HOUSTON, Feb. 27, 2015 /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 of $46.2 million,
or $0.60 per diluted share, for the
fourth quarter 2014, which compares with net income of $32.8 million, or $0.43 per diluted share, for the fourth quarter
2013. Net income was $122.7
million, or $1.59 per diluted
share, for 2014. This compares with net income of $168.4 million, or $2.19 per diluted share, for 2013.
According to Vincent R. Volpe Jr,
President and CEO of Dresser-Rand, "Given the present environment
in our end markets, the planned merger of the Company with Siemens,
and the overall financial results for the fourth quarter 2014,
three critical concepts merit emphasis and provide proper
perspective:
1)
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Fourth quarter 2014
results were adversely impacted by a confluence of events
(including the cost of the merger transaction, the price of oil and
the movement in several non-U.S. dollar based trade currencies)
that we believe mask what was otherwise a strong operating
performance from the Company.
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2)
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Given the prevailing
view that oil prices are expected to remain under pressure in the
near future, the Company is taking appropriate measures to continue
its emphasis on operating earnings growth, even in what is expected
to be a relatively stable year in sales in 2015.
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3)
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Given the flexible
manufacturing model that the Company has worked to implement
starting back in 2000, it should be possible to make adjustments
quickly and at a cost that has less than a one year pay-back to
adjust for the lower activity levels expected in the new units
business.
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In summary, while current market conditions may generate
discomfort in the industry, we believe the Company is structurally
well placed with its flexible manufacturing model to implement an
efficient and a relatively non-disruptive restructuring plan.
Based on our experience and plans, we believe that these
actions together with our resilient aftermarket will generate
increased profits throughout the cycle."
Discussion:
1)
|
Fourth quarter
2014 results were greatly impacted by a confluence of events
(including the cost of the merger transaction, the price of oil and
the movement in several non-U.S. dollar based trade currencies)
that we believe mask what was otherwise a strong operating
performance from the Company.
|
|
|
|
a.
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Transaction costs
related to the expected merger– approximately $5 million
(pre-tax)
|
|
b.
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Foreign Exchange
transaction impact due to the weakening of several currencies in
which we do business – approximately $32 million (pre-tax) – Note:
approximately $26 million of this loss is related to unrealized
losses on economic hedges for which we have not attempted to seek
hedge accounting treatment, and will be recovered in future periods
as the revenue on the underlying projects is recognized in the
first half of 2016.
|
|
c.
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Impact on absorption
due to lower than expected new units bookings and aftermarket
bookings (especially October and November, 2014) – approximately
$15 million (pre-tax).
|
|
d.
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Impact on book and
ship in the aftermarket based on slow September, October and
November 2014 services bookings – approximately $50 million
(pre-tax).
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|
|
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Despite these challenges, the operating performance of the
Company was otherwise strong as on-time delivery of new equipment
and parts continued to improve well into the mid and upper 90%
range. At the same time, delivery cycle times accelerated and the
Company's fixed capacity costs were well managed. The Company
also generated strong operating cash flow of approximately
$255 million. Importantly, the
Company's commitment to safety resulted in continued world class
safety performance in 2014.
The Net Income and EPS impact of items a. through d. amount to
approximately $71 million and
$0.92 per diluted share,
respectively. Adjusting our actual fourth quarter 2014 results by
this amount would yield approximately $1.52 per diluted share and this combined with a
favorable effective tax rate of approximately 23%, would put the
result generally in line with the present view expressed by the
sell side analysts who follow our stock.
2)
|
Given the
prevailing view that oil prices are expected to remain under
pressure in the near future, the Company is taking appropriate
measures to continue its emphasis on operating earnings growth,
even in what is expected to be a relatively stable year in sales in
2015.
|
|
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Looking forward, the Company has modified its view of new units
bookings, particularly as they pertain to the upstream investment
activities of its key clients. On this basis, the Company has
announced a planned reduction in workforce of approximately 8%,
which covers its world-wide operations, and associated overhead
costs from the different support disciplines. It is important to
note that the restructuring, which will commence within the next
several weeks' time, is in response to the expected activity levels
present in the marketplace and not a result or in anticipation of
the upcoming combination with the Siemens Compressor business.
These restructuring measures will address the short-term issues,
whilst positioning the Company well through the cycle.
3)
|
Given the
flexible manufacturing model that the Company has worked to
implement starting back in the year 2000, it should be possible to
make adjustments quickly, and at a cost which has less than a one
year pay-back to adjust for the lower activity levels expected in
the new units business.
|
|
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The overall impact of the program, which contains severance as
well as non-cash charges associated with the restructuring or
disposal of certain assets is expected to be approximately
$50 million in 2015. The robust
flexible manufacturing footprint is expected to allow for
approximately 60% to 70% of the savings to actually be realized in
2015 in the form of reduced fixed costs and higher shop absorption
rates.
For further details on Dresser-Rand's 2014 financial results
refer to the Annual Report on Form 10-K filed with the Securities
and Exchange Commission today.
DRESSER-RAND GROUP
INC.
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Net Income and
Diluted Earnings Per Share
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Excluding the
Impact of Certain Fourth Quarter Events
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($ in millions,
except per share amounts)
|
|
|
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Three Months
Ended
|
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December 31,
2014
|
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(Unaudited)
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Net income
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$
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46.2
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Impact of certain
fourth quarter events
|
70.7
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Net income before
impact of certain fourth quarter events
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$
|
116.9
|
|
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Net income
attributable to Dresser-Rand per diluted share
|
|
Earnings per
share
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$
|
0.60
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Impact of certain
fourth quarter events
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0.92
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Earnings per share
before impact of certain fourth quarter events
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$
|
1.52
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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, and India, and maintains a network of 51 service
and support centers (including 7 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 our 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
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SOURCE Dresser-Rand Group Inc.