##### Table of Contents



SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
  Form 10-Q
   þ

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934For the Quarterly Period Ended
    June 30, 2008o

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
    ACTFor the Transition Period
    from          to    Commission file number
    001-32586
  Dresser-Rand Group
    Inc.
 (Exact name of registrant as
    specified in its charter)
   Delaware

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

(I.R.S. Employer
    Identification No.)West8 Tower, Suite 1000
    10205 Westheimer Rd.
    Houston, TX(Address of principal
    executive offices)

77042(Zip Code)   (713) 354-6100
 (Registrants telephone
    number, including area code)
   1200 W. Sam Houston Parkway, N. Houston, TX
    77043
 (Former name, former address and
    former fiscal year, if changed since last report)
   þ 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




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##### 



DRESSER-RAND
    GROUP INC.
  TABLE OF CONTENTS
   
 PagePART I.  FINANCIAL
    INFORMATIONItem 1.


Financial Statements (unaudited):Consolidated Statement of Income for the three
    and six months ended June 30, 2008 and 2007


3Consolidated Balance Sheet at June 30, 2008
    and December 31, 2007


4Consolidated Statement of Cash Flows for the six
    months ended June 30, 2008 and 2007


5Notes to Unaudited Consolidated Financial Statements at
    June 30, 2008


6-22Item 2.


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


23-32Item 3.


Quantitative and Qualitative Disclosure about
    Market Risk


32Item 4.


Controls and Procedures


32PART II.  OTHER
    INFORMATIONItem 1.


Legal Proceedings


33Item 2.


Unregistered Sales of Equity Securities and Use
    of Proceeds


33Item 4.


Submission of Matters to a Vote of Security
    Holders


34Item 6.


Exhibits


35-36Signatures


37ExhibitsEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION   2




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##### Table of Contents



PART I. 
    FINANCIAL INFORMATION  ITEM 1.
    FINANCIAL
    STATEMENTS  DRESSER-RAND
    GROUP INC.
  CONSOLIDATED
    STATEMENT OF INCOME
  Three Months Ended June 30,


Six Months Ended June 30,2008


2007


2008


2007(Unaudited; $ in millions,except per share amounts)Net sales of products

$
448.2


$
354.6


$
735.3


$
596.7Net sales of services


93.0



86.6



169.7



158.9Total revenues


541.2



441.2



905.0



755.6Cost of products sold


329.5



260.1



535.7



433.4Cost of services sold


61.7



62.2



113.6



111.7Total cost of sales


391.2



322.3



649.3



545.1Gross profit


150.0



118.9



255.7



210.5Selling and administrative expenses


68.9



66.2



132.8



121.8Research and development expenses


3.8



2.6



5.9



5.7Curtailment amendment / partial settlement


1.8







(5.4
)


Income from operations


75.5



50.1



122.4



83.0Interest expense, net


(7.1
)


(10.0
)


(14.1
)


(20.9
)Other income, net


1.2



1.3



3.0



3.7Income before income taxes


69.6



41.4



111.3



65.8Provision for income taxes


22.9



15.2



37.4



24.2Net income

$
46.7


$
26.2


$
73.9


$
41.6Net income per common share-basic and diluted

$
0.55


$
0.31


$
0.86


$
0.49Weighted average shares outstanding  (In
    thousands)Basic


85,337



85,465



85,425



85,462Diluted


85,555



85,465



85,609



85,462    3




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
  CONSOLIDATED
    BALANCE SHEET
  June 30,


December 31,2008


2007(Unaudited; $ in millions, except per share amount)ASSETSCurrent assetsCash and cash equivalents

$
273.1


$
206.2Accounts receivable, less allowance for losses of $7.9 at 2008
    and $5.9 at 2007


311.5



311.9Inventories, net


279.0



265.3Prepaid expenses


33.7



23.0Deferred income taxes, net


18.3



19.3Total current assets


915.6



825.7Property, plant and equipment, net


218.4



216.7Goodwill


469.5



447.5Intangible assets, net


434.8



440.0Other assets


19.5



21.0Total assets

$
2,057.8


$
1,950.9LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable and accruals

$
379.1


$
358.4Customer advance payments


283.3



239.9Accrued income taxes payable


8.3



22.0Loans payable


0.2



0.2Total current liabilities


670.9



620.5Deferred income taxes


46.9



48.4Postemployment and other employee benefit liabilities


70.5



80.6Long-term debt


370.2



370.3Other noncurrent liabilities


31.8



25.9Total liabilities


1,190.3



1,145.7Commitments and contingencies (Notes 6 through 10 and
    14)Stockholders equityCommon stock, $0.01 par value, 250,000,000 shares
    authorized; and, 85,359,319 and 85,826,523 shares issued
    and outstanding, respectively


0.9



0.9Additional paid-in capital


502.9



527.3Retained earnings


303.5



229.7Accumulated other comprehensive income


60.2



47.3Total stockholders equity


867.5



805.2Total liabilities and stockholders equity

$
2,057.8


$
1,950.9    4




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
  CONSOLIDATED
    STATEMENT OF CASH FLOWS
  Six Months Ended June 30,2008


2007(Unaudited; $ in millions)Cash flows from operating activitiesNet income

$
73.9


$
41.6Adjustments to arrive at net cash provided by operating
    activities:Depreciation and amortization


24.9



24.2Deferred income taxes


(0.6
)


2.6Stock-based compensation


2.9



5.7Amortization of debt financing costs


1.5



3.7Provision for losses on inventory


1.3



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


0.2



(0.5
)Curtailment amendment / partial settlement


(11.8
)


Working capital and otherAccounts receivable


5.1



52.1Customer advances


33.4



43.5Accounts payable


11.6



3.7Inventories


(10.0
)


(16.6
)Other


(28.2
)


(24.4
)Net cash provided by operating activities


104.2



136.2Cash flows from investing activitiesCapital expenditures


(14.8
)


(8.6
)Acquisition






(8.1
)Proceeds from sales of property, plant and equipment


0.2



0.6Net cash used in investing activities


(14.6
)


(16.1
)Cash flows from financing activitiesProceeds from exercise of stock options


1.3



0.2Repurchase of common stock


(27.7
)


Payments of long-term debt


(0.1
)


(110.1
)Net cash used in financing activities


(26.5
)


(109.9
)Effect of exchange rate changes on cash and cash equivalents


3.8



3.8Net increase in cash and cash equivalents


66.9



14.0Cash and cash equivalents, beginning of the period


206.2



146.8Cash and cash equivalents, end of period

$
273.1


$
160.8    5




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  1.
    Basis of
    presentation  Form 10-K
  2.
    New
    accounting standards  Fair Value Measurements.
    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

$
3.9Foreign currency exchange contracts liabilities

$
2.7     No. 157-2, Partial Deferral of the Effective Date of Statement
    No. 157, No. 157-2
 6




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  Employers Accounting for
    Defined Benefit Pension and Other Postretirement Plans, an
    amendment of FASB Statements No. 87, 88, 106 and 132(R),
  Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133
  3.
    Intangible
    assets and goodwill    June 30, 2008


Weighted


December 31, 2007Accumulated


Average





AccumulatedCost


Amortization


Useful Lives


Cost


AmortizationTrade names

$
88.8


$
8.0



40 years


$
88.7


$
6.9Customer relationships


250.6



23.9



39 years



246.9



20.2Software


30.6



11.2



10 years



30.6



9.7Existing technology


127.1



19.2



25 years



127.1



16.5Total amortizable intangible assets

$
497.1


$
62.3






$
493.3


$
53.3       June 30,2008Beginning balance

$
447.5Foreign currency adjustments


22.0Ending balance

$
469.5  7




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  4.
    Inventories    June 30,


December 31,2008


2007Raw materials and supplies

$
133.3


$
123.9Work-in-process
    and finished goods


474.8



330.2608.1



454.1Less:Progress payments


(329.1
)


(188.8
)Total inventories

$
279.0


$
265.3     5.
    Property,
    plant and equipment    June 30,


December 31,2008


2007Cost:Land

$
9.9


$
9.6Buildings and improvements


85.1



80.4Machinery and equipment


229.8



215.4324.8



305.4Less: Accumulated depreciation


(106.4
)


(88.7
)Property, plant and equipment, net

$
218.4


$
216.7   6.
    Income
    taxes     8




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  7.
    Pension
    plans    Three Months Ended June 30,


Six Months Ended June 30,2008


2007


2008


2007Service cost

$
1.8


$
1.8


$
3.6


$
3.5Interest cost


5.2



4.6



10.3



9.2Expected return on plan assets


(5.8
)


(5.5
)


(11.6
)


(10.9
)Amortization of net losses


0.1







0.2



Net pension expense

$
1.3


$
0.9


$
2.5


$
1.8   8.
    Postretirement
    benefits other than pensions    Three Months Ended June 30,


Six Months Ended June 30,2008


2007


2008


2007Service cost

$



$
0.4


$
0.1


$
0.8Interest cost


0.3



0.6



0.8



1.2Amortization of prior service (credit)


(1.8
)


(0.2
)


(3.6
)


(0.3
)Curtailment amendment / partial settlement


1.8







(5.4
)


Net periodic postretirement benefits cost (gain)

$
0.3


$
0.8


$
(8.1
)

$
1.7    9




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  9.
    Commitments
    and contingencies         10




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  10.
    Warranty
    accruals      Six Months Ended June 30,2008


2007Beginning balance

$
28.5


$
23.4Provisions for warranties issued during the period


11.4



9.9Adjustments to warranties issued in prior periods


4.0



(0.1
)Payments during period


(13.6
)


(7.9
)Foreign currency adjustments


0.8



0.6Ending balance

$
31.1


$
25.9   11.
    Segment
    information         11




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
    Three Months Ended


Six Months EndedJune 30,


June 30,2008


2007


2008


2007RevenuesNew units

$
299.2


$
232.2


$
448.7


$
346.6Aftermarket parts and services


242.0



209.0



456.3



409.0Total revenues

$
541.2


$
441.2


$
905.0


$
755.6Operating IncomeNew units

$
25.7


$
17.4


$
34.9


$
22.0Aftermarket parts and services


70.8



52.0



120.8



100.1Unallocated


(21.0
)


(19.3
)


(33.3
)


(39.1
)Total operating income

$
75.5


$
50.1


$
122.4


$
83.0Depreciation and AmortizationNew units

$
7.8


$
7.2


$
13.5


$
12.2Aftermarket parts and services


4.7



5.1



11.5



12.0Total depreciation and amortization

$
12.5


$
12.3


$
25.0


$
24.2Total Assets (including Goodwill)New units

$
317.5


$
251.7


$
317.5


$
251.7Aftermarket parts and services


735.0



626.1



735.0



626.1Unallocated


1,005.3



887.7



1,005.3



887.7Total assets

$
2,057.8


$
1,765.5


$
2,057.8


$
1,765.5  12




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  12.
    Stockholders
    equity    AccumulatedOtherCommon


Additional


Retained


ComprehensiveStock


Paid-in Capital


Earnings


Income


TotalAt December 31, 2007

$
0.9


$
527.3


$
229.7


$
47.3


$
805.2Stock-based employee compensation






3.3











3.3Stock repurchase






(27.7
)










(27.7
)Adoption of FASB Statement No. 158










(0.1
)






(0.1
)Net income










73.9







73.9Other comprehensive income (loss)Foreign currency translation adjustment














15.5



15.5Pension and other postretirement benefit plans  net
    of $1.7 tax:Adoption of FASB Statement No. 158














(0.3
)


(0.3
)Benefit plans amortization














(2.1
)


(2.1
)Benefit plan amendment














2.2



2.2Curtailment amendment














(4.5
)


(4.5
)Partial settlement














1.2



1.2Net gain from remeasurement














0.9



0.9At June 30, 2008

$
0.9


$
502.9


$
303.5


$
60.2


$
867.5     Three Months Ended June 30,


Six Months Ended June 30,2008


2007


2008


2007Net income

$
46.7


$
26.2


$
73.9


$
41.6Other comprehensive (loss) income:Foreign currency adjustments


(3.4
)


7.8



15.5



12.8Pension and other postretirement benefit plans  net
    of $1.7 tax in 2008 and $(3.1) in 2007:Adoption of FASB Statement No. 158










(0.3
)


Benefit plans amortization


(1.1
)






(2.1
)


Benefit plan amendment










2.2



5.0Curtailment amendment










(4.5
)


Partial settlement


1.2







1.2



Net gain from remeasurement










0.9



Total comprehensive income

$
43.4


$
34.0


$
86.8


$
59.4    13




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
      13.
    Acquisition      Inventory

$
4.6Property, plant and equipment


0.5Amortizable intangible assets


3.0Cash paid  net

$
8.1     14. Subsequent
    Event (£ in millions)
   14




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
        15.
    Supplemental
    guarantor financial information      CONDENSED
    CONSOLIDATING STATEMENT OF INCOME
    For the three months ended June 30, 2008
  Subsidiary


Subsidiary


ConsolidatingIssuer


Guarantors


Non-Guarantors


Adjustments


TotalNet sales

$



$
325.6


$
261.0


$
(45.4
)

$
541.2Cost of sales






238.4



191.7



(38.9
)


391.2Gross profit






87.2



69.3



(6.5
)


150.0Selling and administrative expenses


31.9



14.4



28.8



(6.2
)


68.9Research and development expenses






3.8











3.8Partial settlement






1.8











1.8(Loss) income from operations


(31.9
)


67.2



40.5



(0.3
)


75.5Equity earnings in affiliates


65.2



1.5







(66.7
)


Interest (expense) income, net


(8.1
)






1.0







(7.1
)Intercompany interest and fees


5.8



2.7



(8.5
)






Other income (expense), net


5.5



(5.6
)


1.3







1.2Income before income taxes


36.5



65.8



34.3



(67.0
)


69.6(Benefit) provision for income taxes


(10.2
)


25.2



7.9







22.9Net income

$
46.7


$
40.6


$
26.4


$
(67.0
)

$
46.7  15




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF INCOME
    For the three months ended June 30, 2007
  Subsidiary


Subsidiary


ConsolidatingIssuer


Guarantors


Non-Guarantors


Adjustments


TotalNet sales

$



$
269.2


$
199.9


$
(27.9
)

$
441.2Cost of sales






201.6



146.8



(26.1
)


322.3Gross profit






67.6



53.1



(1.8
)


118.9Selling and administrative expenses


31.2



13.2



26.9



(5.1
)


66.2Research and development expenses






2.5



0.1







2.6(Loss) income from operations


(31.2
)


51.9



26.1



3.3



50.1Equity earnings in affiliates


45.3



(0.4
)






(44.9
)


Interest (expense), net


(8.6
)






(1.4
)






(10.0
)Intercompany interest and fees


9.8



1.0



(10.8
)






Other income (expense), net


2.2



(0.9
)










1.3Income before income taxes


17.5



51.6



13.9



(41.6
)


41.4(Benefit) provision for income taxes


(8.7
)


19.1



4.8







15.2Net income

$
26.2


$
32.5


$
9.1


$
(41.6
)

$
26.2  16




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##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF INCOME
    For the six months ended June 30, 2008
  SubsidiarySubsidiary


Non-


ConsolidatingIssuer


Guarantors


Guarantors


Adjustments


TotalNet sales

$



$
601.6


$
377.6


$
(74.2
)

$
905.0Cost of sales






441.7



267.6



(60.0
)


649.3Gross profit






159.9



110.0



(14.2
)


255.7Selling and administrative expenses


64.5



28.7



51.4



(11.8
)


132.8Research and development expenses






5.7



0.2







5.9Curtailment amendment / partial settlement






(5.4
)










(5.4
)(Loss) income from operations


(64.5
)


130.9



58.4



(2.4
)


122.4Equity earnings in affiliates


115.5



2.7







(118.2
)


Interest (expense) income, net


(16.1
)






2.0







(14.1
)Intercompany interest and fees


7.4



2.5



(9.9
)






Other income (expense), net


5.3



(4.7
)


2.4







3.0Income before income taxes


47.6



131.4



52.9



(120.6
)


111.3(Benefit) provision for income taxes


(26.3
)


48.3



15.4







37.4Net income

$
73.9


$
83.1


$
37.5


$
(120.6
)

$
73.9  17




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF INCOME
    For the six months ended June 30, 2007
  Subsidiary


Subsidiary


ConsolidatingIssuer


Guarantors


Non-Guarantors


Adjustments


TotalNet sales

$



$
485.7


$
326.9


$
(57.0
)

$
755.6Cost of sales






354.6



237.9



(47.4
)


545.1Gross profit






131.1



89.0



(9.6
)


210.5Selling and administrative expenses


64.0



23.9



45.5



(11.6
)


121.8Research and development expenses






5.5



0.2







5.7(Loss) income from operations


(64.0
)


101.7



43.3



2.0



83.0Equity earnings in affiliates


82.9



0.2







(83.1
)


Interest (expense), net


(17.8
)






(3.1
)






(20.9
)Intercompany interest and fees


15.2



2.0



(17.2
)






Other income (expense), net


2.4



(1.0
)


2.3







3.7Income before income taxes


18.7



102.9



25.3



(81.1
)


65.8(Benefit) provision for income taxes


(22.9
)


38.3



8.8







24.2Net income

$
41.6


$
64.6


$
16.5


$
(81.1
)

$
41.6  18




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  CONDENSED
    CONSOLIDATING BALANCE SHEET
    June 30, 2008
  Subsidiary


Subsidiary


ConsolidatingIssuer


Guarantors


Non-Guarantors


Adjustments


TotalASSETSCash and cash equivalents

$
65.6


$



$
207.5


$



$
273.1Accounts receivables, net


0.1



143.0



168.4







311.5Inventories, net






202.0



85.2



(8.2
)


279.0Prepaids expenses and deferred income taxes


20.2



3.1



28.7







52.0Total current assets


85.9



348.1



489.8



(8.2
)


915.6Investment in affiliates


1,615.7



69.4







(1,685.1
)


Property, plant, and equipment, net






148.4



70.0







218.4Intangible assets, net






447.1



457.2







904.3Other assets


16.9







2.6







19.5Total assets

$
1,718.5


$
1,013.0


$
1,019.6


$
(1,693.3
)

$
2,057.8LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable and accruals

$
(17.3
)

$
328.2


$
359.8


$



$
670.7Loans payable






0.2











0.2Total current liabilities


(17.3
)


328.4



359.8







670.9Long-term debt


370.0



0.2











370.2Intercompany accounts


469.1



(586.1
)


117.0







Other noncurrent liabilities


29.2



53.4



66.6







149.2Total liabilities


851.0



(204.1
)


543.4







1,190.3Common stock


0.9















0.9Other stockholders equity


866.6



1,217.1



476.2



(1,693.3
)


866.6Total stockholders equity


867.5



1,217.1



476.2



(1,693.3
)


867.5Total liabilities and stockholders equity

$
1,718.5


$
1,013.0


$
1,019.6


$
(1,693.3
)

$
2,057.8  19




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  CONDENSED
    CONSOLIDATING BALANCE SHEET
    December 31, 2007
  Subsidiary


Subsidiary


ConsolidatingIssuer


Guarantors


Non-Guarantors


Adjustments


TotalASSETSCash and cash equivalents

$
70.7


$



$
135.5


$



$
206.2Accounts 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







216.7Intangible 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 noncurrent 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  20




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
    For the six months ended June 30, 2008
  Subsidiary


Subsidiary


ConsolidatingIssuer


Guarantors


Non-Guarantors


Adjustments


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

$
(18.4
)

$
93.7


$
29.0


$
(0.1
)

$
104.2Cash flows from investing activities:Capital expenditures






(11.4
)


(3.4
)






(14.8
)Proceeds from sale of property, plant and equipment






0.1



0.1







0.2Net cash used in investing activities






(11.3
)


(3.3
)






(14.6
)Cash flows from financing activities:Proceeds from exercised options


1.3















1.3Payments of long-term debt






(0.1
)










(0.1
)Repurchase of common stock


(27.7
)














(27.7
)Change in intercompany accounts


39.7



(82.3
)


42.5



0.1



Net cash provided by (used in) financing activities


13.3



(82.4
)


42.5



0.1



(26.5
)Effect of exchange rate changes










3.8







3.8Net (decrease) increase in cash and equivalents


(5.1
)






72.0







66.9Cash and cash equivalents, beginning of period


70.7







135.5







206.2Cash and cash equivalents, end of period

$
65.6


$



$
207.5


$



$
273.1  21




---



##### Table of Contents



DRESSER-RAND
    GROUP INC.
    NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    ($ millions, except share amounts)
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
    For the six months ended June 30, 2007
  Subsidiary


Subsidiary


ConsolidatingIssuer


Guarantors


Non-Guarantors


Adjustments


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

$
(54.2
)

$
150.4


$
41.9


$
(1.9
)

$
136.2Cash flows from investing activities:Capital expenditures


(2.2
)


(4.8
)


(1.6
)






(8.6
)Proceeds from sale of property, plant and equipment






0.1



0.5







0.6Acquisition


(8.1
)














(8.1
)Net cash used in investing activities


(10.3
)


(4.7
)


(1.1
)






(16.1
)Cash flows from financing activities:Net change in debt


(62.2
)






(47.9
)






(110.1
)Proceeds from exercise of options


0.2















0.2Change in intercompany accounts


128.6



(145.7
)


15.2



1.9



Net cash provided by (used in) financing activities


66.6



(145.7
)


(32.7
)


1.9



(109.9
)Effect of exchange rate changes










3.8







3.8Net increase in cash and equivalents


2.1







11.9







14.0Cash and cash equivalents, beginning of period


37.0







109.8







146.8Cash and cash equivalents, end of period

$
39.1


$



$
121.7


$



$
160.8  22




---



##### Table of Contents



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS ($ in millions)  Overview
              Results
    of Operations
  Three
    months ended June 30, 2008, compared to the three months
    ended June 30, 2007:
  Three Months Ended June 30,


Three Months Ended June 30,


Period to Period Change2008


2007


2007 to 2008


% ChangeStatement of Operations Data:Total revenues

$
541.2



100.0
%

$
441.2



100.0
%

$
100.0



22.7
%Cost of sales


391.2



72.3



322.3



73.1



68.9



21.4
%Gross profit


150.0



27.7



118.9



26.9



31.1



26.2
%Selling and administrative expenses


68.9



12.7



66.2



15.0



2.7



4.1
%Research and development expenses


3.8



0.7



2.6



0.5



1.2



46.2
%Partial settlement


1.8



0.3











1.8



NMOperating income


75.5



14.0



50.1



11.4



25.4



50.7
%Interest expense, net


(7.1
)


(1.3
)


(10.0
)


(2.3
)


2.9



(29.0
)%Other income, net


1.2



0.2



1.3



0.3



(0.1
)


(7.7
)%Income before income taxes


69.6



12.9



41.4



9.4



28.2



68.1
%Provision for income taxes


22.9



4.3



15.2



3.5



7.7



50.7
%Net income

$
46.7



8.6
%

$
26.2



5.9
%

$
20.5



78.2
%Bookings

$
503.6






$
659.2






$
(155.6
)


(23.6
)%Backlog-ending

$
2,085.8






$
1,612.5






$
473.3



29.4
%  23




---



##### Table of Contents



Total revenues.
  Cost of sales.
  Gross profit.
  Selling and administrative expenses.
  Research and development expenses.
  Partial settlement.
  Operating income.
  Interest expense, net.
  Other income, net.
  Provision for income taxes.
 24




---



##### Table of Contents



Bookings and backlog.
  Segment
    information
          Segment
    Analysis  three months ended June 30, 2008,
    compared to three months ended June 30, 2007:
  Three Months Ended June 30,





Period to Period Change2008





2007





2007 to 2008


% ChangeStatement of Segment Data:RevenuesNew units

$
299.2



55.3
%

$
232.2



52.6
%

$
67.0



28.9
%Aftermarket parts and services


242.0



44.7
%


209.0



47.4
%


33.0



15.8
%Total revenues

$
541.2



100.0
%

$
441.2



100.0
%

$
100.0



22.7
%Gross profitNew units

$
47.1






$
39.6






$
7.5



18.9
%Aftermarket parts and services


102.9







79.3







23.6



29.8
%Total gross profit

$
150.0






$
118.9






$
31.1



26.2
%Operating incomeNew units

$
25.7






$
17.4






$
8.3



47.7
%Aftermarket parts and services


70.8







52.0







18.8



36.2
%Unallocated


(21.0
)






(19.3
)






(1.7
)


8.8
%Total operating income

$
75.5






$
50.1






$
25.4



50.7
%BookingsNew units

$
232.2






$
452.9






$
(220.7
)


(48.7
)%Aftermarket parts and services


271.4







206.3







65.1



31.6
%Total bookings

$
503.6






$
659.2






$
(155.6
)


(23.6
)%Backlog-endingNew units

$
1,707.8






$
1,335.2






$
372.6



27.9
%Aftermarket parts and services


378.0







277.3







100.7



36.3
%Total backlog

$
2,085.8






$
1,612.5






$
473.3



29.4
%  25




---



##### Table of Contents



New
    Units
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
  Aftermarket
    Parts and Services
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
 26




---



##### Table of Contents



Results
    of Operations
  Six
    months ended June 30, 2008, compared to the six months
    ended June 30, 2007:
  Period to Period ChangeSix Months Ended June 30, 2008


Six Months Ended June 30, 2007


2007 to 2008


% ChangeStatement of Operations Data:Total revenues

$
905.0



100.0
%

$
755.6



100.0
%

$
149.4



19.8
%Cost of sales


649.3



71.7



545.1



72.1



104.2



19.1
%Gross profit


255.7



28.3



210.5



27.9



45.2



21.5
%Selling and administrative expenses


132.8



14.7



121.8



16.1



11.0



9.0
%Research and development expenses


5.9



0.7



5.7



0.8



0.2



3.5
%Curtailment amendment / partial settlement


(5.4
)


(0.6
)










(5.4
)


NMOperating income


122.4



13.5



83.0



11.0



39.4



47.5
%Interest expense, net


(14.1
)


(1.6
)


(20.9
)


(2.8
)


6.8



(32.5
)%Other income, net


3.0



0.4



3.7



0.5



(0.7
)


(18.9
)%Income before income taxes


111.3



12.3



65.8



8.7



45.5



69.1
%Provision for income taxes


37.4



4.1



24.2



3.2



13.2



54.5
%Net income

$
73.9



8.2
%

$
41.6



5.5
%

$
32.3



77.6
%Bookings

$
1,079.3






$
1,084.8






$
(5.5
)


(0.5
)%Backlog - ending

$
2,085.8






$
1,612.5






$
473.3



29.4
%   Total revenues.
  Cost of sales.
  Gross profit.
  Selling and administrative expenses.
  Research and development expenses.
 27




---



##### Table of Contents



Curtailment amendment / partial
    settlement.
  Operating income.
  Interest expense, net.
  Other income, net.
  Provision for income taxes.
  Bookings and backlog.
 28




---



##### Table of Contents



Segment
    Analysis  six months ended June 30, 2008,
    compared to six months ended June 30, 2007:
  Six Months Ended June 30,





Period to Period Change2008





2007





2007 to 2008


% ChangeStatement of Segment Data:RevenuesNew units

$
448.7



49.6
%

$
346.6



45.9
%

$
102.1



29.5
%Aftermarket parts and services


456.3



50.4
%


409.0



54.1
%


47.3



11.6
%Total revenues

$
905.0



100.0
%

$
755.6



100.0
%

$
149.4



19.8
%Gross profitNew units

$
72.3






$
56.3






$
16.0



28.4
%Aftermarket parts and services


183.4







154.2







29.2



18.9
%Total gross profit

$
255.7






$
210.5






$
45.2



21.5
%Operating incomeNew units

$
34.9






$
22.0






$
12.9



58.6
%Aftermarket parts and services


120.8







100.1







20.7



20.7
%Unallocated


(33.3
)






(39.1
)






5.8



(14.8
)%Total operating income

$
122.4






$
83.0






$
39.4



47.5
%BookingsNew units

$
571.2






$
687.9






$
(116.7
)


(17.0
)%Aftermarket parts and services


508.1







396.9







111.2



28.0
%Total bookings

$
1,079.3






$
1,084.8






$
(5.5
)


(0.5
)%Backlog - endingNew units

$
1,707.8






$
1,335.2






$
372.6



27.9
%Aftermarket parts and services


378.0







277.3







100.7



36.3
%Total backlog

$
2,085.8






$
1,612.5






$
473.3



29.4
%   New
    Units
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
 29




---



##### Table of Contents



Aftermarket
    Parts and Services
  Revenues.
  Gross profit.
  Operating income.
  Bookings and Backlog.
  Liquidity
    and Capital Resources
  work-in-process.
        New
    accounting standards
  Fair Value Measurements.
 30




---



##### 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

$
3.9Foreign currency exchange contracts liabilities

$
2.7     No. 157-2, Partial Deferral of the Effective Date of Statement
    No. 157 No. 157-2
  Employers Accounting for
    Defined Benefit Pension and Other Postretirement Plans, an
    amendment of FASB Statements No. 87, 88, 106 and 132(R),
  Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133
  SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
  form 10-Q
 31




---



##### Table of Contents



Form 10-Q,
  
    economic or industry downturns;
    our inability to implement our business strategy to increase our
    Aftermarket Parts and Services revenue;
    competition in our markets;
    failure to complete or achieve the expected benefits from any
    future acquisitions;
    economic, political, currency and other risks associated with
    our international sales and operations;
    loss of our senior management;
    our brand name may be confused with others;
    environmental compliance costs and liabilities;
    failure to maintain safety performance acceptable to our clients;
    unexpected product claims or regulations;
    infringement on our intellectual property or our infringement on
    others intellectual property; and
    other factors described in this report and as set forth in the
    Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2007.  ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK ($ in
    millions)  non-U.S. subsidiaries
    ITEM 4.
    CONTROLS
    AND PROCEDURES  Rules 13a-15(e)
   32




---



##### Table of Contents



PART II. 
    OTHER INFORMATION  ITEM 1.
    LEGAL
    PROCEEDINGS ($ millions)          ITEM 2.
    UNREGISTERED
    SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  Repurchase
    of Common Stock
   33




---



##### Table of Contents



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


ProgramsApril 2008










May 2008


386,235
(1)

$
38.84



385,600June 2008


320,165
(2)

$
39.72



320,165Total


706,400


$
39.24



705,765


$
122.3 million     (1)
    
    Includes 635 shares delivered to us as payment of
    withholding taxes due on the vesting of restricted stock issued
    under our stock incentive plan.(2)
    
    As of June 30, 2008, the trade dates for the repurchase of
    106,900 shares for a total purchase price of $4.1 had
    occurred, but the repurchase had not yet settled and accordingly
    such shares were still outstanding as of that date.  ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS      Proposals:

Votes For


Against


Withheld


AbstainElection of DirectorsWilliam E. Macaulay


78,354,539







126,421



Jean-Paul Vettier


77,909,126







571,854



Vincent R. Volpe Jr.


78,355,510







125,450



Michael L. Underwood


78,354,436







126,524



Philip R. Roth


78,354,621







126,339



Louis A. Raspino


77,933,940







547,020



Rita V. Foley


77,950,820







530,140



Joseph C. Winkler


78,343,961







136,999



Ratify appointment of Independent Registered Public
    Accountants


78,414,971



56,207







9,782Dresser-Rand Group Inc. 2008 Stock Incentive Plan


61,565,178



11,268,320







25,097Stockholders Proposal


31,176,257



38,216,241







3,466,097    34




---



##### Table of Contents



ITEM 6.
    EXHIBITS    Exhibit 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 on July 18, 2005, File No. 333-124963).Exhibit 3.2

Amended and Restated Bylaws (incorporated by reference to
    Exhibit 3.1 to Dresser-Rand Group Inc.s Current Report on
    Form 8-K filed on November 16, 2007, File No. 001-32586).Exhibit 10.1

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 UBS Securities LLC, as Co-Syndication
    Agents, Citgroup 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 on August 31, 2007, File No. 001-32586).Exhibit 10.2

Amendment No. 1, dated 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 Current Report on form 10-Q, filed on April 29,
    2008, File No. 001-32586).Exhibit 10.4

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 on May 14, 2008, File
    No. 333-150894).Exhibit 10.5

Form of Grant Notice and Standard Terms and Conditions 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 on May 14, 2008, File No.
    001-32586).Exhibit 10.6

Form of Grant Notice and Standard Terms and Conditions 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 on May 14, 2008, File No. 001-32586).Exhibit 10.7

Form of Grant Notice and Standard Terms and Conditions 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 on May 14, 2008, File No.
    001-32586).Exhibit 10.8

Form of Grant Notice and Standard Terms and Conditions 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 on May 14, 2008, File No.
    001-32586).Exhibit 10.9

Amended and Restated Employment Agreement by and among Vincent
    R. Volpe Jr. and Dresser-Rand Group Inc., dated as of June 11,
    2008 (incorporated by reference to Exhibit 10.1 to Dresser-Rand
    Group Inc.s Current Report on Form 8-K filed on June 12,
    2008, File No. 001-32586).Exhibit 10.10

Form of Indemnification Agreement (incorporated by reference to
    Exhibit 10.2 to Dresser-Rand Group Inc.s Current Report on
    Form 8-K filed on June 12, 2008, File No. 001-32586).Exhibit 31.1

Certification of the President and Chief Executive Officer
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2

Certification of the Executive Vice President and Chief
    Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.Exhibit 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.) 35




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Exhibit 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.)  36




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SIGNATURES    DRESSER-RAND GROUP INC.
  /s/  Lonnie
    A. Arnett       37