quarter 2014 revenues compared to the corresponding period in 2013 reflects the above mentioned delays by the Company's end-user clients in placing equipment orders for major projects.

New unit operating income was $27.1 million for the second quarter 2014, compared to operating income of $25.8 million for the second quarter 2013.  This segment's operating margin was 9.0% for the second quarter 2014, compared to 6.1% for the second quarter 2013.  The increase in operating margin was due to a better mix of projects during the period as well as a shift in fixed cost allocations to the aftermarket segment due to changes in the mix of products and volume.

Aftermarket Parts and Services Segment

Aftermarket bookings of $348.3 million for the second quarter 2014 were 20.2% lower than bookings of $436.4 million for the corresponding period in 2013.  The principal reasons for the lower level of aftermarket bookings include:

1. The impact of the recently published Spanish ministerial order on the Company's cogeneration facilities in Spain, which reduced second quarter 2014 aftermarket bookings by approximately $35 million compared to the second quarter of 2013.
2. A reduction in bookings from one Latin American national oil company of approximately $16 million compared to the second quarter of 2013. 
3. A $57 million contract renewal for certain energy assets in Brazil that was booked in the second quarter of 2013.

The backlog at June 30, 2014, of $726.3 million was 5.1% higher than the $691.1 million backlog at June 30, 2013.

Aftermarket parts and services revenues were $325.7 million for the second quarter 2014, compared to $385.1 million for the second quarter 2013, a decrease of $59.4 million or 15.4%.  The decrease in revenues for the three months ended June 30, 2014, is principally due to the adverse impact of the recently published Spanish ministerial order on the Company's six cogeneration facilities in Spain and a reduction in shipments to one Latin American national oil company as the Company works collaboratively with this client to reduce outstanding receivables.

Aftermarket operating income was $70.5 million for the second quarter 2014, compared to $92.8 million for the second quarter 2013.  This segment's operating margin was 21.6% for the second quarter 2014, compared to 24.1% for the second quarter 2013.  Second quarter 2014 operating income decreased compared with the corresponding period in 2013, principally as a result of a shift in cost allocations from the new unit segment due to changes in the mix of products and volume, partially offset by a more favorable mix.

Liquidity and Capital Resources

As of June 30, 2014, cash and cash equivalents totaled $138.7 million and borrowing availability under the $1,168.5 million revolving credit portion of the Company's senior secured credit facility was $586.2 million, as $508.0 million of borrowings was outstanding and $74.3 million was used for outstanding letters of credit.

In the first six months of 2014, cash provided by operating activities was $94.6 million, compared with cash used in operating activities of $34.4 million for the corresponding period in 2013.  The increase in net cash provided by operating activities was principally due to a decrease in working capital of approximately $6.0 million, as compared to an increase of $182.5 million in the first six months of 2013, partially offset by lower net income. 

As of June 30, 2014, net debt was approximately $1,042.9 million, compared to $1,088.5 million at December 31, 2013.

Outlook

The Company is reiterating its full year operating income guidance of $377 to $396 million.  The Company expects its full year 2014 fully diluted earnings per share to be between $2.60 and $2.80. Bookings are expected to increase 5% to 10% over the 2013 level.

Conference Call

The Company will discuss its second quarter 2014 results at its conference call on August 5, 2014, at 9:00 a.m. Eastern Time.  You may access the live webcast presentation at www.dresser-rand.com. Participants may also join the conference call by dialing (877) 868-1831 in the U.S. and (914) 495-8595 from outside the U.S. five to ten minutes prior to the scheduled start time.

A replay of the webcast will be available from 12:00 p.m. (noon) Eastern Time on August 5, 2014, through 11:59 p.m. Eastern Time on August 12, 2014.  You may access the webcast replay at www.dresser-rand.com.  The replay of the conference can be accessed by dialing (855) 859-2056 in the U.S. and (404) 537-3406 from outside the U.S.  The replay pass code is 77986521.

About Dresser-Rand

Dresser-Rand is among the largest suppliers of rotating equipment solutions to the worldwide oil, gas, petrochemical, and process industries.  The Company operates manufacturing facilities in the United States, France, United Kingdom, Spain, Germany, Norway, India, and Brazil, and maintains a network of 49 service and support centers (including 6 engineering and R&D centers) covering more than 150 countries.

This news release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include, without limitation, the Company's plans, objectives, goals, strategies, future events, future bookings, revenues, or performance, capital expenditures, financing needs, plans, or intentions relating to acquisitions, business trends, executive compensation, and other information that is not historical information.  The words "anticipates", "believes", "expects", "intends", "appears", "outlook", and similar expressions identify such forward-looking statements.  Although the Company believes that such statements are based on reasonable assumptions, these forward-looking statements are subject to numerous factors, risks, and uncertainties that could cause actual outcomes and results to be materially different from those projected.  These factors, risks, and uncertainties include, among others, the following: economic or industry downturns; the variability of bookings due to volatile market conditions, subjectivity clients exercise in placing orders, and timing of large orders; volatility and disruption of the credit markets; its inability to generate cash and access capital on reasonable terms and conditions; its inability to implement its business strategy; its ability to comply with local content requirements; delivery delays by third party suppliers; cost overruns and fixed-price contracts; its ability to implement potential tax strategies; competition in its markets; failure to complete or achieve the expected benefits from any acquisitions, joint ventures or strategic investments; economic, political, currency and other risks associated with international sales and operations; fluctuations in currencies and volatility in exchange rates; loss of senior management; environmental compliance costs and liabilities; failure to maintain safety performance acceptable to its clients; failure to negotiate new collective bargaining agreements; a failure or breach of its information system security; unexpected product claims and regulations; infringement on its intellectual property or infringement on others' intellectual property; its pension expenses and funding requirements; difficulty in implementing an information management system; and the Company's brand name may be confused with others.  These and other risks are discussed in detail in the Company's filings with the Securities and Exchange Commission at www.sec.gov.  Actual results, performance, or achievements could differ materially from those expressed in, or implied by, the forward-looking statements.  The Company can give no assurances that any of the events anticipated by the forward-looking statements will occur or, if any of them does, what impact they will have on results of operations and financial condition.  The Company undertakes no obligation to update or revise forward-looking statements, which may be made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, except as required by applicable law.  For information about Dresser-Rand, go to its website at www.dresser-rand.com.

DRC-FIN

SOURCE Dresser-Rand Group Inc.

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