Houston, TX, July 29, 2009 – 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 $60.3 million, or $0.74 per diluted share, for the second quarter 2009. This is an increase of 29.1% compared with net income of $46.7 million, or $0.55 per diluted share, for the second quarter 2008.
Vincent R. Volpe Jr., President and Chief Executive Officer of Dresser-Rand, said, “We are pleased with our second quarter performance. We had a good solid quarter with strong top line and bottom line growth. Total revenues increased 12%, operating income increased 27% and net income improved 29% over the corresponding period of last year.
“We also saw an improvement in the new units segment with bookings up sequentially from $109 million in the first quarter 2009 to $169 million in the second quarter 2009. While there is still a ways to go before we get back to 2008 bookings levels, we continue to see a steady flow of inquiries and expect our full year guidance of $700 million to $1.1 billion will be met.
“On the aftermarket side, bookings are steady with the exception of one of our key national oil company clients. Adjusting for the shortfall in this client’s bookings for the first six months of this year, bookings were slightly higher than last year. We do expect our bookings with this client to increase and, therefore, we expect aftermarket bookings to be consistent with 2008 levels.
“We are also pleased to report that we entered into a strategic alliance with Samsung Techwin Co., Ltd. (“Samsung Techwin”), an affiliate of Samsung Group in Korea, to cooperate in packaging and selling engineered centrifugal compressors and gas turbines. We’re excited to have an alliance with Samsung Techwin to better serve clients in the important and growing markets for floating production, storage, and offloading (FPSO) vessels and floating LNG (FLNG) vessels.”
Total revenues for the second quarter 2009 of $606.1 million increased $64.9 million or 12.0% compared with $541.2 million for the second quarter 2008, principally due to higher volume. Revenue increased approximately $24.9 million as a result of the acquisitions of Peter Brotherhood Ltd., Enginuity LLC, and Arrow Industries Inc., in the third quarter of 2008. This increase was more than offset by the foreign currency translation impact of the stronger U.S. dollar in the three months ended June 30, 2009, which reduced revenues by approximately $44.8 million.
Total revenues for the six months ended June 30, 2009, of $1,115.0 million increased $210.0 million or 23.2% compared with $905.0 million for the corresponding period in 2008, principally due to higher volume. Revenues increased approximately $70.7 million as a result of the three acquisitions mentioned above. This increase was more than offset by the foreign currency translation impact of a stronger U.S. dollar, which reduced revenues by approximately $75.0 million.
Operating income for the second quarter 2009 was $96.2 million. This compares to operating income of $75.5 million for the second quarter 2008. Operating income increased from the corresponding period last year principally due to higher volume partially offset by a slightly unfavorable sales mix. Total revenues reflected a higher percentage of the lower margin new unit sales. However, the unfavorable change in sales mix between the new unit and aftermarket segments was more than offset by a more favorable mix within the new unit segment.
Operating income for the six months ended June 30, 2009, was $160.3 million. This compares to operating income of $122.4 million for the corresponding period in 2008. Operating income increased from the year ago period primarily due to higher volume partially offset by a significant shift in sales mix as lower margin new unit sales increased to 56.2% of total sales compared with 49.6% for the six months ended June 30, 2008. This impact was partially offset by a more favorable mix within the new unit segment.
Bookings for the second quarter 2009 of $404.7 million compare with bookings for the second quarter 2008 of $503.6 million. Bookings for the six months ended June 30, 2009, of $760.5 million, compare with bookings for the corresponding period in 2008 of $1,079.3 million.
The backlog at the end of June 2009 was $1,949.2 million or 6.5% lower than the backlog at the end of June 2008 of $2,085.8 million.
New Units Segment
New unit revenues for the second quarter 2009 of $348.3 million increased 16.4% compared with $299.2 million for the second quarter 2008, principally due to higher volume. New unit revenues increased approximately $11.9 million as a result of the acquisitions of Peter Brotherhood Ltd. and Enginuity LLC. This increase was more than offset by the foreign currency translation impact of the stronger U.S. dollar in the three months ended June 30, 2009, which reduced revenues by approximately $25.6 million.
New unit revenues for the six months ended June 30, 2009, of $626.7 million increased 39.7% compared with $448.7 million for the corresponding period in 2008, principally due to higher volume. The increase in revenues compared with the corresponding period last year reflects the strong market conditions in 2008, when most of this revenue was booked. New unit revenues increased approximately $44.5 million as a result of the acquisitions of Peter Brotherhood Ltd. and Enginuity LLC. This increase was substantially offset by the foreign currency translation impact of the stronger U.S. dollar in the six months ended June 30, 2009, which reduced revenues by approximately $43.2 million.
New unit operating income was $48.1 million for the second quarter 2009 compared with $25.7 million for the second quarter 2008. This segment’s operating margin was 13.8% compared with 8.6% for the second quarter 2008. Operating results improved significantly as a result of a better mix of orders, higher volume and the impact of the 2008 acquisitions. These impacts were partially offset by the foreign currency impact of a stronger U.S. dollar in the three months ended June 30, 2009.
New unit operating income was $73.3 million for the six months ended June 30, 2009, compared with $34.9 million for the corresponding period in 2008. This segment’s operating margin for the six months ended June 30, 2009, was 11.7% compared with 7.8% for the corresponding period in 2008. The increases from the corresponding period in 2008 were attributable to a significantly improved mix within the new units segment. Overall operating income increased from improved mix, higher volume and the impact of the 2008 acquisitions. These impacts were partially offset by the foreign currency impact of a stronger U.S. dollar in the six months ended June 30, 2009.
Bookings for the three and six months ended June 30, 2009, of $169.0 and $278.4 million, respectively, compared with bookings for the corresponding periods in 2008 of $232.2 and $571.2 million, respectively. The market for new units remains sluggish as end users continue to delay the placement of orders. The Company continues to believe the delays are temporary as the flow of inquiries remains steady.
The backlog at June 30, 2009, of $1,535.6 million was 10.1% lower than the $1,707.8 million backlog at June 30, 2008.
Aftermarket Parts and Services Segment
Aftermarket parts and services revenues for the second quarter 2009 of $257.8 million increased 6.5% compared with $242.0 million for the second quarter 2008. The aftermarket segment experienced higher volumes as well as some improved pricing during the three months ended June 30, 2009, as compared with the three months ended June 30, 2008. Aftermarket revenues increased approximately $13.0 million as a result of the acquisitions of Peter Brotherhood Ltd., Enginuity LLC, and Arrow Industries Inc. This increase was more than offset by the foreign currency translation impact of the strengthening U.S. dollar, which reduced revenues by approximately $19.2 million.
Aftermarket parts and services revenues for the six months ended June 30, 2009, of $488.3 million increased 7.0% compared with $456.3 million for the corresponding period in 2008. The aftermarket segment experienced higher volumes as well as some improved pricing during the six months ended June 30, 2009, as compared with the six months ended June 30, 2008. Revenues increased approximately $26.2 million as a result of the three acquisitions mentioned above. This increase was more than offset by the foreign currency translation impact of the strengthening U.S. dollar, which reduced revenues by approximately $31.8 million.
Aftermarket operating income for the second quarter 2009 of $67.6 million compares with $70.8 million for the second quarter 2008. This segment’s operating margin of approximately 26.2% compares with 29.3% for the second quarter 2008. The decrease in operating income from the corresponding period in 2008 was principally attributable to a less favorable mix within the segment. Overall operating income benefited from improved prices, higher volume and the impact of the 2008 acquisitions which were more than offset by mix and the foreign currency translation impact of the strengthening U.S. dollar.
Aftermarket operating income for the six months ended June 30, 2009, of $126.5 million compares with $120.8 million for the six months ended June 30, 2008. This segment’s operating margin of approximately 25.9% compares with 26.5% for the corresponding period in 2008. The decrease in operating margin from the corresponding period in 2008 was principally attributable to a less favorable mix within the segment. Overall operating income increased from improved prices, higher volume and the impact of the 2008 acquisitions partially offset by mix and the foreign currency translation impact of the strengthening U.S. dollar.
Bookings for the three months ended June 30, 2009, of $235.7 million were 13.2% lower than bookings for the corresponding period in 2008 of $271.4 million. Bookings for the six months ended June 30, 2009, of $482.1 million were 5.1% lower than bookings for the corresponding period in 2008 of $508.1 million. Aftermarket bookings have been adversely impacted by a significant reduction in order flow from one national oil company client. Adjusting for this one client, bookings for the first six months of 2009 were slightly higher than the corresponding period last year.
The backlog at June 30, 2009, of $413.6 million was 9.4% above the backlog of $378.0 million at June 30, 2008.
Liquidity and Capital Resources
As of June 30, 2009, cash and cash equivalents totaled $201.2 million and borrowing availability under the $500.0 million revolving credit portion of the Company’s senior credit facility was $258.6 million, as $241.4 million was used for outstanding letters of credit.
In the first six months of 2009, cash provided by operating activities was $68.4 million, which compared with $104.2 million for the corresponding period in 2008. The decrease of $35.8 million in net cash provided by operating activities was principally from increased pension contributions of $26.0 million and changes in working capital. In the first six months of 2009, capital expenditures totaled $13.9 million. As of June 30, 2009, total debt was $370.2 million and total debt net of cash and cash equivalents was approximately $169.0 million.
In the second quarter 2008, the Company purchased 705,765 shares for approximately $27.7 million.
Board of Directors
On May 12, 2009, the Company’s stockholders approved the re-election of our eight directors at the Company's annual meeting.
The directors serving an additional one-year term are William A. Macaulay, Vincent R. Volpe Jr., Michael L. Underwood, Philip R. Roth, Louis A. Raspino, Jean-Paul Vettier, Rita V. Foley and Joseph C. Winkler. On June 2, 2009, Jean-Paul Vettier notified the Company of his intention to resign as a director as a result of his appointment as the Chief Executive Officer of Petroplus Holdings AG effective September 1, 2009, and his desire to devote his full attention to his new position. Mr. Vettier’s resignation will be effective at the conclusion of the Board’s meeting on August 21, 2009.
Additionally, shareholders ratified the appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accountants.
Outlook
The market for new unit orders remains slow as end users continue to delay the placement of orders. The Company believes the delays are temporary as inquiries remain steady. While new unit bookings for the first half of the year on a run rate basis were below the low end of the Company’s previously reported guidance, it still expects new unit bookings for the full year to be in the range of $700 million to $1.1 billion.
The Company continues to believe that its 2009 operating income will be in the range of $320 to $360 million. In line with historical levels, its third quarter 2009 operating income is expected to be in the range of 24% to 26% of the total year.
Conference Call
The Company will discuss its second quarter 2009 results at its conference call on Thursday, July 30, 2009. A webcast presentation will be accessible live at 8:30 a.m. Eastern Time. You may access the live presentation at www.dresser-rand.com. Participants may also join the conference call by dialing (877) 440-5791 in the U.S. and (719) 325-4872 from outside the U.S. five to ten minutes prior to the scheduled start time.
A replay of the webcast will be available from 11:30 a.m. Eastern Time on July 30, 2009, through 11:59 p.m. Eastern Time on August 6, 2009. You may access the webcast replay at www.dresser-rand.com. A replay of the conference can be accessed by dialing (888) 203-1112 in the U.S. and (719) 457-0820 from outside the U.S. The replay pass code is 2004575.
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, Germany, Norway, India, and China, and maintains a network of 34 service and support centers covering more than 140 countries.
Dresser-Rand Group Inc.
Dresser-Rand Group Inc.
Dresser-Rand Group Inc.
Dresser-Rand Group Inc.
