##### 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, 2008oro

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(State or other jurisdiction
    of
    incorporation or organization)

20-1780492(I.R.S. Employer
    Identification No.)   West8 Tower,
    Suite 1000
 10205 Westheimer
    Rd.
 Houston, Texas 77042
 (Address Of Principal Executive
    Offices)
 (713) 354-6100
 (Registrants Telephone
    Number, Including Area Code)
    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
  12b-2
  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

13Item 1B.


Unresolved Staff Comments

21Item 2.


Properties

22Item 3.


Legal Proceedings

22Item 4.


Submission of Matters to a Vote of Security
    Holders

23PART IIItem 5.


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

24Item 6.


Selected Financial Data

26Item 7.


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

27Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk

44Item 8.


Financial Statements and Supplementary Data

44Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure

44Item 9A.


Controls and Procedures

44Item 9B.


Other Information

45PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance

45Item 11.


Executive Compensation

45Item 12.


Security Ownership of Certain Beneficial Owners
    and Management

45Item 13.


Certain Relationships and Related Transactions,
    and Director Independence

45Item 14.


Principal Accounting Fees and Services

45PART IVItem 15.


Exhibits, Financial Statements and Schedules

46EX-10.42: NON-QUALIFIED RETIREMENT PLANEX-10.43: NON-EMPLOYEE DIRECTOR FEE DEFERRAL PLANEX-10.44: OFFER LETTER TO JERRY WALKEREX-10.45: OFFER LETTER TO LUCIANO MOZZATTOEX-10.46: ENGLISH TRANSLATION OF OFFER LETTER TO NICOLETTA GIADROSSIEX-10.47: LETTER OF ASSIGNMENTEX-10.48: LETTER OF AGREEMENTEX-10.49: FORM OF GRANT NOTICEEX-10.50: FORM OF GRANT NOTICEEX-10.51: OFFER LETTEREX-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 clients and our transaction costs;
    better forecast our future revenues;
    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; and
    provide access to the entire organization that enhances
    communications.   3




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
    the increased worldwide demand for oil & gas products
    resulting from economic growth;
    the maturation of production fields worldwide, which requires
    increased use of compression equipment to maintain production
    levels;
    the 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.
 4




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Grow Alliances.
  Expand our Performance-Based Long-Term Service
    Contracts. Availability+
  Introduce New and Innovative Products and
    Technologies. New Product Development.
  Continue to Improve Profitability.
  Selectively Pursue Acquisitions.
 5




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Services
    and Products
    
  Form 10-K.
  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



ü



üGas Turbines & Power Recovery Turbines


up to 50+ MW



ü



ü



ü



ü



ü



ü



üHot Gas Expanders


up to 1600 °F











ü



ü











üReciprocating CompressorsProcess


up to 350k 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.
   6




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Reciprocating Compressors. 2 3
  Steam Turbines.
  New
    Product Development
       7




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Revamp/Upgrade
    Opportunities
      and/or
    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
     9




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Clients
    and/or
  Competition
       10




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Research
    and Development
    Employees
            contract-by-contract
  Environmental
    and Government Regulation
   11




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Intellectual
    Property
         12




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Additional
    Information
  www.dresser-rand.com 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
  The
    economic recession could adversely affect our
    business.
    The
    volatility and disruption of the credit markets may negatively
    impact us.
    Our
    operating results and cash flows could be harmed because of the
    current or other industry downturns.
   13




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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.
    We may
    not be able to integrate our acquisitions successfully, 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
    restated 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. 14




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Economic,
    political and other risks associated with international sales
    and operations could adversely affect our
    business.
    
    changes in foreign currency exchange rates;
    exchange controls which impact our ability to convert currencies;
    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;
    unexpected changes in regulatory requirements; and
    the burden of complying with multiple and potentially
    conflicting laws.       15




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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.
        and/or
 16




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If we
    lose our senior management or key personnel, our business may be
    materially and adversely affected.
    Environmental
    compliance costs and liabilities and responses to concerns
    regarding climate change could affect our financial condition,
    results of operations and cash flows adversely.
  clean-up and/or
  clean-up
  clean-up clean-up and/or
   17




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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
  We may
    be faced with product claims or adverse consequences of
    regulations as a result of the hazardous applications in which
    our products are used.
    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.
   18




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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.
    We
    require a significant amount of cash to operate our business and
    to service our indebtedness. Our ability to generate cash and
    access capital on reasonable terms and conditions depends on
    many factors beyond our control.
   19




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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
  Our
    pension expenses and funding requirements are affected by
    factors outside our control, including the performance of plan
    assets, interest rates, actuarial data and experience and
    changes in laws and regulations.
    Other
    Risks Relating to Us
  We
    have reported material weaknesses in our internal controls over
    financial reporting in prior years.
  Form 10-K
 20




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Controls and Procedures Form 10-K
    The
    market price of our common stock may be volatile.
    
    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, depressions 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   21




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##### Table of Contents



ITEM 2.
    PROPERTIES    Approx.Location

Status

Square Feet


TypePainted Post, New York

Owned/Leased


840,000


Manufacturing and servicesOlean, New York

Owned/Leased


970,000


Manufacturing and servicesWellsville, New York

Owned/Leased


380,000


Manufacturing and servicesBurlington, Iowa

Owned


215,000


Manufacturing and servicesCampinas, Brazil

Owned


36,870


ServicesKongsberg, 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 servicesBielefeld, Germany

Owned


31,000


Manufacturing and servicesHouston, Texas

Owned


109,800


Manufacturing and servicesHouston, Texas

Owned/Leased


173,000


Warehouse and officesShanghai, China

Leased


92,493


Manufacturing and servicesPeterborough, United Kingdom

Owned/Leased


172,000


Manufacturing and services   ITEM 3.
    LEGAL
    PROCEEDINGS ($ in millions)         22




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ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   23




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##### Table of Contents



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


Low2008Quarter ended March 31, 2008

$
40.74


$
27.47Quarter ended June 30, 2008

$
41.76


$
30.49Quarter ended September 30, 2008

$
40.56


$
30.23Quarter ended December 31, 2008

$
30.11


$
12.742007Quarter 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


$
34.33       Issuer
    Purchases of Equity Securities
    ApproximateDollar Valueof SharesTotal Number


That May Yetof Shares


Be PurchasedTotal Number


Average Price


Purchased as Part of


Under theof Shares


Paid per


Publicly Announced Plans


Plans orPeriod

Purchased


Share


or Programs


ProgramsOctober 2008














November 2008


8,628
(1)

$
15.18







December 2008














Total


8,628











     (1)
    
    These shares were delivered to us as payment of withholding
    taxes due on the vesting of restricted stock issued under our
    2005 Stock Incentive Plan. 24




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##### Table of Contents



Performance
    Graph
    Comparison
    of Cumulative Total Return
  
  INDEXED RETURNSBase


Years EndingPeriodCompany/Index


8/5/05


12/30/05


12/29/06


12/31/07


12/31/08Dresser-Rand Group Inc.


$
100



$
106



$
107



$
171



$
76S&P 500 Index



100




103




119




125




79PHLX Oil Service Sector Index



100




110




121




182




73    25




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA ($ in millions, except per share
    amounts)  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations Form 10-K.
  Successor



PredecessorPeriod from



Period fromOctober 30



January 1through



throughYear Ended December 31,


December 31,



October 29,2008


2007


2006


2005


2004



2004Statement of Income Data:Net sales, third parties

$
2,194.7


$
1,665.0


$
1,501.5


$
1,206.9


$
199.9



$
712.5Net sales to affiliates























1.8Other operating revenue














1.3








1.2Total revenues


2,194.7



1,665.0



1,501.5



1,208.2



199.9




715.5Cost of sales


1,576.1



1,216.1



1,097.8



921.0



149.6




538.0Gross profit


618.6



448.9



403.7



287.2



50.3




177.5Selling and administrative expenses(1)


273.8



239.0



228.8



164.0



21.5




122.7Research and development expenses


12.7



12.8



10.4



7.1



1.0




5.7Curtailment amendment/partial settlement(2)


(5.4
)






(11.8
)











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


















1.8




Income from operations


337.5



197.1



176.3



116.1



26.0




49.1Interest (expense) income, net


(29.4
)


(36.8
)


(47.9
)


(57.0
)


(9.7
)



3.2Early redemption premium on debt














(3.7
)







Other (expense) income, net


(6.8
)


7.3



8.9



(2.8
)


(1.8
)



1.9Income before income taxes


301.3



167.6



137.3



52.6



14.5




54.2Provision for income taxes(3)


103.6



60.9



58.5



15.5



7.3




12.0Net income

$
197.7


$
106.7


$
78.8


$
37.1


$
7.2



$
42.2Net income per share- basic and diluted(4)

$
2.36


$
1.25


$
0.92


$
0.56


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

$
234.8


$
216.0


$
164.1


$
212.4


$
17.4



$
57.7Cash flows used in investing activities


(136.3
)


(26.0
)


(19.5
)


(59.5
)


(1,126.9
)



(4.9
)Cash flows (used in) provided by financing activities


(148.6
)


(140.8
)


(100.1
)


(160.1
)


1,217.6




(52.0
)   SuccessorAs of December 31,2008


2007


2006


2005



2004Balance Sheet Data:Cash and cash equivalents

$
147.1


$
206.2


$
146.8


$
98.0



$
111.5Total assets


2,052.2



1,950.9



1,771.3



1,657.9




1,751.1Debt:Current portion of debt


0.2



0.2



0.1



0.1




6.7Long-term debt, net of current maturities


370.1



370.3



505.6



598.1




816.7Total debt


370.3



370.5



505.7



598.2




823.4Stockholders equity


760.2



805.2



631.9



514.7




452.9  26




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##### Table of Contents



(1)
    
    2006 amount includes stock-based compensation
    expense  exit units of $23.6.(2)
    
    See Note 12, 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
    OPERATIONS ($ in millions, except per share
    amounts)  Safe
    Harbor Statement Under Private Securities Litigation
    Reform Act of 1995
  Form 10-K Form 10-K,
  
    the economic recession and the volatility and disruption of the
    credit markets;
    economic or industry downturns;
    our inability to implement our business strategy to increase our
    aftermarket parts and services revenue;
    our inability to generate cash and access capital on reasonable
    terms;
    competition in our markets;
    failure to integrate our acquisitions, or achieve the expected
    benefits from any future acquisitions;
    economic, political, currency and other risks associated with
    our international sales and operations;
    fluctuations in currency values and exchange rates;
    loss of our senior management or other key personnel;
    environmental compliance costs and liabilities;
    failure to maintain safety performance acceptable to our clients;
    failure to negotiate new collective bargaining agreements;
    unexpected product claims or regulations;
    infringement of our intellectual property rights or our
    infringement of others intellectual property rights;
    our pension expenses and funding requirements; and
    other factors described in this
    Form 10-K.  Risk Factors
 27




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Overview
  Business, Form 10-K
    Corporate
    History
          Basis of
    Presentation
  Selected Financial
    Data
     28




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Effects
    of Currency Fluctuations
    Revenues
    Cost of
    Sales
    Selling
    and Administrative Expenses
    Research
    and Development Expenses
    Other
    (Expense) Income
    Depreciation
    and Amortization
   29




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Income
    Taxes
  Selected
    Financial Data
    Bookings
    and Backlog
  New
    Units
    Aftermarket
    Parts and Services
    Letters
    of Credit, Bank Guarantees and Surety Bonds
   30




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Results
    of Operations
  Year
    ended December 31, 2008, compared to the year ended
    December 31, 2007
  Year Ended


Year EndedDecember 31, 2008


December 31, 2007Statement of Operations Data:Total revenues

$
2,194.7



100.0
%

$
1,665.0



100.0
%Cost of sales


1,576.1



71.8



1,216.1



73.0Gross profit


618.6



28.2



448.9



27.0Selling and administrative expenses


273.8



12.5



239.0



14.4Research and development expenses


12.7



0.6



12.8



0.8Curtailment amendment/partial settlement


(5.4
)


(0.2
)






Operating income


337.5



15.3



197.1



11.8Interest expense, net


(29.4
)


(1.3
)


(36.8
)


(2.2
)Other (expense) income, net


(6.8
)


(0.3
)


7.3



0.4Income before income taxes


301.3



13.7



167.6



10.1Provision for income taxes


103.6



4.7



60.9



3.7Net income

$
197.7



9.0
%

$
106.7



6.4
%Bookings

$
2,523.3






$
2,194.7Backlog  end of period

$
2,251.5






$
1,859.3   Total revenues.
  Cost of sales.
  Gross profit.
  Selling and administrative expenses.
  Research and development expenses.
 31




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##### Table of Contents



Curtailment amendment/partial settlement.
  Operating income.
  Interest expense, net.
  Other (expense) income, net.
  Provision for income taxes.
  Bookings and Backlog.
  Segment
    information
       32




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Segment
    Analysis  year ended December 31, 2008, compared
    to year ended December 31, 2007
  Year Ended


Year EndedDecember 31, 2008


December 31, 2007Statement of Segment Data:RevenuesNew units

$
1,202.7



54.8
%

$
813.5



48.9
%Aftermarket parts and services


992.0



45.2
%


851.5



51.1
%Total revenues

$
2,194.7



100.0
%

$
1,665.0



100.0
%Gross profitNew units

$
217.2






$
127.2Aftermarket parts and services


401.4







321.7Total gross profit

$
618.6






$
448.9Operating incomeNew units

$
131.9






$
56.4Aftermarket parts and services


276.7







213.8Unallocated corporate expenses


(71.1
)






(73.1
)Total operating income

$
337.5






$
197.1BookingsNew units

$
1,429.3






$
1,321.5Aftermarket parts and services


1,094.0







873.2Total bookings

$
2,523.3






$
2,194.7Backlog  end of periodNew units

$
1,830.5






$
1,543.0Aftermarket parts and services


421.0







316.3Total backlog

$
2,251.5






$
1,859.3   New
    Units
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
 33




---



##### Table of Contents



Aftermarket
    Parts and Services
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
  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.
 34




---



##### Table of Contents



Gross profit.
  Selling and administrative expenses.
  Stock based compensation  exit
    units.
      Research and development expenses.
  Curtailment amendment.
  Operating income.
 35




---



##### Table of Contents



Interest expense, net.
  Other income (expense), net.
  Provision for income taxes.
  Bookings and Backlog.
 36




---



##### Table of Contents



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   New
    Units
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
 37




---



##### Table of Contents



Aftermarket
    Parts and Services
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
  Liquidity
    and Capital Resources
           38




---



##### Table of Contents



Contractual
    Obligations ( in millions)
    30-year
       39




---



##### Table of Contents



Payments Due by PeriodTotal


2009


2010-2011


2012-2013


ThereafterDebt obligations

$
370.3


$
0.2


$
0.1


$



$
370.0Operating lease obligations


50.3



11.4



18.5



11.2



9.2Postemployment benefits


236.1



19.7



40.2



45.9



130.3Interest


163.7



27.3



54.6



54.6



27.2License agreement(trademark)


2.2



0.4



0.9



0.9



Other investments


5.0



5.0











Total

$
827.6


$
64.0


$
114.3


$
112.6


$
536.7   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
 40




---



##### Table of Contents



Taxes on income  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

$
0.2


$
(0.1
)Effect on postretirement benfit obligations


1.9



(1.7
)  41




---



##### Table of Contents



Commitments and contingencies
    Goodwill and other intangible assets
    New
    Accounting Standards
  Fair Value Measurements,
  No. 157-2, Partial Deferral of the Effective Date of Statement
    No. 157 157-2 No. 157-2
 42




---



##### Table of Contents



Level 1

Unadjusted quoted prices in active markets for identical assets
    or liabilitiesLevel 2

Unadjusted quoted prices in active markets for similar assets or
    liabilities, orUnadjusted quoted prices for identical or similar assets or
    liabilities in markets that are not active, orInputs other than quoted prices that are observable for the
    asset or liabilityLevel 3

Unobservable inputs for the asset or liability     Foreign currency exchange contracts assets

$
25.4Foreign currency exchange contracts liabilities

$
17.1     Employers Accounting for Defined
    Benefit Pension and Other Postretirement Plans, an amendment of
    FASB Statements No. 87, 88, 106 and 132(R),
  Noncontrolling Interests in consolidated Financial
    Statements  an amendment of ARB No. 51 Consolidated financial
    Statements
  Business Combinations
  Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133
 43




---



##### Table of Contents



Employers Disclosures about Postretirement
    Benefit Plan Assets,
  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)
  Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) Internal Control  Integrated
    Framework
 44




---



##### Table of Contents



Form 10-K.
  Changes
    in Internal Control Over Financial Reporting
    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   45




---



##### 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, 2008, 2007 and 2006

F-3Consolidated Balance Sheet at December 31, 2008 and 2007

F-4Consolidated Statement of Cash Flows for the years ended
    December 31, 2008, 2007 and 2006

F-5Consolidated Statement of Changes in Stockholders Equity
    for the years ended December 31, 2008, 2007 and 2006

F-6Notes to Consolidated Financial Statements

F-7 to 42(2)

Consolidated Financial Statement SchedulesSchedule II  Valuation and Qualifying Accounts
    and Reserves  For the years ended December 31,
    2008, 2007 and 2006.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)

Exhibits     3
.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

Amendment No. 1, dated as of April 24, 2008, to the
    Amended and Restated Credit Agreement dated as of
    August 30, 2007 (incorporated by reference to
    Exhibit 10.2 to Dresser-Rand Group Inc.s Quarterly
    Report on
    Form 10-Q,
    filed April 29, 2008, File
    No. 001-32586). 46




---



##### Table of Contents



10
.4

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).10
.5

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
.7

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
.8

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
.9

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
.10

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
.11

Amended and Restated Employment Agreement, dated June 11,
    2008, by and among Vincent R. Volpe and Dresser-Rand
    Group Inc. (incorporated by reference to Exhibit 10.1 to
    Dresser-Rand Group Inc.s Current Report on
    Form 8-K,
    filed June 12, 2008, File
    No. 001-32586).*10
.12

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
.13

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
.14

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
.15

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
.16

First Amendment to Dresser-Rand Group Inc. 2005 Stock Incentive
    Plan, dated October 28, 2008 (incorporated by reference to
    Exhibit 10.1 to Dresser-Rand Group Inc.s Quarterly
    Report on
    Form 10-Q,
    filed October 30, 2008, File
    No. 001-32586).*10
.17

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
.18

Amendment No. 1 to the Dresser-Rand Group Inc.
    2005 Directors Stock Incentive Plan, effective
    January 1, 2007 (incorporated by reference to
    Exhibit 10.29 to Dresser-Rand Group Inc.s Annual
    Report on
    Form 10-K,
    filed February 26, 2008, File
    No. 001-32586).*10
.19

Amendment No. 2 to the Dresser-Rand Group Inc.
    2005 Directors Stock Incentive Plan, dated
    February 12, 2008 (incorporated by reference to
    Exhibit 10.30 to Dresser-Rand Group Inc.s Annual
    Report on
    Form 10-K,
    filed February 26, 2008, File
    No. 001-32586).*10
.20

Third Amendment to the Dresser-Rand Group Inc.
    2005 Directors Stock Incentive Plan, dated October 28,
    2008 (incorporated by reference to Exhibit 10.2 to
    Dresser-Rand Group Inc.s Quarterly Report on
    Form 10-Q,
    filed October 30, 2008, File
    No. 001-32586).* 47




---



##### Table of Contents



10
.21

Dresser-Rand Group Inc. 2008 Stock Incentive Plan (incorporated
    by reference to Exhibit 4.4 to Dresser-Rand Group
    Inc.s Registration Statement on
    Form S-8,
    filed May 14, 2008, File
    No. 333-150894).*10
.22

Form of Grant Notice for 2008 Stock Incentive Plan Nonqualified
    Stock Options (incorporated by reference to Exhibit 10.2 to
    Dresser-Rand Group Inc.s Current Report on
    Form 8-K,
    filed May 14, 2008, File
    No. 001-32586).*10
.23

Form of Grant Notice for 2008 Stock Incentive Plan Restricted
    Stock (incorporated by reference to Exhibit 10.3 to
    Dresser-Rand Group Inc.s Current Report on
    Form 8-K,
    filed May 14, 2008, File
    No. 001-32586).*10
.24

Form of Grant Notice for 2008 Stock Incentive Plan Restricted
    Stock Units (incorporated by reference to Exhibit 10.4 to
    Dresser-Rand Group Inc.s Current Report on
    Form 8-K,
    filed May 14, 2008, File
    No. 001-32586).*10
.25

Form of Grant Notice for 2008 Stock Incentive Plan Stock
    Appreciation Rights (incorporated by reference to
    Exhibit 10.5 to Dresser-Rand Group Inc.s Current
    Report on
    Form 8-K,
    filed May 14, 2008, File
    No. 001-32586).*10
.26

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
.27

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
.28

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
.29

Form of Indemnification Agreement between Dresser-Rand Group
    Inc. and each of its directors and certain other executive
    officers (incorporated by reference to Exhibit 10.2 to
    Dresser-Rand Group Inc.s Current Report on
    Form 8-K,
    filed June 12, 2008, File
    No. 001-32586).*10
.30

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
.31

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
.32

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
.33

Letter Agreement with Lonnie A. Arnett (incorporated by
    reference to Exhibit 10.3 to
    Dresser-Rand
    Group Inc.s Quarterly Report on
    Form 10-Q,
    filed April 29, 2008, File
    No. 001-32586).*10
.35

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
.36

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
.37

Offer Letter, dated July 7, 2008, from Dresser-Rand Group
    Inc. to Raymond L. Carney (incorporated by reference to
    Exhibit 10.1 to Dresser-Rand Group Inc.s Current
    Report on
    Form 8-K,
    filed November 4, 2008, File
    No. 001-32586).*10
.38

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
.39

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
.40

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). 48




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##### Table of Contents



10
.41

Letter from the Company to Walter J. Nye dated November 14,
    2008, revised December 3, 2008 and December 9, 2008,
    accepted by Mr. Nye on December 15, 2008, and
    effective December 22, 2008 (incorporated by reference to
    Exhibit 10.1 to Dresser-Rand Group Inc.s Current
    Report on
    Form 8-K,
    filed December 23, 2008, File
    No. 001-32586).*10
.42

The Dresser-Rand Company Non-Qualified Retirement Plan restated
    effective as of January 1, 200910
.43

Dresser-Rand Non-Employee Director Fee Deferral Plan, which was
    effective as of January 1, 200910
.44

Offer Letter, dated August 22, 2008, from Dresser-Rand
    Company to Jerry Walker.10
.45

Offer Letter, dated October 29, 2008, from Dresser-Rand
    Company to Luciano Mozzato.10
.46

English translation of letter agreement, dated December 29,
    2008, between Dresser-Rand S.A. and Nicoletta Giadrossi.10
.47

Letter of Assignment, dated February 5, 2007, from
    Dresser-Rand Company to Jean-Francois Chevrier.10
.48

Letter of Agreement, dated January 24, 2009, from Dresser-Rand
    S.A. to Jean-Francois Chevrier.10
.49

Form of Grant Notice for 2008 Stock Incentive Plan Restricted
    Stock for Non-Employee Directors.10
.50

Form of Grant Notice for 2008 Stock Incentive Plan Restricted
    Stock Units for Non-Employee Directors.10
.51

Offer Letter, dated December 14, 2008, from Dresser-Rand
    Company to Nicoletta Giadrossi.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. 49




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##### Table of Contents



SIGNATURES
      By:
    /s/  VINCENT
    R. VOLPE JR.   Title:
    President, Chief Executive   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 23, 2009/s/  MARK
    E. BALDWINMark
    E. Baldwin

Executive Vice President
    and Chief Financial Officer

February 23, 2009/s/  RAYMOND
    L. CARNEY JR.Raymond
    L. Carney Jr.

Vice President, Controller and
    Chief Accounting Officer

February 23, 2009/s/  WILLIAM
    E. MACAULAYWilliam
    E. Macaulay

Chairman of the Board of
    Directors

February 23, 2009/s/  RITA
    V. FOLEYRita
    V. Foley

Director

February 23, 2009/s/  LOUIS
    A. RASPINOLouis
    A. Raspino

Director

February 23, 2009/s/  PHILIP
    R. ROTHPhilip
    R. Roth

Director

February 23, 2009/s/  MICHAEL
    L. UNDERWOODMichael
    L. Underwood

Director

February 23, 2009/s/  JEAN-PAUL
    VETTIERJean-Paul
    Vettier

Director

February 23, 2009/s/  JOSEPH
    C. WINKLERJoseph
    C. Winkler

Director

February 23, 2009  50




---



##### 



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, 2008, 2007, and 2006

F-3Consolidated Balance Sheet at December 31,
    2008 and 2007

F-4Consolidated Statement of Cash Flow for the years
    ended December 31, 2008, 2007 and 2006

F-5Consolidated Statement of Changes in
    Stockholders Equity for the years ended December 31,
    2008, 2007, and 2006

F-6Notes to Consolidated Financial Statements

F-7 to F-42   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
  Year Ended December 31,2008


2007


2006($ in millions, except per share amounts)Net sales of products

$
1,805.1


$
1,339.5


$
1,210.7Net sales of services


389.6



325.5



290.8Total revenues


2,194.7



1,665.0



1,501.5Cost of products sold


1,307.2



989.5



900.5Cost of services sold


268.9



226.6



197.3Cost of sales


1,576.1



1,216.1



1,097.8Gross profit


618.6



448.9



403.7Selling and administrative expenses (2006 amount includes $23.6
    of stock based compensation  exit units)


273.8



239.0



228.8Research and development expenses


12.7



12.8



10.4Curtailment amendment/partial settlement


(5.4
)






(11.8
)Income from operations


337.5



197.1



176.3Interest expense, net


(29.4
)


(36.8
)


(47.9
)Other (expense) income, net


(6.8
)


7.3



8.9Income before income taxes


301.3



167.6



137.3Provision for income taxes


103.6



60.9



58.5Net income

$
197.7


$
106.7


$
78.8Net income per common share  basic and diluted

$
2.36


$
1.25


$
0.92Weighted average shares outstanding  (in
    thousands)Basic


83,678



85,470



85,453Diluted


83,837



85,586



85,453    F-3




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  CONSOLIDATED
    BALANCE SHEET
  December 31,2008


2007($ in millions except share amounts)AssetsCurrent assetsCash and cash equivalents

$
147.1


$
206.2Accounts receivable, less allowance for losses of $11.6 at 2008
    and $5.9 at 2007


366.3



311.9Inventories, net


328.5



265.3Prepaid expenses


43.4



23.0Deferred income taxes, net


22.5



19.3Total current assets


907.8



825.7Property, plant and equipment, net


250.3



216.7Goodwill


429.1



447.5Intangible assets, net


441.6



440.0Other assets


23.4



21.0Total assets

$
2,052.2


$
1,950.9Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable and accruals

$
430.9


$
358.4Customer advance payments


275.0



239.9Accrued income taxes payable


30.2



22.0Loans payable


0.2



0.2Total current liabilities


736.3



620.5Deferred income taxes


22.9



48.4Postemployment and other employee benefit liabilities


135.3



80.6Long-term debt


370.1



370.3Other noncurrent liabilities


27.4



25.9Total liabilities


1,292.0



1,145.7Commitments and contingencies (Notes 9, 11 through 18)Stockholders equityCommon stock, $0.01 par value, 250,000,000 shares
    authorized; and,81,958,846 and 85,831,530 shares issued and outstanding,
    respectively


0.8



0.9Additional paid-in capital


384.6



527.3Retained earnings


427.3



229.7Accumulated other comprehensive (loss) income


(52.5
)


47.3Total stockholders equity


760.2



805.2Total liabilities and stockholders equity

$
2,052.2


$
1,950.9    F-4




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  CONSOLIDATED
    STATEMENT OF CASH FLOW
  Year Ended December 31,2008


2007


2006($ in millions)Cash flows from operating activitiesNet income

$
197.7


$
106.7


$
78.8Adjustments to arrive at net cash provided by operating
    activities:Depreciation and amortization


48.8



49.3



50.4Deferred income taxes


(2.6
)


(1.7
)


14.1Stock-based compensation


6.0



8.1



26.0Excess tax benefits from share-based compensation


(0.4
)






Amortization of debt financing costs


3.1



6.9



5.7Provision for losses on inventory


3.3



0.4



0.6Loss (gain) on sales of property, plant and equipment






(0.6
)


0.4Curtailment amendment/partial settlement


(11.8
)






(11.8
)Working capital and other, net of acquisitionsAccounts receivable


(57.9
)


2.4



(28.2
)Inventories


(51.2
)


(71.6
)


(35.2
)Accounts payable and accruals


77.7



40.6



(13.7
)Customer advances


25.4



93.9



48.2Other


(3.3
)


(18.4
)


28.8Net cash provided by operating activities


234.8



216.0



164.1Cash flows from investing activitiesCapital expenditures


(40.2
)


(23.7
)


(19.7
)Acquisitions, net of cash acquired


(91.4
)


(8.1
)


Other investment


(5.0
)






Proceeds from sales of property, plant and equipment


0.3



5.8



0.2Net cash used in investing activities


(136.3
)


(26.0
)


(19.5
)Cash flows from financing activitiesProceeds from exercise of stock options


1.4



0.4



Excess tax benefits from share-based compensation


0.4







Repurchase of common stock


(150.2
)






Payments for debt financing costs






(4.5
)


Payments of long-term debt


(0.2
)


(137.2
)


(100.1
)Proceeds from long-term debt






0.5



Net cash used in financing activities


(148.6
)


(140.8
)


(100.1
)Effect of exchange rate changes on cash and cash equivalents


(9.0
)


10.2



4.3Net (decrease) increase in cash and cash equivalents


(59.1
)


59.4



48.8Cash and cash equivalents, beginning of the period


206.2



146.8



98.0Cash and cash equivalents, end of period

$
147.1


$
206.2


$
146.8    F-5




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  CONSOLIDATED
    STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
  AccumulatedAdditional





Other


TotalCommon


Paid-in


Retained


Comprehensive


ComprehensiveStock


Capital


Earnings


Income (Loss)


Income (Loss)


Total($ in millions)At 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 income (loss)Pension and other post retirement benefit plans  net
    of $15.3 taxNet actuarial gain arising during year














8.1



8.1



Curtailment amendment














11.4



11.4



Amendments














4.8



4.8



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






$
805.2Stock-based compensation






7.4















7.4Stock repurchase


(0.1
)


(150.1
)














(150.2
)Net income










197.7






$
197.7



Other comprehensive income (loss)Foreign currency adjustments














(48.3
)


(48.3
)


Pension and other postretirement benefit plans  net
    of $30.8 taxAdoption of FASB Statement No. 158










(0.1
)


(0.3
)


(0.3
)


(0.1
)Amortization of prior service cost and net actuarial loss
    included in net periodic costs














(4.4
)


(4.4
)


Amendments














2.2



2.2



Net actuarial loss arising during the year














(45.7
)


(45.7
)


Curtailment amendment/partial settlement














(3.3
)


(3.3
)


Total comprehensive income

















$
97.9



97.9At December 31, 2008

$
0.8


$
384.6


$
427.3


$
(52.5
)





$
760.2    F-6




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS
 ($ in
    millions, except per share amounts)
  1.
    Business
    Activities and Certain Related Party Transactions      The
    Acquisition
    Dresser-Rand
    Name
    2.
    Summary
    of Significant Accounting Policies    Principles
    of Consolidation
    Use of
    Estimates
    Cash
    and Cash Equivalents
   F-7




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
  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
  Intangible
    Assets
  Goodwill
    and Other Intangible Assets non-amortizable
 F-8




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    Income
    Taxes
  country-by-country
    Product
    Warranty
    Environmental
    Costs
    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).   F-9




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
      Taxes
    Imposed on Revenue Transactions
    Shipping
    and Handling Costs
    Research
    and Development Costs
    Comprehensive
    Income (Loss)
    Foreign
    Currency
  non-U.S. consolidated average-for-the-year
  non-U.S. entities
  Financial
    Instruments
       F-10




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    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,
  No. 157-2, Partial Deferral of the Effective Date of Statement
    No. 157 No. 157-2
 F-11




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    Level 1

Unadjusted quoted prices in active markets for identical assets
    or liabilitiesLevel 2

Unadjusted quoted prices in active markets for similar assets or
    liabilities, orUnadjusted quoted prices for identical or similar assets or
    liabilities in markets that are not active, orInputs other than quoted prices that are observable for the
    asset or liabilityLevel 3

Unobservable inputs for the asset or liability     Foreign currency exchange contracts assets

$
25.4Foreign currency exchange contracts liabilities

$
17.1   over-the-counter
  Employers Accounting for
    Defined Benefit Pension and Other Postretirement Plans, an
    amendment of FASB Statements No. 87, 88, 106 and 132(R),
  Noncontrolling Interests in consolidated Financial
    Statements  an amendment of ARB No. 51 Consolidated financial
    Statements
  Business Combinations
 F-12




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133
  Employers Disclosures about Postretirement
    Benefit Plan Assets,
  Reclassification
    3.
    Acquisitions
    and other investments (£ in millions)           F-13




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
        2008


2007Accounts receivable, net

$
11.6


$
Inventory, net


29.4



4.6Prepaid expenses


1.1



Total current assets


42.1



4.6Property, plant and equipment


39.6



0.5Amortizable intangible assets


33.4



3.0Goodwill


24.2



Other assets


0.3



Total assets acquired


139.6



8.1Accounts payable and accruals


18.4



Customer advance payments


26.0



Other liabilities


3.8



Total liabilities assumed


48.2



Cash paid  net of $18.6 cash acquired in 2008

$
91.4


$
8.1     Other
    Investments
    4.
    Earnings
    per Share   F-14




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    Year Ended December 31,2008


2007


2006Net income

$
197.7


$
106.7


$
78.8Weighted -average common shares outstanding:(In thousands)Basic


83,678



85,470



85,453Dilutive effect of stock compensation awards


159



116




*Diluted


83,837



85,586



85,453Income per share of common stock  basic and diluted:

$
2.36


$
1.25


$
0.92     *
    
    Anti-dilutive  5.
    Inventories    December 31,2008


2007Raw materials and supplies

$
158.5


$
123.9Work-in-process
    and finished goods


479.6



330.2638.1



454.1Less:Progress payments


(309.6
)


(188.8
)Total

$
328.5


$
265.3     6.
    Property,
    Plant and Equipment    December 31,2008


2007Land

$
14.7


$
9.6Buildings and improvements


88.0



80.4Machinery and equipment


266.3



215.4369.0



305.4Less: Accumulated depreciation


(118.7
)


(88.7
)Property plant and equipment, net

$
250.3


$
216.7    F-15




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
  7.
    Intangible
    Assets and Goodwill    December 31, 2008


Weighted


December 31, 2007Accumulated


Average





AccumulatedCost


Amortization


Useful Lives


Cost


AmortizationTrade names

$
92.8


$
9.2



39 years


$
88.7


$
6.9Customer relationships


250.5



26.5



38 years



246.9



20.2Software


30.6



12.7



10 years



30.6



9.7Existing technology


136.3



22.1



24 years



127.1



16.5Non-compete agreement


2.1



0.2



4 years







Total amortizable intangible assets

$
512.3


$
70.7






$
493.3


$
53.3       December 31,2008


2007Beginning balance

$
447.5


$
410.5Acquisitions


24.2



Adjustments


(0.6
)


Foreign currency adjustments


(42.0
)


37.0Ending balance

$
429.1


$
447.5   8.
    Accounts
    Payable and Accruals    December 31,2008


2007Accounts payable

$
221.3


$
204.8Accruals:Payroll and benefits


62.2



47.3Warranties


37.0



28.5Taxes other than income


24.2



19.2Third party commissions


15.2



14.5Interest


5.7



6.6Insurance and claims


8.7



6.4Legal, audit and consulting


4.0



4.7Pension and postretirement benefits


4.1



2.8Forward exchange contracts


17.1



0.6Repairs and maintanence


6.8



4.5Other


24.6



18.5Total accounts payable and accruals

$
430.9


$
358.4  F-16




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
  9.
    Income
    Taxes    Year Ended December 31,2008


2007


2006United States

$
158.6


$
78.6


$
47.1Foreign


142.7



89.0



90.2Total

$
301.3


$
167.6


$
137.3     Year Ended December 31,2008


2007


2006Current tax expenseUnited States

$
55.3


$
27.0


$
12.8Foreign


50.9



35.6



31.6Total current


106.2



62.6



44.4Deferred tax (benefit) expenseUnited States


1.1



1.6



11.8Foreign


(3.7
)


(3.3
)


2.3Total deferred


(2.6
)


(1.7
)


14.1Total provision for income taxes

$
103.6


$
60.9


$
58.5     Year Ended December 31,2008


2007


2006U.S Statutory rate


35.0
%


35.0
%


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


(1.3
)%


0.3
%


0.2
%State and local income taxes, net of U.S. tax


0.4
%


1.2
%


1.6
%Valuation allowances


0.9
%


0.2
%


1.5
%Export/manufacturing deductions


(0.8
)%


(1.0
)%


(1.9
)%Stock-based compensation






0.8
%


6.3
%Other


0.2
%


(0.2
)%


(0.1
)%Effective tax rate


34.4
%


36.3
%


42.6
%   Accounting for Uncertainty in Income Taxes
  Year Ended December 31,2008


2007Beginning balance

$
2.2


$
2.1Additions based on tax positions related to current year


0.3



0.2Settlements






(0.2
)Foreign currency adjustments


(0.1
)


0.1Ending balance

$
2.4


$
2.2  F-17




---



##### Table of Contents



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

Open YearsBrazil

2003 - 2007Canada

2003 - 2007France

2005 - 2007Germany

2003 - 2007India

2005 - 2007Italy

2002 - 2007Malaysia

2004 - 2007Netherlands

2004 - 2007Norway

2004 - 2007United Kingdom

2005 - 2007United States

2004 - 2007Venezuela

2004 - 2007       December 31,2008


2007Deferred tax liabilitiesDepreciation and amortization

$
65.8


$
63.7Deferred tax assetsInventories and receivables

$
(6.7
)

$
(6.8
)Other accrued expenses


(12.2
)


(5.3
)Tax net operating loss carryforwards


(7.2
)


(7.4
)Pension and employee benefits


(45.8
)


(20.6
)Total deferred tax assets


(71.9
)


(40.1
)Valuation allowances


6.5



5.5Net deferred tax assets


(65.4
)


(34.6
)Total net deferred tax liabilities

$
0.4


$
29.1Presented in the balance sheet as:Current deferred tax assets

$
(22.5
)

$
(19.3
)Non-current deferred tax liabilities


22.9



48.4Total net deferred tax liabilities

$
0.4


$
29.1    F-18




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
        10.
    Long-Term
    Debt  Senior
    Secured Credit Facility
      1 2 1 2
   F-19




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    Senior
    Subordinated Notes
  3 8
        December 31,2008


2007Senior subordinated notes

$
370.0


$
370.0Senior secured credit facility






Other debt


0.3



0.5Total debt


370.3



370.5Less: current maturity


(0.2
)


(0.2
)Total long-term debt

$
370.1


$
370.3    F-20




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
  11.
    Pension
    Plans  Non-U.S. plans non-U.S. plans
    December 31,2008


2007Change in projected benefit obligationsBenefit obligation at beginning of the period

$
350.6


$
351.0Service cost


7.5



6.9Interest cost


22.2



18.6Employee contributions


0.3



0.3Expenses paid


(0.9
)


(0.6
)Actuarial gain


(6.3
)


(15.8
)Plan amendments


3.1



0.2Acquisitions


12.1



Benefits paid


(20.2
)


(17.0
)Foreign currency adjustments


(33.8
)


7.0Benefit obligation at end of the period

$
334.6


$
350.6Change in plan assetsFair value at beginning of the period

$
298.7


$
284.1Actual return on assets


(57.1
)


22.4Acquisitions


12.9



Company contributions


9.4



5.7Employee contributions


0.3



0.3Expenses paid


(0.9
)


(0.6
)Benefits paid


(20.2
)


(17.0
)Foreign currency adjustments


(28.0
)


3.8Fair value of assets at end of the period

$
215.1


$
298.7Funded statusUnfunded benefit obligation

$
119.5


$
51.9Contributions after measurement date






(0.5
)Balance sheet liability

$
119.5


$
51.4Amounts recognized in the balance sheet consist of:Current liabilities

$
2.5


$
1.8Noncurrent liabilities


117.0



49.6Total

$
119.5


$
51.4Amounts recognized in accumulated other comprehensive loss
    (income) consists of:Net actuarial loss (gain)

$
68.9


$
(4.9
)Prior service cost


3.0



0.7Total

$
71.9


$
(4.2
)  F-21




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    December 31,2008


2007Weighted-average assumptions used for benefit obligationsDiscount rateU.S. plans


6.10
%


6.10
%Non-U.S.
    plans


6.28
%


5.82
%Rate of compensation increaseU.S. plans


N/A



N/ANon-U.S.
    plans


3.73
%


4.27
%     For Year Ended December 31,2008


2007


2006Net periodic pension costService cost

$
6.9


$
6.9


$
6.2Interest cost


20.5



18.6



17.5Expected return on plan assets


(23.2
)


(21.9
)


(20.1
)Amortization of net actuarial loss


0.3







0.1Amortization of prior service cost


0.1







Net periodic pension cost


4.6



3.6



3.7Amounts recognized in other comprehensive loss (income)Net actuarial loss (gain)


74.1



(15.8
)


1.6Prior service cost


2.4



0.2



0.5Amortization of net actuarial loss


(0.3
)






(0.1
)Amortization of prior service cost


(0.1
)






Total recognized in other comprehensive loss (income)


76.1



(15.6
)


2.0Total recognized

$
80.7


$
(12.0
)

$
5.7Weighted-average assumptions used for net periodic pension costDiscount rateU.S. plans


6.10
%


5.60
%


5.65
%Non-U.S.
    plans


5.82
%


4.94
%


4.89
%Rate of compensation increaseU.S. plans


N/A



N/A



N/ANon-U.S.
    plans


4.27
%


3.88
%


3.66
%Expected return on plan assetsU.S. plans


8.50
%


8.50
%


8.50
%Non-U.S.
    plans


6.53
%


6.87
%


6.48
%      F-22




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    December 31,2008


2007Projected benefit obligation

$
263.4


$
261.3Accumulated benefit obligation


256.9



253.5Fair value of plan assets


151.6



217.1       December 31,2008


2007Asset Category*Equity securities


50
%


60
%Debt securities


40
%


34
%Other


10
%


6
%Total


100
%


100
%     *
    
    Reflects weighted average percentage allocations of U.S. and
    non-U.S.
    plans.    non-U.S. plans
   F-23




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
  Defined
    Contribution Plans
  non-U.S. defined non-U.S. benefit
  12.
    Post-retirement
    Benefits other than Pensions       F-24




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    December 31,2008


2007Change in benefit obligationsBenefit obligation at beginning of the period

$
29.4


$
50.0Service cost


0.3



1.4Interest cost


1.4



2.4Benefits paid


(0.4
)


(0.1
)Actuarial (gains) losses


(1.7
)


2.5Plan amendments


(5.4
)


(8.2
)Settlement payment


(6.4
)


Curtailment amendment






(18.6
)Unfunded benefit obligation at end of the period and balance
    sheet liability

$
17.2


$
29.4Amounts recognized in the balance sheet:Current liabilities

$
0.6


$
0.4Noncurrent liabilities


16.6



29.0Total

$
17.2


$
29.4Amounts recognized in accumulated other comprehensive income:Net actuarial loss

$
4.9


$
7.7Net prior service credit


(17.0
)


(26.0
)Total

$
(12.1
)

$
(18.3
)        F-25




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    Year Ended December 31,2008


2007


2006Net periodic post-retirement benefits (income) costService cost

$
0.2


$
1.4


$
1.7Interest cost


1.3



2.4



2.4Amortization ofNet prior service credit


(7.4
)


(0.7
)


Net actuarial (gain) loss


(0.1
)


0.1



Curtailment amendment/partial settlement


(5.4
)






(11.8
)Total periodic post-retirement benefits (income) cost


(11.4
)


3.2



(7.7
)Amounts recognized as other comprehensive loss (income)Adoption of FASB Statement No. 158


0.4







Net actuarial (gain) loss


(1.7
)


2.5



5.3Curtailment amendment/partial settlement


5.4



(18.6
)


Plan amendments


(5.4
)


(8.2
)


0.1Amortization ofNet prior service credit


7.4



.7



Net actuarial gain (loss)


0.1



(0.1
)


Total recognized in comprehensive loss (income)


6.2



(23.7
)


5.4Total recognized

$
(5.2
)

$
(20.5
)

$
(2.3
)   Year Ended December 31,2008


2007


2006Weighted-average assumptions used to determine 
    benefit obligations at December 31Discount rate


6.10
%


6.20
%


5.70
%Measurement date


12/31/08



11/30/07



11/30/06Weighted-average assumptions used to determine net periodic
    benefit cost (income) for years ended December 31Discount rate


6.20
%


5.70
%


5.80
%Discount rate at remeasurement date


6.60
%


N/A



N/AMeasurement date


11/30/07



11/30/06



11/30/05Remeasurement date


04/01/08



N/A



N/AAssumed health care cost trend ratesCurrent year trend rate


9.00
%


10.00
%


10.00
%Ultimate trend rate


4.75
%


5.00
%


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


2031



2013



2012Net periodic benefit cost for the year


2013



2012



2011    F-26




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    1%


1%Increase


DecreaseEffect on total service and interest cost components

$
0.2


$
(0.1
)Effect on postretirement benfit obligations


1.9



(1.7
)   13.
    Share
    Repurchase    14.
    Financial
    Instruments      15.
    Commitments
    and Contingencies ( in millions)     F-27




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
                 F-28




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
    16.
    Warranties      Year Ended December 31,2008


2007


2006Beginning balance

$
28.5


$
23.4


$
21.5Acquisitions


1.1







Provision for warranties issued during period


29.1



18.9



17.2Adjustments to warranties issued in prior periods


4.1



2.6



(0.4
)Payments during the period


(23.1
)


(17.9
)


(16.5
)Foreign currency adjustments


(2.7
)


1.5



1.6Ending balance

$
37.0


$
28.5


$
23.4   17.
    Incentive
    Stock-Based Compensation Plans   F-29




---



##### Table of Contents



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


Exercise PriceBalance, 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


$
25.47Granted


158,194


$
30.94Excercised


(64,955
)

$
21.94Forfeited


(15,765
)

$
26.94Expired


(2,225
)

$
25.18Balance, December 31, 2008


1,172,308


$
26.37Excerisable December 31, 2006


83,284


$
21.00Excerisable December 31, 2007


139,184


$
22.34Excerisable December 31, 2008


248,814


$
24.82       SEC Staff Accounting
    Bulletin No. 107
  2008


2007


2006Option term (years)


5.5



5.7



6.0Volatility


39.9
%


34.5
%


32.7
%Risk-free interest rate (zero coupon US Treasury note)


0.9
%


4.75
%


4.65
%Dividend yield










    F-30




---



##### Table of Contents



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


Grant PriceNonvested 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


$
25.92Granted


246,662


$
33.42Vested


(109,327
)

$
25.09Forfeited


(17,093
)

$
28.97Nonvested at December 31, 2008


521,599


$
29.40             18.
    Significant
    Customers and Concentration of Credit Risk   F-31




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
      19.
    Other
    (Expense) Income    Year Ended December 31,2008


2007


2006Foreign currency (losses) gains

$
(15.6
)

$
6.9


$
7.0Gain (loss) on forward exchange contracts


9.1



(1.4
)


1.9Gain on sale of investment






2.3



Other


(0.3
)


(0.5
)


Total other (expense) income, net

$
(6.8
)

$
7.3


$
8.9   20.
    Segment
    Information:          Year Ended December 31,2008


2007


2006RevenuesNew units

$
1,202.7


$
813.5


$
749.6Aftermarket parts and services


992.0



851.5



751.9Total revenues

$
2,194.7


$
1,665.0


$
1,501.5Operating incomeNew units

$
131.9


$
56.4


$
47.3Aftermarket parts and services


276.7



213.8



204.4Unallocable


(71.1
)


(73.1
)


(75.4
)Total operating income

$
337.5


$
197.1


$
176.3 F-32




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
  Year Ended December 31,2008


2007


2006Depreciation and amortizationNew units

$
28.2


$
26.4


$
26.9Aftermarket parts and services


20.6



22.9



23.5Total depreciation and amortization

$
48.8


$
49.3


$
50.4GoodwillNew units

$
133.7


$
131.6


$
117.9Aftermarket parts and services


295.4



315.9



292.6Total goodwill

$
429.1


$
447.5


$
410.5Total assets (including goodwill)New units

$
352.4


$
315.0


$
280.7Aftermarket parts and services


765.8



697.8



605.7Unallocable


934.0



938.1



884.9Total assets

$
2,052.2


$
1,950.9


$
1,771.3Revenues by destinationNorth America

$
901.1


$
693.0


$
541.1Latin America


251.3



218.6



213.7Europe


538.4



300.2



362.3Asia-Pacific


263.0



202.9



204.3Middle East, Africa


240.9



250.3



180.1Total revenues

$
2,194.7


$
1,665.0


$
1,501.5Long-lived assets by geographic areaNorth America

$
166.3


$
149.3


$
160.4Latin America


3.6



3.7



3.3Europe


72.0



54.7



52.0Asia-Pacific


8.4



9.0



7.4Middle East, Africa










Total long-lived assets

$
250.3


$
216.7


$
223.1     21.
    Selected
    Unaudited Quarterly Financial Data:  Three Months EndedMarch 31,


June 30,


September 30,


December 31,2008


2008


2008


2008Total revenues

$
363.8


$
541.2


$
543.9


$
745.8Gross profit


105.7



150.0



157.4



205.5Net income


27.2



46.7



46.8



77.0Net income per share-basic and diluted


0.32



0.55



0.57



0.94   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  F-33




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
  22.
    Supplemental
    Cash Flow Information:  Year Ended December 31,2008


2007


2006Cash paid for interest

$
33.9


$
37.6


$
45.6Cash paid for income taxes, net of refunds


100.4



71.1



15.9   23.
    Supplemental
    guarantor financial information:     F-34




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF INCOME
    For the year ended December 31, 2008
  SubsidiarySubsidiary


Non-


ConsolidatingIssuer


Guarantors


Guarantors


Adjustments


TotalNet sales

$



$
1,320.1


$
1,029.8


$
(155.2
)

$
2,194.7Cost of sales






960.4



747.1



(131.4
)


1,576.1Gross profit






359.7



282.7



(23.8
)


618.6Selling and administrative expenses


125.9



59.2



110.6



(21.9
)


273.8Research and development expenses






11.7



1.0







12.7Curtailment amendment/partial settlement






(5.4
)










(5.4
)(Loss) income from operations


(125.9
)


294.2



171.1



(1.9
)


337.5Equity earnings in affiliates


280.1



6.7







(286.8
)


Interest (expense) income, net


(31.4
)


0.2



1.8







(29.4
)Intercompany interest and fees


18.4



4.0



(22.4
)






Other income (expense), net


2.2



(2.9
)


(6.1
)






(6.8
)Income before income taxes


143.4



302.2



144.4



(288.7
)


301.3(Benefit) provision for income taxes


(54.3
)


110.3



47.6







103.6Net income

$
197.7


$
191.9


$
96.8


$
(288.7
)

$
197.7  F-35




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share 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 goods sold






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-36




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share 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 goods sold






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 amortization






(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-37




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
  CONDENSED
    CONSOLIDATING BALANCE SHEET
    December 31, 2008
  SubsidiarySubsidiary


Non-


ConsolidatingIssuer


Guarantors


Guarantors


Adjustments


TotalAssetsCash and cash equivalents

$
26.5


$



$
120.6


$



$
147.1Accounts receivable, net






166.8



199.4



0.1



366.3Inventories, net






233.7



102.5



(7.7
)


328.5Prepaid expenses and deferred income taxes


23.1



3.7



39.3



(0.2
)


65.9Total current assets


49.6



404.2



461.8



(7.8
)


907.8Investment in affiliates


1,668.3



65.6







(1,733.9
)


Property, plant, and equipment, net






159.8



90.5







250.3Intangible assets, net






445.3



425.4







870.7Other assets


20.4



1.2



1.8







23.4Total assets

$
1,738.3


$
1,076.1


$
979.5


$
(1,741.7
)

$
2,052.2Liabilities and Stockholders EquityAccounts payable and accruals

$
(55.9
)

$
416.9


$
375.1


$



$
736.1Loans payable






0.2











0.2Total current liabilities


(55.9
)


417.1



375.1







736.3Long-term debt


370.0



0.1











370.1Intercompany accounts


660.7



(712.4
)


51.7







Other noncurrent liabilities


3.3



125.9



56.4







185.6Total liabilities


978.1



(169.3
)


483.2







1,292.0Common stock


0.8















0.8Other stockholders equity


759.4



1,245.4



496.3



(1,741.7
)


759.4Total stockholders equity


760.2



1,245.4



496.3



(1,741.7
)


760.2Total liabilities and stockholders equity

$
1,738.3


$
1,076.1


$
979.5


$
(1,741.7
)

$
2,052.2  F-38




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share 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 receivable, 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-39




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
    For the year ended December 31, 2008
  SubsidiarySubsidiary


Non-Guarantors


Guarantors


ConsolidatingIssuer


Entities


Entities


Adjustments


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

$
(121.3
)

$
273.8


$
82.3


$



$
234.8Cash flows from investing activities:Capital expenditures






(32.8
)


(7.4
)






(40.2
)Proceeds from sale of property, plant and equipment






0.1



0.2







0.3Other investment


(5.0
)














(5.0
)Acquisitions


(91.4
)














(91.4
)Net cash used in investing activities


(96.4
)


(32.7
)


(7.2
)






(136.3
)Cash flows from financing activities:Proceeds from exercised options


1.4















1.4Payments of long-term debt






(0.2
)










(0.2
)Repurchase of common stock


(150.2
)














(150.2
)Excess tax benefits from share-based compensation






0.4











0.4Change in intercompany accounts


322.3



(241.3
)


(81.0
)






Net cash provided by (used in) financing activities


173.5



(241.1
)


(81.0
)






(148.6
)Effect of exchange rate changes










(9.0
)






(9.0
)Net decrease in cash and equivalents


(44.2
)






(14.9
)






(59.1
)Cash and cash equivalents, beginning of period


70.7







135.5







206.2Cash and cash equivalents, end of period

$
26.5


$



$
120.6


$



$
147.1  F-40




---



##### Table of Contents



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


(119.9
)


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-41




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 ($ in
    millions, except per share 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-42




---



##### Table of Contents



Dresser-Rand
    Group Inc.
    SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS AND
    RESERVES
    for the years ended December 31, 2008, 2007 and 2006
    ($ in millions)
  Dresser-Rand
    Group Inc.
 Schedule II  Valuation and Qualifying
    Accounts and Reserves
  AdditionsBeginning


Charges to








EndingBalance at


Costs and


Charges to





Balance atDescription

01/01/08


Expenses


Other Accounts


Deductions


12/31/2008Allowance for losses on receivables

$
5.9


$
7.6


$



$
1.9
(a)

$
11.6Valuation allowance for deferred tax asset


5.5



1.6



(0.6
)(b)






6.5      (a)
    
    - Impact of foreign exchange of $0.7 and write-off of bad
    debts of $1.2.  (b)
    
    - Impact of foreign exchange.  AdditionsBeginning


Charges to








EndingBalance


Costs and


Charges to





Balance atDescription

at 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. S-1