##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number:
    001-32586
      DRESSER-RAND GROUP
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

20-1780492(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer Identification
    No.)   1200 West Sam Houston
    Parkway, No.
 Houston, Texas 77043
 (Address Of Principal Executive
    Offices)
 (713) 467-2221
 (Registrants Telephone
    Number, Including Area Code)
  Securities registered pursuant to
    Section 12(b) of the Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.01 par value

New York Stock Exchange              þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
    Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE




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##### 





TABLE
    OF CONTENTS
   
 PagePART IItem 1.


Business

3Item 1A.


Risk Factors

12Item 1B.


Unresolved Staff Comments

20Item 2.


Properties

20Item 3.


Legal Proceedings

21Item 4.


Submission of Matters to a Vote of Security
    Holders

21PART IIItem 5.


Market for Registrants Common Equity and
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities

22Item 6.


Selected Financial Data

24Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations

25Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk

41Item 8.


Financial Statements and Supplementary Data

41Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure

41Item 9A.


Controls and Procedures

41Item 9B.


Other Information

42PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance

42Item 11.


Executive Compensation

42Item 12.


Security Ownership of Certain Beneficial Owners
    and Management

42Item 13.


Certain Relationships and Related Transactions,
    and Director Independence

42Item 14.


Principal Accounting Fees and Services

42PART IVItem 15.


Exhibits, Financial Statements and Schedules

43EX-10.29: AMENDMENT NO. 1 TO 2005 DIRECTORS STOCK INCENTIVE PLANEX-10.30: AMENDMENT NO. 2 TO 2005 DIRECTORS STOCK INCENTIVE PLANEX-21.1: LIST OF SUBSIDIARIESEX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION   2




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##### Table of Contents



ITEM 1.
    BUSINESS  Overview
  Form 10-K,
  Form 10-K,
    and/or
  
    lower clients total cost of ownership and improve
    equipment performance;
    lower both our transaction costs and our clients ;
    better forecast our future revenues; and
    develop a broad, continuing business-to-business relationship
    with our clients that often results in a substantial increase in
    the level of activity with those clients.   3




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
    the increased worldwide demand for oil products resulting from
    economic growth;
    the maturation of producing fields worldwide, which requires
    increasing use of compression equipment to maintain production
    levels;
    the substantial increase in demand for natural gas, which is
    driving growth in gas production, storage and transmission
    infrastructure;
    regulatory and environmental initiatives, including clean fuel
    legislation and stricter emissions controls worldwide;
    the aging installed base of equipment, which is increasing
    demand for aftermarket parts and services, revamps and
    upgrades; and
    the increased outsourcing of equipment maintenance and
    operations.  Business
    Strategy
    Increase Sales of Aftermarket Parts and Services to Existing
    Installed Base.
  Expand Aftermarket Parts and Services Business to
    Non-Dresser-Rand Original Equipment Manufacturers
    Equipment.
  Grow Alliances.
 4




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Expand our Performance-Based Long-Term Service
    Contracts. Availability+
  Introduce New and Innovative Products and
    Technologies.
  Continue to Improve Profitability.
  Selectively Pursue Acquisitions.
  Services
    and Products
    
  Form 10-K.
 5




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##### Table of Contents



New
    Units
    Dresser-Rand
    Major Product Categories
  End MarketsMaximum


Up


Mid


Down


PetroProduct

Performance


Stream


Stream


Stream


Chemical


Chemical


Industrial


PowerTurbo ProductsCompressors


up to 500k CFM



ü



ü



ü



ü



ü



üGas & Power turbines


up to 60 MW



ü



ü



ü



ü



ü



ü



üHot Gas Expanders


Up to
    16000F











ü



ü











üControl Systems






ü



ü



ü



ü



ü



ü



üReciprocating CompressorsProcess


up to 325k lbs.



ü



ü



ü



ü



ü



üRod LoadSeparable


up to 11k HP,



ü



ü



ü7500 psigSteam Turbines


up to 75 MW



ü



ü



ü



ü



ü



ü



ü   Turbo Products.
      Reciprocating Compressors.
 6




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##### Table of Contents



2 3
  Steam Turbines.
  New
    Product Development
      Revamp/Upgrade
    Opportunities
      and/or
   7




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Aftermarket
    Parts and Services
    
    Replacement Parts
    Equipment Repair & Rerates
    Field Service Turnaround
    Equipment Installation
    U.S. Navy Service and Repair
    Applied Technology
    Operation and Maintenance Contracts
    Long-Term Service Agreements
    Rotor/Spare
    Parts Storage
    Special
    Coatings/Weldings
    Condition Monitoring
    Product Training
    Controls Retrofit
    Turnkey
    Installation/Project
    Management
    Site/Reliability
    Audits       8




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Sales and
    Marketing
    Manufacturing
    and Engineering Design
        Clients
    and/or
 9




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Competition
  non-U.S. companies.
  Electric/Nuovo
    Research
    and Development
    Employees
     10




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contract-by-contract
  Environmental
    and Government Regulation
           11




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Intellectual
    Property
          Additional
    Information
  www.dresser-rand.com website at www.sec.gov Form 10-K. 1-800-SEC-0330.
  www.dresser-rand.com c/o Mark www.dresser-rand.com Form 8-K
    ITEM 1A.
    RISK
    FACTORS  Risks
    Related to Our Business
  We
    have reported material weaknesses in our internal controls over
    financial reporting in prior years.
  Form 10-K
 12




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Controls and Procedures Form 10-K
    Our
    operating results and cash flows could be harmed during economic
    or industry downturns.
    We may
    not be successful in implementing our business strategy to
    increase our aftermarket parts and services
    revenue.
    We
    face intense competition that may cause us to lose market share
    and harm our financial performance.
   13




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We may
    not be able to complete, or achieve the expected benefits from,
    any future acquisitions, which could adversely affect our
    growth.
    
    use of available cash, new borrowings or borrowings under our
    senior secured credit facility to consummate the acquisition;
    demands on management related to the increase in our size after
    an acquisition;
    diversion of managements attention from existing
    operations to the integration of acquired companies;
    integration into our existing systems;
    difficulties in the assimilation and retention of
    employees; and
    potential adverse effects on our operating results.    Economic,
    political and other risks associated with international sales
    and operations could adversely affect our
    business.
    
    changes in foreign currency exchange rates;
    exchange controls;
    changes in a specific countrys or regions political
    or economic conditions, particularly in emerging markets;
    civil unrest in any of the countries in which we operate;
    tariffs, other trade protection measures and import or export
    licensing requirements;
    potentially negative consequences from changes in tax laws;
    difficulty in staffing and managing widespread operations;
    differing labor regulations;
    requirements relating to withholding taxes on remittances and
    other payments by subsidiaries;
    different regimes controlling the protection of our intellectual
    property;
    restrictions on our ability to own or operate subsidiaries, make
    investments or acquire new businesses in these jurisdictions;
    restrictions on our ability to repatriate dividends from our
    subsidiaries;
    difficulty in collecting international accounts receivable;
    difficulty in enforcement of contractual obligations governed by
    non-U.S. law;
    unexpected transportation delays or interruptions; 14




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
    unexpected changes in regulatory requirements; and
    the burden of complying with multiple and potentially
    conflicting laws.          Fluctuations
    in the value of the U.S. dollar and other currencies and the
    volatility of exchange rates may adversely affect our financial
    condition and results of operations.
     15




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and/or
  If we
    lose our senior management, our business may be materially and
    adversely affected.
    Environmental
    compliance costs and liabilities could affect our financial
    condition, results of operations and cash flows
    adversely.
  clean-up and/or
  clean-up
  clean-up clean-up and/or
 16




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Failure
    to maintain a safety performance that is acceptable to our
    clients could result in the loss of future
    business.
      Our
    business could suffer if we are unsuccessful in negotiating new
    collective bargaining agreements.
  contract-by-contract
  Our
    Predecessor financial information may not be comparable to
    future periods.
  Selected Financial Data Form 10-K Form 10-K
  We may
    be faced with unexpected product claims or regulations as a
    result of the hazardous applications in which our products are
    used.
   17




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Third
    parties may infringe our intellectual property or we may
    infringe the intellectual property of third parties, and we may
    expend significant resources enforcing or defending our rights
    or suffer competitive injury.
      Our
    business may be adversely affected if we encounter difficulties
    as we implement an Oracle based information management
    system.
    Our
    brand name may be subject to confusion.
      Natural
    gas operations entail inherent risks that may result in
    substantial liability to us.
   18




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We
    require a significant amount of cash to service our
    indebtedness. Our ability to generate cash depends on many
    factors beyond our control.
    The
    covenants in our restated senior secured credit facility and the
    indenture governing our senior subordinated notes impose
    restrictions that may limit our operating and financial
    flexibility.
    
    incur liens;
    borrow money, guarantee debt and, in the case of restricted
    subsidiaries, sell preferred stock;
    issue redeemable preferred stock;
    pay dividends;
    make redemptions and repurchases of certain capital stock;
    make capital expenditures and specified types of investments;
    prepay, redeem or repurchase subordinated debt;
    sell assets or engage in acquisitions, mergers, consolidations
    and asset dispositions;
    amend material agreements;
    change the nature of our business; and
    engage in affiliate transactions.    and/or and/or
  Other
    Risks Relating to Us
  The
    market price of our common stock may be volatile.
   19




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
    actual or anticipated variations in operating results;
    changes in opinions and earnings and other financial estimates
    by securities analysts;
    actual or anticipated changes in economic, political or market
    conditions, such as recessions or international currency
    fluctuations;
    actual or anticipated changes in the regulatory environment
    affecting our industry;
    changes in the market valuations of our industry peers; and
    announcements by us or our competitors of significant
    acquisitions, strategic partnerships, divestitures, joint
    ventures, new products and technologies, or other strategic
    initiatives.    Provisions
    in our amended and restated certificate of incorporation and
    amended and restated bylaws and Delaware law may discourage a
    takeover attempt.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    Approx.Location

Status

Square Feet


TypeBielefeld, Germany

Owned


31,000


Manufacturing and servicesBurlington, Iowa

Owned


185,000


Manufacturing and servicesCampinas, Brazil

Owned


36,870


ServicesHouston, Texas

Owned


109,800


Manufacturing and ServicesHouston, Texas

Owned/Leased


173,000


Warehouse and officesKongsberg, Norway

Leased


104,000


Manufacturing and servicesLe Havre, France

Owned/Leased


829,700


Manufacturing and servicesNaroda, India

Leased


102,000


Manufacturing and servicesOberhausen, Germany

Owned


75,000


Manufacturing and servicesOlean, New York

Owned/Leased


970,000


Manufacturing and servicesPainted Post, New York

Owned/Leased


840,000


Manufacturing and servicesWellsville, New York

Owned/Leased


380,000


Manufacturing and services  20




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##### Table of Contents



ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   21




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##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS    High


Low2007Quarter ended March 31, 2007

$
31.25


$
22.20Quarter ended June 30, 2007

$
40.28


$
29.77Quarter ended September 30, 2007

$
43.50


$
31.00Quarter ended December 31, 2007

$
43.99


$
34.332006Quarter ended March 31, 2006

$
27.94


$
22.01Quarter ended June 30, 2006

$
27.10


$
18.92Quarter ended September 30, 2006

$
23.64


$
18.60Quarter ended December 31, 2006

$
26.23


$
18.81        22




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##### Table of Contents



Performance
    Graph
    
   INDEXED RETURNSBase


Years EndingPeriodCompany Name/Index


8/5/05


12/30/05


12/29/06


12/31/07Dresser-Rand Group Inc.


$
100



$
106



$
107



$
171S&P 500 Index



100




103




119




125PHLX Oil Service Sector Index



100




110




121




182Peer Group



100




112




129




267    23




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations Form 10-K.
  Successor



PredecessorPeriod from



Period fromOctober 30



January 1


Yearthrough



through


EndedYear Ended December 31,


December 31,



October 29,


December 31,2007


2006


2005


2004



2004


2003($ in millions, except per share data)Statement of Income Data:Net sales, third parties

$
1,665.0


$
1,501.5


$
1,206.9


$
199.9



$
712.5


$
1,332.2Net sales to affiliates



















1.8



1.4Other operating revenue










1.3








1.2



1.7Total revenues


1,665.0



1,501.5



1,208.2



199.9




715.5



1,335.3Cost of sales


1,216.1



1,097.8



921.0



149.6




538.0



1,132.0Gross profit


448.9



403.7



287.2



50.3




177.5



203.3Selling and administrative expenses(1)


239.0



228.8



164.0



21.5




122.7



156.1Research and development expenses


12.8



10.4



7.1



1.0




5.7



8.1Curtailment amendment(2)






(11.8
)















Write-off of purchased in-process research and development assets














1.8








Operating income


197.1



176.3



116.1



26.0




49.1



39.1Interest (expense) income, net


(36.8
)


(47.9
)


(57.0
)


(9.7
)



3.2



1.9Early redemption premium on debt










(3.7
)











Other income (expense), net


7.3



8.9



(2.8
)


(1.8
)



1.9



(9.2
)Income from continuing operations before incomes taxes


167.6



137.3



52.6



14.5




54.2



31.8Provision for incomes taxes(3)


60.9



58.5



15.5



7.3




12.0



11.4Income from continuing operations


106.7



78.8



37.1



7.2




42.2



20.4Net income

$
106.7


$
78.8


$
37.1


$
7.2



$
42.2


$
20.4Income per share, basic and diluted(4)

$
1.25


$
0.92


$
0.56


$
0.13Cash flow data:Cash flows provided by operating activities

$
216.0


$
164.1


$
212.4


$
17.4



$
57.7


$
51.0Cash flows (used in) investing activities


(26.0
)


(19.5
)


(59.5
)


(1,126.9
)



(4.9
)


(7.1
)Cash flows (used in) provided by financing activities


(140.8
)


(100.1
)


(160.1
)


1,217.6




(52.0
)


(63.5
)   24




---



##### Table of Contents



PredecessorSuccessor



As ofAs of December 31,



December 31,2007


2006


2005


2004



2003Balance Sheet Data:Cash and cash equivalents

$
206.2


$
146.8


$
98.0


$
111.5



$
41.5Total assets


1,950.9



1,771.3



1,657.9



1,751.1




1,063.9Debt:Current portion of debt


0.2



0.1



0.1



6.7




3.7Long-term debt, net of current maturities


370.3



505.6



598.1



816.7




0.2Total debt


370.5



505.7



598.2



823.4




3.9Stockholders equity


805.2



631.9



514.7



452.9




Partnership interest



















565.0     (1)
    
    2006 amount includes stock-based compensation
    expense  exit units of $23.6.(2)
    
    See Note 13, Post-retirement Benefits other than
    Pensions, in the Notes to Consolidated Financial Statements.(3)
    
    The Successor is organized as a corporation while the
    Predecessor was organized in the United States as a partnership.
    The information presented does not give effect to the income
    taxes the Predecessor would have been required to recognize if
    it were organized as a corporation. Pro forma tax expense for
    the year ended December 31, 2004, was $16.0. Pro forma tax
    expense reflects income tax expense that would have been
    required to be recorded as a tax expense if organized as a
    corporation during these periods and also includes other pro
    forma adjustments related to the acquisition of Dresser-Rand
    Company by affiliates of First Reserve on October 29, 2004.(4)
    
    Historical basic and diluted earnings per share data have not
    been presented for the Predecessor because the Predecessor did
    not operate as a separate legal entity from Ingersoll Rand.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATION ($ in millions except per share and per unit
    data)  Safe
    Harbor Statement Under Private Securities Litigation
    Reform Act of 1995
  Form 10-K Form 10-K,
  
    economic or industry downturns;
    our inability to implement our business strategy to increase our
    aftermarket parts and services revenue;
    competition in our markets;
    failure to complete, or achieve the expected benefits from, any
    future acquisitions;
    economic, political, currency and other risks associated with
    our international sales and operations;
    loss of our senior management;
    our brand name may be confused with others;
    environmental compliance costs and liabilities;
    failure to maintain safety performance acceptable to our clients;
    failure to negotiate new collective bargaining agreements;
    our ability to operate as a stand-alone company;
    unexpected product claims or regulations; 25




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##### Table of Contents




    infringement of our intellectual property rights or our
    infringement of others intellectual property
    rights; and
    other factors described in this
    Form 10-K.    Overview
  Form 10-K
    Corporate
    History
        Basis of
    Presentation
  Selected Financial
    Data
   26




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##### Table of Contents



Effects
    of Currency Fluctuations
    Revenues
    Cost of
    Sales
    Selling
    and Administrative Expenses
    Research
    and Development Expenses
    Other
    Income (Expense)
    Depreciation
    and Amortization
   27




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##### Table of Contents



Income
    Taxes
      Bookings
    and Backlog
  New
    Units
    Aftermarket
    Parts and Services
    Letters
    of Credit, Bank Guarantees and Surety Bonds
   28




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##### Table of Contents



Results
    of Operations
  Year
    ended December 31, 2007, compared to the year ended
    December 31, 2006
  Year Ended


Year EndedDecember 31, 2007


December 31, 2006Statement of Operations Data:Total revenues

$
1,665.0



100.0
%

$
1,501.5



100.0
%Cost of sales


1,216.1



73.0



1,097.8



73.1Gross profit


448.9



27.0



403.7



26.9Selling and administrative expenses


239.0



14.4



228.8



15.2Research and development expenses


12.8



0.8



10.4



0.7Curtailment amendment










(11.8
)


(0.8
)Operating income


197.1



11.8



176.3



11.7Interest expense, net


(36.8
)


(2.2
)


(47.9
)


(3.2
)Other income, net


7.3



0.4



8.9



0.6Income before income taxes


167.6



10.1



137.3



9.1Provision for income taxes


60.9



3.7



58.5



3.9Net income

$
106.7



6.4
%

$
78.8



5.2
%Bookings

$
2,194.7






$
1,838.9Backlog  end of period

$
1,859.3






$
1,267.4   Total revenues.
  Cost of sales.
  Gross profit.
  Selling and administrative expenses.
  Stock based compensation  exit
    units.
 29




---



##### Table of Contents



Research and development expenses.
  Curtailment amendment.
  Operating income.
  Interest expense, net.
  Other income (expense), net.
  Provision for income taxes.
 30




---



##### Table of Contents



Bookings and Backlog.
  Segment
    information
          Segment
    Analysis  year ended December 31, 2007, compared
    to year ended December 31, 2006
  Year Ended


Year EndedDecember 31, 2007


December 31, 2006Statement of Segment Data:RevenuesNew units

$
813.5



48.9
%

$
749.6



49.9
%Aftermarket parts and services


851.5



51.1
%


751.9



50.1
%Total revenues

$
1,665.0



100.0
%

$
1,501.5



100.0
%Gross profitNew units

$
127.2






$
108.6Aftermarket parts and services


321.7







295.1Total gross profit

$
448.9






$
403.7Operating incomeNew units

$
56.4






$
47.3Aftermarket parts and services


213.8







204.4Unallocated corporate expenses


(73.1
)






(75.4
)Total operating income

$
197.1






$
176.3BookingsNew units

$
1,321.5






$
1,002.3Aftermarket parts and services


873.2







836.6Total bookings

$
2,194.7






$
1,838.9Backlog  end of periodNew units

$
1,543.0






$
981.8Aftermarket parts and services


316.3







285.6Total backlog

$
1,859.3






$
1,267.4  31




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##### Table of Contents



New
    Units
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
  Aftermarket
    Parts and Services
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
 32




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##### Table of Contents



Year
    ended December 31, 2006 compared to the year ended
    December 31, 2005
  Year Ended


Year EndedDecember 31, 2006


December 31, 2005Statement of Operations Data:Total revenues

$
1,501.5



100.0
%

$
1,208.2



100.0
%Cost of sales


1,097.8



73.1



921.0



76.2Gross profit


403.7



26.9



287.2



23.8Selling and administrative expenses


228.8



15.2



164.0



13.6Research and development expenses


10.4



0.7



7.1



0.6Curtailment amendment


(11.8
)


(0.8
)






Operating income


176.3



11.7



116.1



9.6Interest expense, net


(47.9
)


(3.2
)


(57.0
)


(4.8
)Early redemption premium on debt










(3.7
)


(0.3
)Other income (expense), net


8.9



0.6



(2.8
)


(0.2
)Income before income taxes


137.3



9.1



52.6



4.3Provision for income taxes


58.5



3.9



15.5



1.2Net income

$
78.8



5.2
%

$
37.1



3.1
%Bookings

$
1,838.9






$
1,446.2Backlog  end of period

$
1,267.4






$
884.7   Total revenues.
  Cost of sales.
  Gross profit.
  Selling and administrative expenses.
  Stock-based compensation expense  exit
    units.
 33




---



##### Table of Contents



paid-in-capital
    Research and development expenses.
  Curtailment amendment.
  Operating income.
  Interest expense, net.
  Early redemption premium on debt.
  Other income (expense), net.
  Provision for income taxes.
 34




---



##### Table of Contents



Bookings and backlog.
  Segment
    Analysis  year ended December 31, 2006 compared
    to year ended December 31, 2005
  Year Ended


Year EndedDecember 31, 2006


December 31, 2005Statement of Segment Data:RevenuesNew units

$
749.6



49.9
%

$
576.6



47.7
%Aftermarket parts and services


751.9



50.1
%


631.6



52.3
%Total revenues

$
1,501.5



100.0
%

$
1,208.2



100.0
%Gross profitNew units

$
108.6






$
70.9Aftermarket parts and services


295.1







216.3Total gross profit

$
403.7






$
287.2Operating incomeNew units

$
47.3






$
20.8Aftermarket parts and services


204.4







141.4Unallocated corporate expenses


(75.4
)






(46.1
)Total operating income

$
176.3






$
116.1BookingsNew units

$
1,002.3






$
771.9Aftermarket parts and services


836.6







674.3Total bookings

$
1,838.9






$
1,446.2Backlog  end of periodNew units

$
981.8






$
688.1Aftermarket parts and services


285.6







196.6Total backlog

$
1,267.4






$
884.7   New
    Units
  Revenues.
  Gross profit.
  Operating income.
 35




---



##### Table of Contents



Bookings and Backlog.
  Aftermarket
    Parts and Services
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
  Liquidity
    and Capital Resources
  work-in-process. work-in-progress
  Inventories-net Work-in-process
 36




---



##### Table of Contents



Contractual
    Obligations ( in millions)
    30-year
       37




---



##### Table of Contents



Payments Due by PeriodLess than


1-3


4-5


More thanTotal


1 Year


Years


Years


5 YearsLong-term debt obligations

$
370.5


$
0.2


$
0.3


$



$
370.0Operating lease obligations


50.5



10.4



15.8



11.1



13.2Post employment benefits


225.0



17.8



37.9



42.3



127.0Interest


191.0



27.3



54.6



54.6



54.5License agreement


2.7



0.5



0.9



0.9



0.4Total

$
839.7


$
56.2


$
109.5


$
108.9


$
565.1   Critical
    Accounting Policies
  Form 10-K,
  Revenue recognition 
  and/or
  
    The delivered unit(s) has value to the client on a stand-alone
    basis.
    There is objective and reliable evidence of the fair value of
    the undelivered unit(s).      Inventories
  Taxes on income
 38




---



##### Table of Contents



Accounting for Uncertainty in
    Income Taxes, an interpretation of FASB Statement No. 109
    Employee benefit plans
    1% Increase

1% DecreaseEffect on total service and interest cost components

$
0.8


$
(0.8
)Effect of postretirement benefit obligations


5.1



(3.2
)  39




---



##### Table of Contents



Commitments and contingencies
    Goodwill and other intangible assets
    New
    Accounting Standards
  Fair Value Measurements
  Employers Accounting for Defined Benefit Pension and
    Other Post Retirement Plans an amendment of FASB
    Statements No. 87, 88, 106 and 132(R).
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities
 40




---



##### Table of Contents



Business Compensations Noncontrolling Interests in
    Consolidated Financial Statements  an amendment of
    ARB No. 151
  
    More assets acquired and liabilities assumed to be measured at
    fair value as of the acquisition date.
    Liabilities related to contingent consideration to be remeasured
    at fair value in each subsequent reporting period.
    An acquirer to expense acquisition-related costs (e.g., deal
    fees for attorneys, accountants, investment bankers).
    Noncontrolling interests in subsidiaries initially to be
    measured at fair value and classified as a separate component of
    equity.    Accounting for Uncertainty in
    Income Taxes, an interpretation of FASB Statement
    No. 109
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ($ in
    Millions)  non-U.S. dollar non-U.S. subsidiaries
  ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Exhibits, Financial
    Statements and Schedules Form 10-K.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
  Rules 13a-15(e)
 41




---



##### Table of Contents



Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) Internal Control  Integrated
    Framework
  Form 10-K.
  Changes
    in Internal Control Over Financial Reporting
  Form 10-K
    ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   42




---



##### Table of Contents



PART IV ITEM 15.  EXHIBITS,
    FINANCIAL STATEMENTS AND SCHEDULES    Form 10-K
  (1)

Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm

F-2Consolidated Statement of Income for the years ended
    December 31, 2007, 2006 and 2005

F-3Consolidated Balance Sheet at December 31, 2007 and 2006

F-4Consolidated Statement of Cash Flows for the years ended
    December 31, 2007, 2006 and 2005

F-5Consolidated Statement of Changes in Stockholders Equity
    for the years ended December 31, 2007, 2006 and 2005

F-6Notes to Consolidated Financial Statements

F-7 to 40(2)

Consolidated Financial Statement SchedulesSchedule II  Valuation and Qualifying Accounts
    and Reserves  For the years ended December 31,
    2007, 2006 and 2005.Schedules not included have been omitted because they are not
    applicable or the required information is shown in the
    consolidated financial statement or notes.(3)

Exhibits3.1

Amended and Restated Certificate of Incorporation of
    Dresser-Rand Group Inc. (incorporated by reference to
    Exhibit 3.1 to Dresser-Rand Group Inc.s Registration
    Statement on
    Form S-1/A,
    filed July 18, 2005, File
    No. 333-124963).3.2

Amended and Restated By-Laws of Dresser-Rand Group Inc.
    (incorporated by reference to Exhibit 3.1 to Dresser-Rand
    Group Inc.s Current Report on
    Form 8-K,
    filed November 16, 2007, File
    No. 001-32586).4.1

Form of certificate of Dresser-Rand Group Inc. common stock
    (incorporated by reference to Exhibit 4.1 to Dresser-Rand
    Group Inc.s Registration Statement on
    Form S-1/A,
    filed July 18, 2005, File
    No. 333-124963).4.2

Indenture dated as of October 29, 2004 among Dresser-Rand
    Group Inc., the guarantors party thereto and Citibank, N.A., as
    trustee (incorporated by reference to Exhibit 4.2 to
    Dresser-Rand Group Inc.s Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).4.3

First Supplemental Indenture, dated as of December 22, 2005
    among Dresser-Rand Group Inc., the guarantors party thereto and
    Citibank, N.A., as trustee (incorporated by reference to
    Exhibit 4.2 to Dresser-Rand Group Inc.s Registration
    Statement on
    Form S-4,
    filed January 23, 2006, File
    No. 333-131212).10.1

Equity Purchase Agreement, dated as of August 25, 2004, by
    and among FRC Acquisition LLC and Ingersoll-Rand Company Limited
    (incorporated by reference to Exhibit 10.1 to Dresser-Rand
    Group Inc.s Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).10.2

Amended and Restated Credit Agreement, dated as of
    August 30, 2007, among Dresser-Rand Group Inc., certain of
    its foreign subsidiaries, the syndicate of lenders party
    thereto, Citicorp North America, Inc., as Administrative Agent,
    J.P. Morgan Securities Inc. and UBC Securities LLC, as
    Co-Syndication Agents, Citigroup Global Markets Inc.,
    J.P. Morgan Securities Inc. and UBS Securities LLC, as
    Joint Lead Arrangers and Joint Book Managers, and Natixis and
    Wells Fargo Bank, N.A., as Co-Documentation Agents (incorporated
    by reference to Exhibit 10.1 to Dresser-Rand Group
    Inc.s Current Report on
    Form 8-K,
    filed August 31, 2007, File
    No. 001-32586).10.3

Domestic Guarantee and Collateral Agreement, dated and effective
    as of October 29, 2004, among D-R Interholding, LLC,
    Dresser-Rand Group Inc., the domestic subsidiary loan parties
    named therein and Citicorp North America, Inc. as collateral
    agent (incorporated by reference to Exhibit 10.4 to
    Dresser-Rand Group Inc.s Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963). 43




---



##### Table of Contents



10.4

Supplement No. 1 dated as of December 22, 2005, to the
    Domestic Guarantee and Collateral Agreement dated and effective
    as of October 29, 2004, among D-R Interholding, LLC,
    Dresser-Rand Group Inc., the domestic subsidiary loan parties
    named therein and Citicorp North America, Inc. as collateral
    agent (incorporated by reference to Exhibit 10.7 to
    Dresser-Rand Group Inc.s Registration Statement on
    Form S-4,
    filed January 23, 2006, File
    No. 333-131212).10.5

Supply Agreement, dated October 31, 2004, by and between
    Dresser-Rand Company and Ingersoll-Rand Company (incorporated by
    reference to Exhibit 10.6 to Dresser-Rand Group Inc.s
    Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).10.6

License Agreement, dated as of October 26, 2004, by and
    between Dresser, Inc. and Dresser-Rand Group Inc. (incorporated
    by reference to Exhibit 10.7 to Dresser-Rand Group
    Inc.s Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).10.7

License Agreement, dated as of October 29, 2004, by and
    between Dresser-Rand Company, Dresser-Rand A.S., Ingersoll-Rand
    Energy Systems Corporation and the Energy Systems Division of
    Ingersoll-Rand Company (incorporated by reference to
    Exhibit 10.8 to Dresser-Rand Group Inc.s Registration
    Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).10.8

Amended and Restated Limited Liability Company Agreement of
    Dresser-Rand Holdings, LLC, effective as of October 29,
    2004 (incorporated by reference to Exhibit 10.9 to
    Dresser-Rand Group Inc.s Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).*10.9

Amendment to the Amended and Restated Limited Liability Company
    Agreement of Dresser-Rand Holdings, LLC, effective as of
    June 24, 2005 (incorporated by reference to
    Exhibit 10.20 to Dresser-Rand Group Inc.s
    Registration Statement on
    Form S-1/A,
    filed June 28, 2005, File
    No. 333-124963).*10.10

Employment Agreement, dated October 27, 2004, by and among
    Vincent R. Volpe, Dresser-Rand Holdings, LLC and Dresser-Rand
    Group Inc. (incorporated by reference to Exhibit 10.10 to
    Dresser-Rand Group Inc.s Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).*10.11

Employment Agreement, dated July 25, 1990, by and between
    Jean-Francois Chevrier and Dresser-Rand S.A. (incorporated by
    reference to Exhibit 10.11 to Dresser-Rand Group
    Inc.s Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).*10.12

Amended and Restated Stockholder Agreement, effective as of
    July 15, 2005, by and among Dresser-Rand Group Inc., D-R
    Interholding, LLC, Dresser-Rand Holdings, LLC and certain
    management employees, together with any other stockholder who
    may be made party to this agreement (incorporated by reference
    to Exhibit 10.12 to Dresser-Rand Group Inc.s
    Registration Statement on
    Form S-1/A,
    filed July 18, 2005, File
    No. 333-124963).*10.13

Dresser-Rand Group Inc. Stock Incentive Plan (incorporated by
    reference to Exhibit 10.13 to Dresser-Rand Group
    Inc.s Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).*10.14

Dresser-Rand Group Inc. 2005 Stock Incentive Plan (incorporated
    by reference to Exhibit 10.16 to Dresser-Rand Group
    Inc.s Registration Statement on
    Form S-1/A,
    filed July 18, 2005, File
    No. 333-124963).*10.15

Dresser-Rand Group Inc. 2005 Directors Stock Incentive Plan
    (incorporated by reference to Exhibit 10.18 to Dresser-Rand
    Group Inc.s Registration Statement on
    Form S-1/A,
    filed July 18, 2005, File
    No. 333-124963).*10.16

Form of Subscription Agreement (incorporated by reference to
    Exhibit 10.14 to Dresser-Rand Group Inc.s
    Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).*10.17

Form of Management Stock Subscription Agreement (incorporated by
    reference to Exhibit 10.15 to Dresser-Rand Group
    Inc.s Registration Statement on
    Form S-1,
    filed May 16, 2005, File
    No. 333-124963).*10.18

Annual Incentive Plan (incorporated by reference to
    Exhibit 10.17 to Dresser-Rand Group Inc.s
    Registration Statement on
    Form S-1/A,
    filed July 18, 2005, File
    No. 333-124963).*10.19

Form of Indemnification Agreement (incorporated by reference to
    Exhibit 10.1 to Dresser-Rand Group Inc.s Current
    Report on
    Form 8-K,
    filed December 9, 2005, File
    No. 001-32586).* 44




---



##### Table of Contents



10.20

Stock Option Agreement between Dresser-Rand Group Inc. and
    Lonnie A. Arnett (incorporated by reference to
    Exhibit 10.23 to Dresser-Rand Group Inc.s
    Registration Statement on
    Form S-1/A,
    filed March 3, 2006, File
    No. 333-131300).*10.21

Performance Stock Option Agreement between Dresser-Rand Group
    Inc. and Lonnie A. Arnett (incorporated by reference to
    Exhibit 10.24 to Dresser-Rand Group Inc.s
    Registration Statement on
    Form S-1/A,
    filed March 3, 2006, File
    No. 333-131300).*10.22

Restricted Shares Agreement between Dresser-Rand Group Inc. and
    Lonnie A. Arnett (incorporated by reference to
    Exhibit 10.25 to Dresser-Rand Group Inc.s
    Registration Statement on
    Form S-1/A,
    filed March 3, 2006, File
    No. 333-131300).*10.23

Offer Letter, dated March 18, 2005, from Dresser-Rand Group
    Inc. to Leonard Anthony (incorporated by reference to
    Exhibit 10.26 to Dresser-Rand Group Inc.s Annual
    Report on
    Form 10-K,
    filed March 7, 2007, File
    No. 001-32586).*10.24

Offer Letter, dated July 15, 2007, from Dresser-Rand Group
    Inc. to Mark Baldwin (incorporated by reference to
    Exhibit 10.1 to Dresser-Rand Group Inc.s Current
    Report on
    Form 8-K,
    filed July 19, 2007, File
    No. 001-32586).*10.25

Offer Letter, dated August 27, 2007, from Dresser-Rand
    Group Inc. to Mark Mai (incorporated by reference to
    Exhibit 10.3 to Dresser-Rand Group Inc.s Quarterly
    Report on
    Form 10-Q,
    filed October 31, 2007, File
    No. 001-32586).*10.26

Participation Agreement, dated as of December 20, 2007, by
    and among Dresser-Rand S.A. (France), as Construction Agent and
    Lessee, Citibank International plc (Paris Branch), as Lessor,
    the Persons named therein as Note Holders, and Citibank
    International plc (Paris Branch) as Agent (incorporated by
    reference to Exhibit 10.1 to Dresser-Rand Group Inc.s
    Current Report on
    Form 8-K,
    filed December 31, 2007, File
    No. 001-32586).10.27

Lease Agreement, dated as of December 28, 2007 by and
    between Citibank International plc (Paris Branch), as Lessor,
    and Dresser-Rand S.A. (France), as Lessee (incorporated by
    reference to Exhibit 10.2 to Dresser-Rand Group Inc.s
    Current Report on
    Form 8-K,
    filed December 31, 2007, File
    No. 001-32586).10.28

Parent Guaranty, dated as of December 28, 2007 by
    Dresser-Rand Group Inc. (incorporated by reference to
    Exhibit 10.3 to Dresser-Rand Group Inc.s Current
    Report on
    Form 8-K,
    filed December 31, 2007, File
    No. 001-32586).10.29

Amendment No. 1 to the Dresser-Rand Group Inc. 2005
    Directors Stock Incentive Plan.10.30

Amendment No. 2 to the Dresser-Rand Group Inc. 2005
    Directors Stock Incentive Plan.21.1

List of Subsidiaries23.1

Consent of PricewaterhouseCoopers LLP24

Powers of Attorney (included in signature page of this
    Form 10-K)31.1

Certification of the President and Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

Certification of the Executive Vice President and Chief
    Financial Officer pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.32.1

Certification of the President and Chief Executive Officer
    pursuant to Title 18, United States Code,
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002 (furnished herewith). (This
    certification is being furnished and shall not be deemed
    filed with the SEC for purposes of Section 18
    of the Exchange Act, or otherwise subject to the liability of
    that section, and shall not be deemed to be incorporated by
    reference into any filing under the Securities Act or the
    Exchange Act, except to the extent that the Registrant
    specifically incorporates it by reference.)32.2

Certification of the Executive Vice President and Chief
    Financial Officer pursuant to Title 18, United States Code,
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002 (furnished herewith). (This
    certification is being furnished and shall not be deemed
    filed with the SEC for purposes of Section 18
    of the Exchange Act, or otherwise subject to the liability of
    that section, and shall not be deemed to be incorporated by
    reference into any filing under the Securities Act or the
    Exchange Act, except to the extent that the Registrant
    specifically incorporates it by reference.)     *
    
    Executive Compensation Plans and Arrangements. 45




---



##### Table of Contents



SIGNATURES
      By:
    /s/  VINCENT
    R. VOLPE, JR.   Title:
    President, Chief Executive   Form 10-K Form 10-K
  Form 10-K
  Signature

Title

Date/s/  VINCENT
    R. VOLPE JR.Vincent
    R. Volpe Jr.

President, Chief Executive 
    Officer and Director

February 26, 2008/s/  MARK
    E. BALDWINMark
    E. Baldwin

Executive Vice President 
    and Chief Financial Officer

February 26, 2008/s/  LONNIE
    A. ARNETTLonnie
    A. Arnett

Vice President, Controller
    and Chief Accounting Officer

February 26, 2008/s/  WILLIAM
    E. MACAULAYWilliam
    E. Macaulay

Chairman of the Board of
    Directors

February 26, 2008/s/  RITA
    V. FOLEYRita
    V. Foley

Director

February 26, 2008/s/  JOSEPH
    C. WINKLERJoseph
    C. Winkler

Director

February 26, 2008/s/  MICHAEL
    L. UNDERWOODMichael
    L. Underwood

Director

February 26, 2008/s/  PHILIP
    R. ROTHPhilip
    R. Roth

Director

February 26, 2008/s/  LOUIS
    A. RASPINOLouis
    A. Raspino

Director

February 26, 2008/s/  JEAN-PAUL
    VETTIERJean-Paul
    Vettier

Director

February 26, 2008  46




---



##### 



DRESSER-RAND
    GROUP INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
   
 PageReport of Independent Registered Public
    Accounting Firm

F-2Consolidated Financial StatementsConsolidated Statement of Income for the years
    ended December 31, 2007, 2006, and 2005

F-3Consolidated Balance Sheet at December 31,
    2007 and 2006

F-4Consolidated Statement of Cash Flow for the years
    ended December 31, 2007, 2006 and 2005

F-5Consolidated Statement of Changes in
    Stockholders Equity for the years ended December 31,
    2007, 2006, and 2005

F-6Notes to Consolidated Financial Statements

F-7 to F-40   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     Internal Control  Integrated
    Framework
          F-2




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  CONSOLIDATED
    STATEMENT OF INCOME
  Years Ended December 31,2007


2006


2005($ in millions, except per share amounts)Net sales of products

$
1,339.5


$
1,210.7


$
974.7Net sales of services


325.5



290.8



232.2Other operating revenue










1.3Total revenues


1,665.0



1,501.5



1,208.2Cost of products sold


989.5



900.5



749.7Cost of services sold


226.6



197.3



171.3Cost of sales


1,216.1



1,097.8



921.0Gross profit


448.9



403.7



287.2Selling and administrative expenses (2006 amount includes $23.6
    of stock based compensation  exit units)


239.0



228.8



164.0Research and development expenses


12.8



10.4



7.1Curtailment amendment






(11.8
)


Income from operations


197.1



176.3



116.1Interest expense, net


(36.8
)


(47.9
)


(57.0
)Early redemption premium on debt










(3.7
)Other income (expense), net


7.3



8.9



(2.8
)Income before income taxes


167.6



137.3



52.6Provision for income taxes


60.9



58.5



15.5Net income

$
106.7


$
78.8


$
37.1Net income per common share  basic and diluted

$
1.25


$
0.92


$
0.56Weighted average shares outstanding  (In
    thousands)Basic


85,470



85,453



66,547Diluted


85,586



85,453



66,547    F-3




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  CONSOLIDATED
    BALANCE SHEET
  December 31,2007


2006($ in millions, except per share amounts)AssetsCurrent assetsCash and cash equivalents

$
206.2


$
146.8Accounts receivable, less allowance for losses of $5.9 at 2007
    and $6.1 at 2006


311.9



305.1Inventories, net


265.3



183.0Prepaid expenses


23.0



20.2Deferred income taxes, net


19.3



13.9Total current assets


825.7



669.0Property, plant and equipment, net


216.7



223.1Goodwill


447.5



410.5Intangible assets, net


440.0



446.9Other assets


21.0



21.8Total assets

$
1,950.9


$
1,771.3Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable and accruals

$
358.4


$
303.7Customer advance payments


239.9



137.4Accrued income taxes payable


22.0



30.3Loans payable


0.2



0.1Total current liabilities


620.5



471.5Deferred income taxes


48.4



26.6Postemployment and other employee benefit liabilities


80.6



113.7Long-term debt


370.3



505.6Other noncurrent liabilities


25.9



22.0Total liabilities


1,145.7



1,139.4Commitments and contingencies (Notes 10, 12 through 18)Stockholders EquityCommon stock, $0.01 par value, 250,000,000 shares
    authorized; and, 85,826,523 and 85,477,160 shares issued
    and outstanding, respectively


0.9



0.9Additional paid-in capital


527.3



518.8Retained earnings


229.7



123.1Accumulated other comprehensive income (loss)


47.3



(10.9
)Total stockholders equity


805.2



631.9Total liabilities and stockholders equity

$
1,950.9


$
1,771.3    F-4




---



##### Table of Contents



Dresser-Rand
    Group Inc.
 Consolidated
    Statement of Cash Flow  Years Ended December 31,2007


2006


2005($ in millions)Cash flows from operating activitiesNet income

$
106.7


$
78.8


$
37.1Adjustments to arrive at net cash provided by operating
    activities:Depreciation and amortization


49.3



50.4



61.4Stock-based compensation


8.1



26.0



4.1Deferred income taxes


(1.7
)


14.1



(2.2
)Amortization of debt financing costs


6.9



5.7



9.5Provision for losses on inventory


0.4



0.6



0.9(Gain) loss on sale of property, plant and equipment


(0.6
)


0.4



Curtailment amendment






(11.8
)


Working capital and otherCustomer advances


93.9



48.2



49.9Accounts payable


30.1



6.3



20.3Accounts receivable


2.4



(28.2
)


(0.2
)Inventories


(71.6
)


(35.2
)


28.7Other


(7.9
)


8.8



2.9Net cash provided by operating activities


216.0



164.1



212.4Cash flows from investing activitiesCapital expenditures


(23.7
)


(19.7
)


(15.5
)Acquisitions, net of cash


(8.1
)






(55.0
)Proceeds from entity investment dispositons










10.0Proceeds from sales of property, plant and equipment


5.8



0.2



1.0Net cash used in investing activities


(26.0
)


(19.5
)


(59.5
)Cash flows from financing activitiesPayments of long-term debt


(137.2
)


(100.1
)


(211.1
)Payments for debt financing costs


(4.5
)






Proceeds from long-term debt


0.5







Proceeds from exercise of stock options


0.4







Proceeds from initial public offering, net










608.9Dividends paid










(557.7
)Payments of short-term borrowings










(1.6
)Issuance of common stock










1.4Net cash used in financing activities


(140.8
)


(100.1
)


(160.1
)Effect of exchange rate changes on cash and cash equivalents


10.2



4.3



(6.3
)Net increase (decrease) in cash and cash equivalents


59.4



48.8



(13.5
)Cash and cash equivalents, beginning of the period


146.8



98.0



111.5Cash and cash equivalents, end of period

$
206.2


$
146.8


$
98.0    F-5




---



##### Table of Contents



Dresser-Rand
    Group Inc.
 Consolidated
    Statement of Changes in Stockholders Equity  AccumulatedAdditional





Other


TotalCommon


Paid-in


Retained


Comprehensive


ComprehensiveStock


Capital


Earnings


Income (Loss)


Income (Loss)


Total($ in millions)At December 31, 2004

$
0.6


$
436.6


$
7.2


$
8.5






$
452.9Stock-based compensation






5.6















5.6Initial public offering net proceeds


0.3



608.6















608.9Cash dividends






(557.6
)














(557.6
)Net income










37.1






$
37.1



Other comprehensive income (loss)Minimum pension liability, net of $2.7 tax














(5.1
)


(5.1
)


Foreign currency adjustments














(27.1
)


(27.1
)


Total comprehensive income

















$
4.9



4.9At December 31, 2005


0.9



493.2



44.3



(23.7
)






514.7Stock-based compensation






26.0















26.0Other






(0.4
)














(0.4
)Net income










78.8






$
78.8



Other comprehensive income (loss)Minimum pension liability, net of $0.2 tax














0.3



0.3



Foreign currency adjustments














18.0



18.0



Adoption of Statement No. 158, net of $2.6 tax














(5.5
)






(5.5
)Total comprehensive income

















$
97.1



97.1At December 31, 2006


0.9



518.8



123.1



(10.9
)






631.9Stock-based compensation






8.5















8.5Adoption of FASB Interpretation No. 48










(0.1
)










(0.1
)Net income










106.7






$
106.7



Other comprehensive incomePension and other postretirement benefit plans  net
    of $15.3 taxNet gain arising during year














8.1



8.1



Curtailment amendment














11.4



11.4



Plan amendments














4.8



4.8



Less: amortization of prior service credit included in net
    periodic costs














(0.3
)


(0.3
)


Foreign currency adjustments














34.2



34.2



Total comprehensive income

















$
164.9



164.9At December 31, 2007

$
0.9


$
527.3


$
229.7


$
47.3






$
805.2    F-6




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 ($ in millions, except per share and per unit amounts)
  1.
    Business
    Activities and Certain Related Party Transactions      The
    Acquisition
    Ingersoll
    Rand Transition Services Agreement
    License
    Agreement
  250-kilowatt
  Dresser-Rand
    Name
    2.
    Summary
    of Significant Accounting Policies    Principles
    of Consolidation
   F-7




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
    Use of
    Estimates
    Cash
    and Cash Equivalents
    Allowance
    for Losses on Receivables
    Inventories
    Property,
    Plant and Equipment
    Capitalized
    Software
  No. 98-1 Accounting for the Costs of Computer Software Developed or
    Obtained for Internal Use
  Impairment
    of Long-Lived Assets
  Accounting for the Impairment or Disposal
    of Long Lived Assets
 F-8




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  Intangible
    Assets
  Goodwill
    and Other Intangible Assets non-amortizable
    Income
    Taxes
    Product
    Warranty
    Environmental
    Costs
    Revenue
    Recognition
   F-9




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
      
    The delivered unit(s) has value to the client on a stand-alone
    basis.
    There is objective evidence of the fair value of the undelivered
    unit(s).      No. 99-19, Reporting Revenue Gross as a Principal versus Net as an
    Agent
  Taxes
    Imposed on Revenue Transactions
    Distribution
    and Shipping Costs
    Research
    and Development Costs
    Comprehensive
    Income (Loss)
    Foreign
    Currency
  non-U.S. consolidated
  non-U.S. entities
 F-10




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  Financial
    Instruments
      Accounting for
    Derivative Instruments and Hedging Activities
  Stock-based
    Compensation
  Share-Based Payment Staff
    Accounting Bulletin No. 107.
  Conditional
    Asset Retirement Obligations
  Accounting for
    Conditional Asset Retirement Obligations.
  New
    Accounting Standards
  Fair Value Measurements
 F-11




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  Employers Accounting for Defined Benefit Pension and
    Other Post Retirement Plans an amendment of FASB
    Statements No. 87, 88, 106 and 132(R).
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities
  Business Combinations Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  
    More assets acquired and liabilities assumed to be measured at
    fair value as of the acquisition date.
    Liabilities related to contingent consideration to be remeasured
    at fair value in each subsequent reporting period.
    An acquirer to expense acquisition-related costs (e.g., deal
    fees for attorneys, accountants, investment bankers).
    Noncontrolling interests in subsidiaries initially to be
    measured at fair value and classified as a separate component of
    equity.    3.
    Acquisitions      Inventories

$
4.6Property, plant and equipment , net


0.5Amortizable intangible assets


3.0Cash paid  net

$
8.1    F-12




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
    Accounts receivable

$
12.5Inventories


7.3Prepaid expenses and other current assets


0.5Total current assets


20.3Property, plant and equipment , net


19.0Amortizable intangible assets


19.6Goodwill


7.1Total assets acquired


66.0Accounts payable and accruals


9.4Other liabilities


2.0Total liabilities assumed


11.4Cash paid  net

$
54.6         Customer relationships

$
10.7



19 yearsTrade names


5.8



38 yearsTechnology


4.6



25 yearsBacklog


1.5



1 yearTotals

$
22.6     4.
    Sale of
    common stock  3 8
 F-13




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  5.
    Earnings
    per Share    Years Ended December 31,2007


2006


2005(Shares in thousands)Net income

$
106.7


$
78.8


$
37.1Weighted -average common shares outstanding:Basic


85,470



85,453



66,547Dilutive effect of stock compensation awards


116



*



*Diluted


85,586



85,453



66,547Income per share of common stock  basic and diluted:

$
1.25


$
0.92


$
0.56     *
    
    Anti-dilutive  6.
    Inventories    December 31,2007


2006Raw materials and supplies

$
123.9


$
112.7Work-in-process
    and finished goods


330.2



210.0454.1



322.7Less:Progress payments


(188.8
)


(139.7
)Total

$
265.3


$
183.0    F-14




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  7.
    Property,
    Plant and Equipment    December 31,2007


2006Cost:Land

$
9.6


$
10.2Buildings and improvements


80.4



74.1Machinery and equipment


215.4



195.7305.4



280.0Less: Accumulated depreciation


(88.7
)


(56.9
)Property plant and equipment, net

$
216.7


$
223.1     8.
    Intangible
    Assets and Goodwill    December 31, 2007


Weighted


December 31, 2006Accumulated


Average





AccumulatedCost


Amortization


Useful Lives


Cost


AmortizationTrade names

$
88.7


$
6.9



40 years


$
87.6


$
4.6Customer relationships


246.9



20.2



39 years



237.5



13.0Software


30.6



9.7



10 years



30.5



6.6Existing technology


127.1



16.5



25 years



126.6



11.1Order backlog










19 months



26.3



26.3Non-compete agreement










2 years



4.4



4.4Total amortizable intangible assets

$
493.3


$
53.3






$
512.9


$
66.0       December 31,2007


2006Beginning balance

$
410.5


$
393.3Dispositions/Adjustments






(11.7
)TES acquisition






1.2Foreign currency adjustments


37.0



27.7Ending balance

$
447.5


$
410.5    F-15




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  9.
    Accounts
    Payable and Accruals    December 31,2007


2006Accounts payable

$
204.8


$
158.4Accruals:Payroll and benefits


47.3



34.9Warranties


28.5



23.4Taxes other than income


19.2



25.1Third party commissions


14.5



12.0Interest


6.6



6.9Insurance and claims


6.4



8.5Legal, audit and consulting


4.7



7.8Pension and postretirement benefits


2.8



5.4Other


23.6



21.3Total accounts payable and accruals

$
358.4


$
303.7   10.
    Income
    Taxes    Years Ended December 31,2007


2006


2005United States

$
78.6


$
47.1


$
4.9Foreign


89.0



90.2



47.7Total

$
167.6


$
137.3


$
52.6     Years Ended December 31,2007


2006


2005Current tax expenseUnited States

$
27.0


$
12.8


$
Foreign


35.6



31.6



17.7Total current


62.6



44.4



17.7Deferred tax expense (benefit)United States


1.6



11.8



2.1Foreign


(3.3
)


2.3



(4.3
)Total deferred


(1.7
)


14.1



(2.2
)Total provision for income taxes

$
60.9


$
58.5


$
15.5  F-16




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
    Years Ended December 31,2007


2006


2005U.S. Statutory rate


35.0
%


35.0
%


35.0
%Increase (decrease) in rates resulting from:Foreign operations


0.3
%


0.2
%


0.8
%State and local income taxes, net of U.S. tax


1.2
%


1.6
%


0.6
%Valuation allowances


0.2
%


1.5
%


(1.8
)%Export and manufacturing deductions


(1.0
)%


(1.9
)%


(7.7
)%Stock-based compensation


0.8
%


6.3
%


2.6
%Other


(0.2
)%


(0.1
)%


(0.1
)%Effective tax rate


36.3
%


42.6
%


29.4
%   Accounting for Uncertainty in Income Taxes
  Balance at January 1, 2007

$
2.1Additions based on tax positions related to the current year


0.2Settlements


(0.2
)Foreign currency adjustments


0.1Balance at December 31, 2007

$
2.2   Ingersoll-Rand.
  Jurisdiction

Open YearsBrazil


2002 - 2006Canada


2003 - 2006France


2004 - 2006Germany


2003 - 2006India


2000 - 2006Italy


2002 - 2006Malaysia


2000 - 2006Netherlands


2004 - 2006Norway


2004 - 2006United Kingdom


2004 - 2006United States


2004 - 2006Venezuela


2003 - 2006    F-17




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
    December 31,2007


2006Deferred tax liabilitiesDepreciation and amortization

$
63.7


$
51.3Deferred tax (assets)Inventories


(6.8
)


(6.4
)Other accrued expenses


(5.3
)


(2.1
)Tax net operating loss carryforwards


(7.4
)


(6.3
)Pension and employee benefits


(20.6
)


(28.1
)Total deferred tax (assets)


(40.1
)


(42.9
)Valuation allowances


5.5



4.3Net deferred tax (assets)


(34.6
)


(38.6
)Total net deferred tax liabilities

$
29.1


$
12.7Presented in the balance sheet as:Current deferred tax (assets)

$
(19.3
)

$
(13.9
)Non-current deferred tax liabilities


48.4



26.6Total net deferred tax liabilities

$
29.1


$
12.7          F-18




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  11.
    Long-Term
    Debt  Senior
    Secured Credit Facility
      1 2 1 2
      Senior
    Subordinated Notes
  3 8
 F-19




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
        December 31,2007


2006Senior subordinated notes

$
370.0


$
370.0Senior secured credit facility






135.6Other debt


0.5



0.1Total debt


370.5



505.7Less: current maturity


(0.2
)


(0.1
)Total long-term debt

$
370.3


$
505.6     12.
    Pension
    Plans  Non-U.S. plans non-U.S. plans
 F-20




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
    December 31,2007


2006Change in projected benefit obligationsBenefit obligation at beginning of the period

$
351.0


$
326.8Service cost


6.9



6.2Interest cost


18.6



17.5Employee contributions


0.3



0.2Expenses paid


(0.6
)


(0.9
)Actuarial (gain) loss


(15.8
)


3.0Plan amendments


0.2



0.5Benefits paid


(17.0
)


(15.2
)Foreign currency adjustments


7.0



12.9Benefit obligation at end of the period

$
350.6


$
351.0Change in plan assetsFair value at beginning of the period

$
284.1


$
252.9Actual return on assets


22.4



26.8Company contributions


5.7



10.9Employee contributions


0.3



0.2Expenses paid


(0.6
)


(0.9
)Benefits paid


(17.0
)


(15.2
)Foreign currency adjustments


3.8



9.4Fair value of assets at end of the period

$
298.7


$
284.1Funded statusUnfunded benefit obligation

$
51.9


$
66.9Contributions after measurement date


(0.5
)


(0.2
)Balance sheet liability

$
51.4


$
66.7Amounts recognized in the balance sheet consist of:Current liabilities

$
1.8


$
4.4Noncurrent liabilities


49.6



62.3Total

$
51.4


$
66.7Amounts recognized in accumulated other comprehensive (income)
    loss consists of:Net actuarial (gain) loss

$
(4.9
)

$
10.9Prior service cost


0.7



0.5Total

$
(4.2
)

$
11.4    F-21




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  December 31,2007


2006Weighted-average assumptions used for benefit obligationsDiscount rateU.S. plans


6.10%



5.60%Non-U.S.
    plans


5.82%



4.94%Rate of compensation increaseU.S. plans


N/A



N/ANon-U.S.
    plans


4.27%



3.88%     Years Ended December 31,2007


2006


2005Net periodic pension costService cost

$
6.9


$
6.2


$
5.1Interest cost


18.6



17.5



17.1Expected return on plan assets


(21.9
)


(20.1
)


(19.4
)Amortization of net losses






0.1



Net periodic benefit cost


3.6



3.7



2.8Amounts recognized in other comprehensive (income) lossNet actuarial (gain) loss


(15.8
)


1.6



7.8Prior service cost


0.2



0.5



Amortization of net losses






(0.1
)


Total recognized in othercomprehensive (income) loss


(15.6
)


2.0



7.8Total recognized

$
(12.0
)

$
5.7


$
10.6Weighted-average assumptions used for net periodic pension costDiscount rateU.S. plans


5.60%



5.65%



5.75%Non-U.S.
    plans


4.94%



4.89%



5.31%Rate of compensation increase U.S. plans


N/A



N/A



N/ANon-U.S.
    plans


3.88%



3.66%



3.75%Expected return on plan assets U.S. plans


8.50%



8.50%



8.50%Non-U.S.
    plans


6.87%



6.48%



7.09%       December 31,2007


2006Projected Benefit Obligation

$
261.3


$
349.9Accumulated Benefit Obligation


253.5



333.2Fair Value of Plan Assets


217.1



283.4    F-22




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
      December 31,2007


2006Asset Category*Equity securities


60
%


60
%Debt securities


34
%


34
%Other


6
%


6
%Total


100
%


100
%     *
    
    Reflects weighted average percentage allocations of U.S. and
    non-U.S.
    plans.    non-U.S. plans
    Defined
    Contribution Plans
  non-U.S. defined non-U.S. benefit
  13.
    Post-retirement
    Benefits other than Pensions   F-23




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
          December 31,2007


2006Change in benefit obligationsBenefit obligation at beginning of the period

$
50.0


$
54.9Service cost


1.4



1.7Interest cost


2.4



2.4Actuarial losses


2.5



5.3Benefits paid


(0.1
)


(0.1
)Plan amendments


(8.2
)


0.1Curtailment amendments


(18.6
)


(14.3
)Unfunded benefit obligation at end of the period and balance
    sheet liability

$
29.4


$
50.0Amounts recognized in the balance sheet:Current liabilities

$
0.4


$
0.2Noncurrent liabilities


29.0



49.8Total

$
29.4


$
50.0Amounts recognized in accumulated other comprehensive (income)
    loss:Net loss

$
7.7


$
5.3Net prior service (credit) cost


(26.0
)


0.1Total

$
(18.3
)

$
5.4      F-24




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
      Years Ended December 31,2007


2006


2005Net periodic post-retirement benefits (income) costService cost

$
1.4


$
1.7


$
2.0Interest cost


2.4



2.4



2.7Amortization ofNet prior service (credit)


(0.7
)






Net loss


0.1







Curtailment amendment






(11.8
)


Total periodic post-retirement benefits cost (income)


3.2



(7.7
)


4.7Amounts recognized as other comprehensive (income) lossNet actuarial loss


2.5



5.3



Curtailment amendment


(18.6
)






Plan amendments


(8.2
)


0.1



Amortization of prior service credit and net loss


0.6







Total recognized in comprehensive (income) loss


(23.7
)


5.4



Total recognized

$
(20.5
)

$
(2.3
)

$
4.7   Years Ended December 31,2007


2006


2005Weighted-average discount rate assumption used to determineBenefit obligations at end of period


6.20
%


5.70
%


5.80
%Net periodic benefit cost for the year ended December 31


5.70
%


5.80
%


5.75
%Assumed health care cost trend ratesCurrent year trend rate


10.00
%


10.00
%


10.00
%Ultimate trend rate


5.00
%


5.00
%


5.00
%Year that the rate reaches the ultimate trend rateBenefit obligations at end of period


2013



2012



2011Net periodic benefit cost for the year


2012



2011



2010       1%

1%Increase

DecreaseEffect on total service and interest cost components

$
0.8


$
(0.8
)Effect on postretirement benfit obligations


5.1



(3.2
)   14.
    Financial
    Instruments   F-25




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
      15.
    Commitments
    and Contingencies ( in millions)             F-26




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  16.
    Warranties      Years Ended December 31,2007


2006


2005Beginning balance

$
23.4


$
21.5


$
21.1Provision for warranties issued during period


18.9



17.2



13.5Adjustments to warranties issued in prior periods


2.6



(0.4
)


1.7Payments during period


(17.9
)


(16.5
)


(13.1
)Foreign currency adjustments


1.5



1.6



(1.7
)Ending balance

$
28.5


$
23.4


$
21.5   17.
    Incentive
    Stock-Based Compensation Plans      Weighted-AverageShares


Grant PriceBalance, December 31, 2004






Granted


107,463


$
21.00Balance, December 31, 2005


107,463



21.00Granted


298,900



24.91Forfeited


(4,750
)


25.10Balance, December 31, 2006


401,613



23.86Granted


814,046



26.26Excercised


(15,982
)


25.15Forfeited


(102,618
)


25.42Balance, December 31, 2007


1,097,059


$
25.47Excerisable December 31, 2005






Excerisable December 31, 2006


83,284


$
21.00Excerisable December 31, 2007


139,184


$
22.34      F-27




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  SEC Staff Accounting
    Bulletin No. 107
  2007


2006


2005Option term (years)


5.7



6.0



4.0Volatility


34.5
%


32.7
%


32.1
%Risk-free interest rate (zero coupon US Treasury note)


4.75
%


4.65
%


4.50
%Dividend yield










       Weighted-AverageShares


Grant PriceNonvested at December 31, 2004






Granted


29,801


$
21.00Nonvested at December 31, 2005


29,801



21.00Vested


(7,450
)


21.00Nonvested at December 31, 2006


22,351



21.00Granted


426,570



26.06Vested


(8,982
)


21.77Forfeited


(38,582
)


25.50Nonvested at December 31, 2007


401,357


$
25.92        F-28




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
      2005


2004Expected volatility


36.2
%


36.2
%Expected dividend yield






Expected average term (in years)


4.0



4.0Risk-free interest rate


3.80
%


3.18
%     paid-in-capital
      18.
    Significant
    Customers and Concentration of Credit Risk     F-29




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  19.
    Other
    Income (Expense)    Years Ended December 31,2007


2006


2005Foreign currency gains (losses)

$
5.5


$
8.9


$
(2.2
)Gain on sale of investment


2.3







Other


(0.5
)






(0.6
)Total other income (expense), net

$
7.3


$
8.9


$
(2.8
)   20.
    Other
    Operating Revenues    21.
    Segment
    Information:          F-30




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  Years Ended December 31,2007


2006


2005RevenuesNew units

$
813.5


$
749.6


$
576.6Aftermarket parts and services


851.5



751.9



631.6Total revenues

$
1,665.0


$
1,501.5


$
1,208.2Operating incomeNew units

$
56.4


$
47.3


$
20.8Aftermarket parts and services


213.8



204.4



141.4Unallocable


(73.1
)


(75.4
)


(46.1
)Total operating income

$
197.1


$
176.3


$
116.1Depreciation and amortizationNew units

$
26.4


$
26.9


$
29.5Aftermarket parts and services


22.9



23.5



31.9Total depreciation and amortization

$
49.3


$
50.4


$
61.4GoodwillNew units

$
131.6


$
117.9


$
114.8Aftermarket parts and services


315.9



292.6



278.5Total goodwill

$
447.5


$
410.5


$
393.3Total assets (including goodwill)New units

$
315.0


$
280.7


$
253.7Aftermarket parts and services


697.8



605.7



541.6Unallocable


938.1



884.9



862.6Total assets

$
1,950.9


$
1,771.3


$
1,657.9Revenues by destinationNorth America

$
693.0


$
541.1


$
498.6Latin America


218.6



213.7



156.9Europe


300.2



362.3



231.4Asia-Pacific


202.9



204.3



135.6Middle East, Africa


250.3



180.1



185.7Total revenues

$
1,665.0


$
1,501.5


$
1,208.2Long-lived assets by geographic areaNorth America

$
149.3


$
160.4


$
169.0Latin America


3.7



3.3



3.1Europe


54.7



52.0



49.7Asia-Pacific


9.0



7.4



6.9Middle East, Africa










Total long-lived assets

$
216.7


$
223.1


$
228.7    F-31




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
    22. Selected
    Unaudited Quarterly Financial Data:
  Three Months EndedMarch 31,


June 30,


September 30,


December 31,2007


2007


2007


2007Total revenues

$
314.4


$
441.2


$
389.3


$
520.1Gross profit


91.6



118.9



98.4



140.0Net income


15.4



26.2



21.3



43.8Net income per share-basic and diluted


0.18



0.31



0.25



0.51   Three Months EndedMarch 31,


June 30,


September 30,


December 31,2006


2006


2006


2006Total revenues

$
291.5


$
424.0


$
310.3


$
475.7Gross profit


67.0



96.4



99.3



141.0Net income


12.3



10.7



22.9



32.9Net income per share-basic and diluted


0.14



0.13



0.27



0.38   23. Supplemental
    Cash Flow Information:
  Years Ended December 31,2007


2006


2005Cash paid for interest

$
37.6


$
45.6


$
50.5Cash paid for income taxes, net of refunds


71.1



15.9



27.0   24.
    Supplemental
    guarantor financial information:     F-32




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF INCOME
    For the Year ended December 31, 2007
  SubsidiarySubsidiary


Non-


ConsolidatingIssuer


Guarantors


Guarantors


Adjustments


TotalNet sales

$



$
1,115.9


$
679.9


$
(130.8
)

$
1,665.0Cost of sales






860.7



471.6



(116.2
)


1,216.1Gross profit






255.2



208.3



(14.6
)


448.9Selling and administrative expenses


114.0



52.3



90.4



(17.7
)


239.0Research and development expenses






12.6



0.2







12.8(Loss) income from operations


(114.0
)


190.3



117.7



3.1



197.1Equity earnings in affiliates


174.8



1.5







(176.3
)


Interest expense, net


(35.1
)


(0.4
)


(1.3
)






(36.8
)Intercompany interest and fees


28.0



(1.7
)


(26.3
)






Other income (expense), net


7.6



(1.7
)


1.4







7.3Income before income taxes


61.3



188.0



91.5



(173.2
)


167.6(Benefit) provision for income taxes


(45.4
)


72.9



33.4







60.9Net income

$
106.7


$
115.1


$
58.1


$
(173.2
)

$
106.7  F-33




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF INCOME
    For the Year ended December 31, 2006
  SubsidiarySubsidiary


Non-


ConsolidatingIssuer


Guarantors


Guarantors


Adjustments


TotalNet sales

$



$
920.8


$
718.5


$
(137.8
)

$
1,501.5Cost of sales






694.1



537.3



(133.6
)


1,097.8Gross profit






226.7



181.2



(4.2
)


403.7Selling and administrative expenses


26.5



132.0



71.4



(1.1
)


228.8Research and development expenses






10.0



0.4







10.4Curtailment amendment






(11.8
)










(11.8
)(Loss) income from operations


(26.5
)


96.5



109.4



(3.1
)


176.3Equity earnings in affiliates


179.7



6.5







(186.2
)


Interest expense, net


(44.5
)






(3.4
)






(47.9
)Intercompany interest and fees


(77.7
)


97.1



(19.4
)






Other income, net


5.2



0.1



3.6







8.9Income before income taxes


36.2



200.2



90.2



(189.3
)


137.3(Benefit) provision for income taxes


(42.6
)


71.0



30.1







58.5Net income

$
78.8


$
129.2


$
60.1


$
(189.3
)

$
78.8  F-34




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF INCOME
    For the Year ended December 31, 2005
  SubsidiarySubsidiary


Non-


ConsolidatingIssuer


Guarantors


Guarantors


Adjustments


TotalNet sales

$



$
815.6


$
506.3


$
(113.7
)

$
1,208.2Cost of sales






647.5



381.0



(107.5
)


921.0Gross profit






168.1



125.3



(6.2
)


287.2Selling and administrative expenses


6.1



103.1



57.9



(3.1
)


164.0Research and development expenses






6.8



0.3







7.1(Loss) income from operations


(6.1
)


58.2



67.1



(3.1
)


116.1Equity earnings in affiliates


96.5



12.2







(108.7
)


Interest (expense) income, net


(52.8
)


0.4



(4.6
)






(57.0
)Intercompany interest and fees


5.5



3.4



(8.9
)






Other expense, net


(3.9
)


(0.8
)


(1.8
)






(6.5
)Income before income taxes


39.2



73.4



51.8



(111.8
)


52.6Provision for income taxes


2.1







13.4







15.5Net income

$
37.1


$
73.4


$
38.4


$
(111.8
)

$
37.1  F-35




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  CONDENSED
    CONSOLIDATING BALANCE SHEET
    December 31, 2007
  SubsidiarySubsidiary


Non-


ConsolidatingIssuer


Guarantors


Guarantors


Adjustments


TotalAssetsCash and cash equivalents

$
70.7


$



$
135.5


$



$
206.2Accounts and notes receivables, net


0.1



155.9



155.9







311.9Inventories, net






184.4



86.8



(5.9
)


265.3Prepaid expenses and deferred income taxes


21.1



2.8



18.4







42.3Total current assets


91.9



343.1



396.6



(5.9
)


825.7Investment in affiliates


1,466.5



69.9







(1,536.4
)


Property, plant, and equipment, net






149.1



67.6







216.7Goodwill and intangible assets, net






454.6



432.9







887.5Other assets


18.7







2.3







21.0Total assets

$
1,577.1


$
1,016.7


$
899.4


$
(1,542.3
)

$
1,950.9Liabilities and Stockholders EquityAccounts payable and accruals

$
(36.4
)

$
316.9


$
339.8


$



$
620.3Loans payable






0.2











0.2Total current liabilities


(36.4
)


317.1



339.8







620.5Long-term debt


370.0



0.3











370.3Intercompany accounts


408.5



(482.7
)


74.2







Other non-current liabilities


29.8



63.1



62.0







154.9Total liabilities


771.9



(102.2
)


476.0







1,145.7Common stock


0.9















0.9Other stockholders equity


804.3



1,118.9



423.4



(1,542.3
)


804.3Total stockholders equity


805.2



1,118.9



423.4



(1,542.3
)


805.2Total liabilities and stockholders equity

$
1,577.1


$
1,016.7


$
899.4


$
(1,542.3
)

$
1,950.9  F-36




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  CONDENSED
    CONSOLIDATING BALANCE SHEET
    December 31, 2006
  SubsidiarySubsidiary


Non-


ConsolidatingIssuer


Guarantors


Guarantors


Adjustments


TotalAssetsCash and cash equivalents

$
36.9


$



$
109.9


$



$
146.8Accounts and notes receivables net






145.8



159.3







305.1Inventories, net






133.3



58.7



(9.0
)


183.0Prepaid expenses and deferred income taxes


8.7



4.2



21.2







34.1Total current assets


45.6



283.3



349.1



(9.0
)


669.0Investment in affiliates


1,232.9



59.4







(1,292.3
)


Property, plant, and equipment, net






160.8



62.3







223.1Goodwill and intangible assets, net






466.6



390.8







857.4Other assets


14.9



4.3



2.6







21.8Total assets

$
1,293.4


$
974.4


$
804.8


$
(1,301.3
)

$
1,771.3Liabilities and Stockholders EquityAccounts payable and accruals

$
22.4


$
222.4


$
226.6


$



$
471.4Loans payable










0.1







0.1Total current liabilities


22.4



222.4



226.7







471.5Long-term debt


432.2







73.4







505.6Intercompany accounts


197.9



(344.8
)


146.9







Other non-current liabilities


9.0



99.0



54.3







162.3Total liabilities


661.5



(23.4
)


501.3







1,139.4Common stock


0.9















0.9Other stockholders equity


631.0



997.8



303.5



(1,301.3
)


631.0Total stockholders equity


631.9



997.8



303.5



(1,301.3
)


631.9Total liabilities and stockholders equity

$
1,293.4


$
974.4


$
804.8


$
(1,301.3
)

$
1,771.3  F-37




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
    For the year ended December 31, 2007
  SubsidiarySubsidiary


Non-Guarantors


Guarantors


ConsolidatingIssuer


Entities


Entities


Adjustments


TotalCash flows from operating activities:Net cash (used in) provided by operating activities

$
(110.5
)

$
187.0


$
139.6


$
(0.1
)

$
216.0Cash flows from investing activities:Capital expenditures






(18.6
)


(5.1
)






(23.7
)Acquisitions, net of cash






(8.1
)










(8.1
)Proceeds from the sale of equity investment






5.1



0.7







5.8Net cash used in investing activities






(21.6
)


(4.4
)






(26.0
)Cash flows from financing activities:Net change in debt


(62.2
)


0.5



(75.0
)






(136.7
)Proceeds from exercise of stock options


0.4















0.4Cash paid for debt issuance costs


(4.5
)














(4.5
)Change in intercompany accounts


210.6



(165.9
)


(44.8
)


0.1



Net cash provided by (used in) financing activities


144.3



(165.4
)


(119.8
)


0.1



(140.8
)Effect of exchange rate changes










10.2







10.2Net increase in cash and cash equivalents


33.8







25.6







59.4Cash and cash equivalents, beginning of period


36.9







109.9







146.8Cash and cash equivalents, end of period

$
70.7


$



$
135.5


$



$
206.2  F-38




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
    For the year ended December 31, 2006
   SubsidiarySubsidiary


Non-Guarantors


Guarantors


ConsolidatingIssuer


Entities


Entities


Adjustments


TotalCash flows from operating activities:Net cash (used in) provided by operating activities

$
(59.0
)

$
215.1


$
4.9


$
3.1


$
164.1Cash flows from investing activities:Capital expenditures






(15.3
)


(4.4
)






(19.7
)Proceeds from the sale of equity investment










0.2







0.2Net cash used in investing activities






(15.3
)


(4.2
)






(19.5
)Cash flows from financing activities:Net change in debt


(100.0
)






(0.1
)






(100.1
)Change in intercompany accounts


195.9



(241.4
)


48.6



(3.1
)


Net cash provided by (used in) financing activities


95.9



(241.4
)


48.5



(3.1
)


(100.1
)Effect of exchange rate changes










4.3







4.3Net increase (decrease) in cash and cash equivalents


36.9



(41.6
)


53.5







48.8Cash and cash equivalents, beginning of period






41.6



56.4







98.0Cash and cash equivalents, end of period

$
36.9


$



$
109.9


$



$
146.8  F-39




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 ($ in
    millions, except per share and per unit amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
    For the year ended December 31, 2005
  SubsidiarySubsidiary


Non-Guarantors


Guarantors


ConsolidatingIssuer


Entities


Entities


Adjustments


TotalCash flows from operating activities:Net cash (used in) provided by operating activities

$
(27.8
)

$
169.6


$
68.9


$
1.7


$
212.4Cash flows from investing activities:Capital expenditures






(11.0
)


(4.5
)






(15.5
)Proceeds from the sale of property, plant and equipment






0.3



0.7







1.0Proceeds from the sale of equity investment






10.0











10.0Acquisitions, net of cash


(55.0
)














(55.0
)Net cash used in investing activities


(55.0
)


(0.7
)


(3.8
)






(59.5
)Cash flows from financing activities:Net change in debt


(167.1
)






(45.6
)






(212.7
)Change in intercompany accounts


197.3



(190.7
)


(4.9
)


(1.7
)


Issuance of common units


1.4















1.4Proceeds from initial public offering


608.9















608.9Dividends paid


(557.7
)














(557.7
)Net cash provided by (used in) financing activities


82.8



(190.7
)


(50.5
)


(1.7
)


(160.1
)Effect of exchange rate changes










(6.3
)






(6.3
)Net (decrease) increase in cash and cash equivalents






(21.8
)


8.3







(13.5
)Cash and cash equivalents, beginning of period






63.3



48.2







111.5Cash and cash equivalents, end of period

$



$
41.5


$
56.5


$



$
98.0  F-40




---



##### Table of Contents



Dresser-Rand
    Group Inc.
  SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
 for the years ended December 31, 2007, 2006 and 2005
 ($ in million)
  Dresser-Rand
    Group Inc.
 Schedule II  Valuation and Qualifying
    Accounts and Reserves
  AdditionsBeginning


Charges to








EndingBalance at


Costs and


Charges to





Balance atDescription

01/01/07


Expenses


Other Accounts


Deductions


12/31/2007Allowance for losses on receivables

$
6.1


$
1.2


$



$
1.4
(a)

$
5.9Valuation allowance for deferred tax asset


4.3



0.5



0.7
(b)






5.5      (a)
    
    - Impact of foreign exchange of $(0.2) and write-off of bad
    debts of $1.6.(b)
    
    - Impact of foreign exchange.  AdditionsBeginning


Charges to








EndingBalance at


Costs and


Charges to





Balance atDescription

01/01/06


Expenses


Other Accounts


Deductions


12/31/2006Allowance for losses on receivables

$
8.6


$
0.8


$
0.1


$
3.4
(a)

$
6.1Valuation allowance for deferred tax asset


19.9



2.0



(11.1
)(b)


6.5
(c)


4.3      (a)
    
    - Impact of foreign exchange of $(0.4) and write-off of bad
    debts of $3.8.(b)
    
    - Impact of foreign exchange of $0.6 and reduction of
    goodwill of $(11.7).(c)
    
    - Write-off of deferred tax assets.  AdditionsBeginning


Charges to








EndingBalance at


Costs and


Charges to





Balance atDescription

01/01/05


Expenses


Other Accounts


Deductions


12/31/2005Allowance for losses on receivables

$
14.5


$
(0.2
)

$
0.8
(a)

$
6.5
(b)

$
8.6Valuation allowance for deferred tax asset


23.7



(1.7
)


(2.1
)(c)






19.9      (a)
    
    - Acquisitions(b)
    
    - Impact of foreign exchange of $0.5 and write-off of bad
    debts of $6.0.(c)
    
    - Impact of foreign exchange of $(0.1) and reduction of
    goodwill of $(2.0). S-1