Dresser-Rand Updates Outlook For 2011 And 2012

HOUSTON, Feb. 3, 2012 /PRNewswire/ -- Dresser-Rand Group Inc. ("Dresser-Rand" or the "Company") (NYSE: DRC), a global supplier of rotating equipment and aftermarket parts and services, announced today that its operating income for the full year 2011 is expected to be between $253 million and $258 million.  The Company updated its outlook based on its preliminary and unaudited results for the fourth quarter, which is subject to change.  The change in its fourth quarter expectation is principally due to a shortfall in new unit revenues, which the Company expects to realize in 2012.  The Company noted that aftermarket revenue and operating margins for both the new units and aftermarket segments were consistent with previous guidance.

The Company expects new unit revenues of approximately $350 million for the fourth quarter, which would be approximately $200 million lower than its earlier expectations.  The Company estimates that the operating income associated with this sales shortfall in the quarter to be approximately $30 million.  The shipment shortfall was principally due to supply chain delays on major buyouts and client requests to defer deliveries to 2012.  The issues with major buyouts were principally related to timely receipt of motors and other drivers. 

The Company achieved record bookings in 2011 totaling approximately $2.9 billion. However, new unit bookings of approximately $1,500 million were at the low end of the Company's previously disclosed guidance range of $1.5 to $1.7 billion, as several major awards did not close in the fourth quarter as previously expected.  The new unit bookings that moved out of the year are expected to close in 2012; however, the delay in new unit bookings is expected to shift related revenues from 2012 to 2013.  The impact of these delayed bookings and sales is expected to approximately offset the operating income benefit in 2012 from the fourth quarter shipment shortfall mentioned above.  Aftermarket bookings of approximately $1,358 million were close to the upper end of the Company's guidance range of $1.2 to $1.4 billion, and in line with fourth quarter expectations. 

The Company also noted that, given the recent strengthening of the U.S. dollar, especially relative to the EURO, its outlook for 2012 revenues and operating income will need to be adjusted accordingly.  The U.S. dollar has strengthened approximately 10% since the Company prepared its preliminary 2012 forecast which was the basis for its 2012 guidance provided at its third quarter earnings conference call on November 3, 2011.  The adverse impact of the strengthened U.S. dollar on the Company's 2012 operating income outlook is estimated to be approximately $30 million.  As a result, the Company is revising its 2012 operating income guidance from $390 - $450 million to $360 - $420 million.

Vincent R. Volpe Jr., President and Chief Executive Officer of Dresser-Rand, said, "Our fourth quarter operating income is expected to be close to a record level; however, it will be lower than our earlier expectation due primarily to a shortfall in new unit revenues.  While this result is disappointing, it should be noted that this is more a question of timing rather than project margin erosion or higher than anticipated fixed costs. Hence the earnings are displaced out of the period but are not lost to the Company.

"It is also noteworthy that the vast majority of the shortfall is related to delivery or quality issues from our supply base, primarily in the area of finished, purchased goods, such as motors and generators, which are required to be integrated into our packages prior to our being able to deliver and recognize project revenue. Said differently, the internal added value work on the Dresser-Rand core products was essentially completed as planned.

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