##### 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 1934
 For the Quarterly Period Ended March 31, 2007
 o
    
    Transition Report under Section 13 or 15(d) of the Exchange Act
 For the Transition Period from  to
 Commission file number 001-32586
 Dresser-Rand Group Inc.
 
  Delaware
    
    20-1780492(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)1200 W. SamHouston Parkway, N.Houston, TX
    
    77043(Address of principal executive offices)
    
    (Zip Code)
  
   
  þ o
  þ o o
 o þ




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##### 



PagePART I.FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited):Consolidated Statement of Income for the three months ended March 31, 2007 and 2006
    
    
    3Consolidated Balance Sheet at March 31, 2007, and December 31, 2006
    
    
    4Consolidated Statement of Cash Flows for the three months ended March 31, 2007 and 2006
    
    
    5Notes to Unaudited Consolidated Financial Statements at March 31, 2007
    
    
    6-15Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16-22Item 3. Quantitative and Qualitative Disclosure about Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23-24PART II.OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    25Item 6. Exhibits
    
    
    26Signatures
    
    
    27-31Exhibits
    
    
    32EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATIONEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
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PART I.  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 Three months ended March 31,2007
    
    
    2006Net sales of products
    
    $
    242.1
    
    
    $
    229.7Net sales of services
    
    
    72.3
    
    
    
    61.9Total revenues
    
    
    314.4
    
    
    
    291.6Cost of products sold
    
    
    173.3
    
    
    
    180.3Cost of services sold
    
    
    49.5
    
    
    
    44.3Total cost of products and services sold
    
    
    222.8
    
    
    
    224.6Gross profit
    
    
    91.6
    
    
    
    67.0Selling and administrative expenses
    
    
    55.5
    
    
    
    46.5Research and development expenses
    
    
    3.1
    
    
    
    2.1Curtailment (gain)
    
    
    
    
    
    
    (11.8
    )Income from operations
    
    
    33.0
    
    
    
    30.2Interest expense, net
    
    
    (10.9
    )
    
    
    (13.6
    )Other income, net
    
    
    2.3
    
    
    
    1.9Income before income taxes
    
    
    24.4
    
    
    
    18.5Provision for income taxes
    
    
    9.0
    
    
    
    6.2Net income
    
    $
    15.4
    
    
    $
    12.3Net income per common share-basic and diluted
    
    $
    0.18
    
    
    $
    0.14Weighted average shares outstanding-basic and diluted
    
    
    85,459
    
    
    
    85,445
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March 31,
    
    
    December 31,2007
    
    
    2006AssetsCurrent assetsCash and cash equivalents
    
    $
    200.1
    
    
    $
    146.8Accounts receivable, less allowance for doubtful
accounts of $6.0 and $6.1 at 2007 and 2006
    
    
    245.8
    
    
    
    305.1Inventories, net
    
    
    193.9
    
    
    
    183.0Prepaid expenses
    
    
    34.9
    
    
    
    20.2Deferred income taxes, net
    
    
    9.9
    
    
    
    13.9Total current assets
    
    
    684.6
    
    
    
    669.0Property, plant and equipment, net
    
    
    220.9
    
    
    
    223.1Goodwill
    
    
    415.5
    
    
    
    410.5Intangible assets, net
    
    
    443.7
    
    
    
    446.9Other assets
    
    
    19.5
    
    
    
    21.8Total assets
    
    $
    1,784.2
    
    
    $
    1,771.3Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable and accruals
    
    $
    293.3
    
    
    $
    303.7Customer advance payments
    
    
    189.8
    
    
    
    137.4Accrued income taxes payable
    
    
    18.5
    
    
    
    30.3Loans payable
    
    
    0.1
    
    
    
    0.1Total current liabilities
    
    
    501.7
    
    
    
    471.5Deferred income taxes
    
    
    31.5
    
    
    
    26.5Postemployment and other employee benefit liabilities
    
    
    108.7
    
    
    
    113.7Long-term debt
    
    
    456.5
    
    
    
    505.6Other noncurrent liabilities
    
    
    24.1
    
    
    
    22.1Total liabilities
    
    
    1,122.5
    
    
    
    1,139.4Commitments and contingencies (Notes 7 through 11)Stockholders equityCommon stock, $0.01 par value, 250,000,000 shares authorized;
and, 85,828,165 and 85,477,160 shares issued and
outstanding, respectively
    
    
    0.9
    
    
    
    0.9Additional paid-in capital
    
    
    523.3
    
    
    
    518.8Retained earnings
    
    
    138.4
    
    
    
    123.1Accumulated other comprehensive loss
    
    
    (0.9
    )
    
    
    (10.9
    )Total stockholders equity
    
    
    661.7
    
    
    
    631.9Total liabilities and stockholders equity
    
    $
    1,784.2
    
    
    $
    1,771.3
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Three months ended March 31,2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    15.4
    
    
    $
    12.3Adjustments to arrive at net cash provided by operating activities:Depreciation and amortization
    
    
    11.9
    
    
    
    13.1Stock-based compensation
    
    
    4.5
    
    
    
    0.4Amortization of debt financing costs
    
    
    1.8
    
    
    
    2.0Deferred income taxes
    
    
    1.0
    
    
    
    2.5Provision for losses (net adjustments) on inventory
    
    
    0.7
    
    
    
    (0.1
    )Curtailment gain
    
    
    
    
    
    
    (11.8
    )Working capital and otherAccounts receivable
    
    
    60.6
    
    
    
    49.0Customer advances
    
    
    51.7
    
    
    
    (7.5
    )Inventories
    
    
    (10.9
    )
    
    
    (36.4
    )Accounts payable
    
    
    (15.8
    )
    
    
    (2.6
    )Other
    
    
    (13.5
    )
    
    
    (8.4
    )Net cash provided by operating activities
    
    
    107.4
    
    
    
    12.5Cash flows from investing activitiesCapital expenditures
    
    
    (4.7
    )
    
    
    (3.2
    )Net cash (used in) investing activities
    
    
    (4.7
    )
    
    
    (3.2
    )Cash flows from financing activitiesPayments of long-term debt
    
    
    (50.0
    )
    
    
    (50.0
    )Net cash (used in) financing activities
    
    
    (50.0
    )
    
    
    (50.0
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    0.6
    
    
    
    1.4Net increase (decrease) in cash and cash equivalents
    
    
    53.3
    
    
    
    (39.3
    )Cash and cash equivalents, beginning of the period
    
    
    146.8
    
    
    
    98.0Cash and cash equivalents, end of period
    
    $
    200.1
    
    
    $
    58.7
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1. Basis of presentation
  2. Adoption of new accounting standard
 Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109
 3. Curtailment gain
  4. Intangible assets and goodwill
  March 31, 2007
    
    
    Weighted
    
    
    December 31, 2006Accumulated
    
    
    Average
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Useful Lives
    
    
    Cost
    
    
    AmortizationTrade names
    
    $
    87.6
    
    
    $
    5.2
    
    
    40 years
    
    $
    87.6
    
    
    $
    4.6Customer relationships
    
    
    238.6
    
    
    
    14.6
    
    
    40 years
    
    
    237.5
    
    
    
    13.0Software
    
    
    30.5
    
    
    
    7.4
    
    
    10 years
    
    
    30.5
    
    
    
    6.6Existing technology
    
    
    126.6
    
    
    
    12.4
    
    
    25 years
    
    
    126.6
    
    
    
    11.1Order backlog
    
    
    
    
    
    
    
    
    
    15 months
    
    
    26.3
    
    
    
    26.3Non-compete agreement
    
    
    
    
    
    
    
    
    
    2 years
    
    
    4.4
    
    
    
    4.4Total amortizable intangible assets
    
    $
    483.3
    
    
    $
    39.6
    
    
    
    
    
    
    $
    512.9
    
    
    $
    66.0
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March 312007Beginning balance
    
    $
    410.5Foreign currency translation adjustments
    
    
    5.0Ending balance
    
    
    415.5
 5. Inventories
  March 31,
    
    
    December 31,2007
    
    
    2006Raw materials and supplies
    
    $
    120.8
    
    
    $
    112.7Work-in-process and finished goods
    
    
    255.0
    
    
    
    210.0375.8
    
    
    
    322.7Less progress payments
    
    
    (181.9
    )
    
    
    (139.7
    )Total inventories
    
    $
    193.9
    
    
    $
    183.0
  6. Property, plant and equipment
  March 31,
    
    
    December 31,2007
    
    
    2006Land
    
    $
    10.2
    
    
    $
    10.2Buildings and improvements
    
    
    74.8
    
    
    
    74.1Machinery and equipment
    
    
    197.9
    
    
    
    195.7282.9
    
    
    
    280.0Less: Accumulated depreciation
    
    
    (62.0
    )
    
    
    (56.9
    )Property, plant and equipment, net
    
    $
    220.9
    
    
    $
    223.1
 7. Income taxes
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Jurisdiction
    
    Open YearsBrazil
    
    2002  2006Canada
    
    2003  2006France
    
    2004  2006Germany
    
    2002  2006India
    
    2000  2006Italy
    
    2002  2006Malaysia
    
    1999  2006Netherlands
    
    2004  2006Norway
    
    1997  2006United Kingdom
    
    2004  2006United States
    
    2004  2006Venezuela
    
    2003  2006
  8. Pension plans
 Three months ended March 31,2007
    
    
    2006Service cost
    
    $
    1.7
    
    
    $
    1.4Interest cost
    
    
    4.6
    
    
    
    4.3Expected return on plan assets
    
    
    (5.4
    )
    
    
    (5.0
    )Net amortization of plan net losses
    
    
    
    
    
    
    0.1Net pension expense
    
    $
    0.9
    
    
    $
    0.8
 9. Postretirement benefits other than pensions
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Three months ended March 31,2007
    
    
    2006Service cost
    
    $
    0.4
    
    
    $
    0.5Interest cost
    
    
    0.6
    
    
    
    0.6Curtailment gain
    
    
    
    
    
    
    (11.8
    )Net amortization of prior service (credit)
    
    
    (0.1
    )
    
    
    Net periodic postretirement benefits cost (gain)
    
    $
    0.9
    
    
    $
    (10.7
    )
  10. Commitments and contingencies
   11. Warranty accruals
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Three months ended March 31,2007
    
    
    2006Beginning balance
    
    $
    23.4
    
    
    $
    21.5Provisions for warranties issued during the period
    
    
    4.8
    
    
    
    3.3Adjustments to warranties issued in prior periods
    
    
    1.0
    
    
    
    0.7Payments during period
    
    
    (3.6
    )
    
    
    (2.1
    )Translation adjustments
    
    
    0.2
    
    
    
    0.3Ending balance
    
    $
    25.8
    
    
    $
    23.7
 12. Segment information
  1)
    
    New Units are highly engineered solutions to new requests from customers. The segment
includes engineering, manufacturing, sales and administrative support.2)
    
    Aftermarket Parts and Services consist of aftermarket support solutions for the existing
population of installed equipment. The segment includes engineering, manufacturing, sales and
administrative support.
  Three months ended March 31,2007
    
    
    2006RevenuesNew units
    
    $
    114.3
    
    
    $
    139.1Aftermarket parts and services
    
    
    200.1
    
    
    
    152.5Total Revenues
    
    $
    314.4
    
    
    $
    291.6Operating IncomeNew units
    
    $
    4.6
    
    
    $
    (1.3
    )Aftermarket parts and services
    
    
    48.2
    
    
    
    34.3Unallocable
    
    
    (19.8
    )
    
    
    (2.8
    )Total Operating Income
    
    $
    33.0
    
    
    $
    30.2Depreciation and AmortizationNew units
    
    $
    5.0
    
    
    $
    6.5Aftermarket parts and services
    
    
    6.9
    
    
    
    6.6Total Depreciation and Amortization
    
    $
    11.9
    
    
    $
    13.1Total Assets (including Goodwill)New units
    
    $
    234.5
    
    
    $
    249.2Aftermarket parts and services
    
    
    606.7
    
    
    
    546.9Unallocable
    
    
    943.0
    
    
    
    816.8Total Assets
    
    $
    1,784.2
    
    
    $
    1,612.9
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13. Stockholders equity
  AccumulatedOtherCommon
    
    
    Additional
    
    
    Retained
    
    
    ComprehensiveStock
    
    
    Paid-in Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    TotalAt December 31, 2006
    
    $
    0.9
    
    
    $
    518.8
    
    
    $
    123.1
    
    
    $
    (10.9
    )
    
    $
    631.9Stock-based employee compensation
    
    
    
    
    
    
    4.5
    
    
    
    
    
    
    
    
    
    
    
    4.5Adoption of FASB Interpretation No. 48
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.1
    )Net income
    
    
    
    
    
    
    
    
    
    
    15.4
    
    
    
    
    
    
    
    15.4Other comprehensive income (loss)Benefit plan amendment  net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.0
    
    
    
    5.0Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.0
    
    
    
    5.0At March 31, 2007
    
    $
    0.9
    
    
    $
    523.3
    
    
    $
    138.4
    
    
    $
    (0.9
    )
    
    $
    661.7
  Three months ended March 31,2007
    
    
    2006Net income
    
    $
    15.4
    
    
    $
    12.3Other comprehensive income:Benefit plan amendment  net of tax
    
    
    5.0
    
    
    
    Foreign currency translation adjustment
    
    
    5.0
    
    
    
    8.2Total comprehensive income
    
    $
    25.4
    
    
    $
    20.5
   14. Subsequent Events
  15. Supplemental guarantor financial information
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CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the three months ended March 31, 2007
 SubsidiarySubsidiary
    
    
    Non-
    
    
    ConsolidatingIssuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalNet sales
    
    $
    
    
    
    $
    216.5
    
    
    $
    127.0
    
    
    $
    (29.1
    )
    
    $
    314.4Cost of goods sold
    
    
    
    
    
    
    153.0
    
    
    
    91.1
    
    
    
    (21.3
    )
    
    
    222.8Gross profit
    
    
    
    
    
    
    63.5
    
    
    
    35.9
    
    
    
    (7.8
    )
    
    
    91.6Selling and administrative expenses
    
    
    32.8
    
    
    
    10.7
    
    
    
    18.5
    
    
    
    (6.5
    )
    
    
    55.5Research and development expenses
    
    
    
    
    
    
    3.0
    
    
    
    0.1
    
    
    
    
    
    
    
    3.1(Loss)income from operations
    
    
    (32.8
    )
    
    
    49.8
    
    
    
    17.3
    
    
    
    (1.3
    )
    
    
    33.0Equity earnings in affiliates
    
    
    37.7
    
    
    
    0.5
    
    
    
    
    
    
    
    (38.2
    )
    
    
    Interest (expense), net
    
    
    (9.2
    )
    
    
    
    
    
    
    (1.7
    )
    
    
    
    
    
    
    (10.9
    )Intercompany interest and fees
    
    
    5.3
    
    
    
    1.0
    
    
    
    (6.3
    )
    
    
    
    
    
    
    Other income (expense), net
    
    
    0.2
    
    
    
    (0.1
    )
    
    
    2.2
    
    
    
    
    
    
    
    2.3Income before income taxes
    
    
    1.2
    
    
    
    51.2
    
    
    
    11.5
    
    
    
    (39.5
    )
    
    
    24.4(Benefit)provision for income taxes
    
    
    (14.2
    )
    
    
    19.1
    
    
    
    4.1
    
    
    
    
    
    
    
    9.0Net income
    
    $
    15.4
    
    
    $
    32.1
    
    
    $
    7.4
    
    
    $
    (39.5
    )
    
    $
    15.4
 CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the three months ended March 31, 2006
 SubsidiarySubsidiary
    
    
    Non-
    
    
    ConsolidatingIssuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalNet sales
    
    $
    
    
    
    $
    167.8
    
    
    $
    154.8
    
    
    $
    (31.0
    )
    
    $
    291.6Cost of goods sold
    
    
    
    
    
    
    125.6
    
    
    
    128.2
    
    
    
    (29.2
    )
    
    
    224.6Gross profit
    
    
    
    
    
    
    42.2
    
    
    
    26.6
    
    
    
    (1.8
    )
    
    
    67.0Selling and administrative expenses
    
    
    0.4
    
    
    
    29.8
    
    
    
    16.6
    
    
    
    (0.3
    )
    
    
    46.5Research and development expenses
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    2.1Curtailment gain
    
    
    
    
    
    
    (11.8
    )
    
    
    
    
    
    
    
    
    
    
    (11.8
    )(Loss)income from operations
    
    
    (0.4
    )
    
    
    22.1
    
    
    
    10.0
    
    
    
    (1.5
    )
    
    
    30.2Equity earnings in affiliates
    
    
    18.0
    
    
    
    1.6
    
    
    
    
    
    
    
    (19.6
    )
    
    
    Interest (expense), net
    
    
    (12.5
    )
    
    
    
    
    
    
    (1.1
    )
    
    
    
    
    
    
    (13.6
    )Intercompany interest and fees
    
    
    1.4
    
    
    
    3.7
    
    
    
    (5.1
    )
    
    
    
    
    
    
    Other income, net
    
    
    1.3
    
    
    
    0.3
    
    
    
    0.3
    
    
    
    
    
    
    
    1.9Income before income taxes
    
    
    7.8
    
    
    
    27.7
    
    
    
    4.1
    
    
    
    (21.1
    )
    
    
    18.5(Benefit)provision for income taxes
    
    
    (4.5
    )
    
    
    9.2
    
    
    
    1.5
    
    
    
    
    
    
    
    6.2Net income
    
    $
    12.3
    
    
    $
    18.5
    
    
    $
    2.6
    
    
    $
    (21.1
    )
    
    $
    12.3
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CONDENSED CONSOLIDATING BALANCE SHEET
March 31, 2007
 Subsidiary
    
    
    Subsidiary Non-
    
    
    ConsolidatingIssuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalASSETSCash and cash equivalents
    
    $
    42.1
    
    
    $
    
    
    
    $
    158.0
    
    
    $
    
    
    
    $
    200.1Accounts receivables net
    
    
    0.2
    
    
    
    123.2
    
    
    
    122.4
    
    
    
    
    
    
    
    245.8Inventories, net (excluding advance payments)
    
    
    
    
    
    
    139.8
    
    
    
    64.4
    
    
    
    (10.3
    )
    
    
    193.9Prepaids expenses and deferred income taxes
    
    
    19.7
    
    
    
    4.8
    
    
    
    20.3
    
    
    
    
    
    
    
    44.8Total current assets
    
    
    62.0
    
    
    
    267.8
    
    
    
    365.1
    
    
    
    (10.3
    )
    
    
    684.6Investment in affiliates
    
    
    1,281.1
    
    
    
    60.6
    
    
    
    
    
    
    
    (1,341.7
    )
    
    
    Property, plant, and equipment, net
    
    
    
    
    
    
    158.3
    
    
    
    62.6
    
    
    
    
    
    
    
    220.9Intangible assets, net
    
    
    
    
    
    
    462.9
    
    
    
    396.3
    
    
    
    
    
    
    
    859.2Other assets
    
    
    17.4
    
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    19.5Total assets
    
    $
    1,360.5
    
    
    $
    949.6
    
    
    $
    826.1
    
    
    $
    (1,352.0
    )
    
    $
    1,784.2LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable and accruals
    
    $
    38.9
    
    
    $
    248.4
    
    
    $
    214.3
    
    
    $
    
    
    
    $
    501.6Loans payable
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1Total current liabilities
    
    
    38.9
    
    
    
    248.4
    
    
    
    214.4
    
    
    
    
    
    
    
    501.7Long-term debt
    
    
    382.2
    
    
    
    
    
    
    
    74.3
    
    
    
    
    
    
    
    456.5Intercompany accounts, net
    
    
    263.6
    
    
    
    (426.4
    )
    
    
    162.8
    
    
    
    
    
    
    
    Other noncurrent liabilities
    
    
    14.1
    
    
    
    91.4
    
    
    
    58.8
    
    
    
    
    
    
    
    164.3Total liabilities
    
    
    698.8
    
    
    
    (86.6
    )
    
    
    510.3
    
    
    
    
    
    
    
    1,122.5Common stock
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9Other stockholders equity
    
    
    660.8
    
    
    
    1,036.2
    
    
    
    315.8
    
    
    
    (1,352.0
    )
    
    
    660.8Total stockholders equity
    
    
    661.7
    
    
    
    1,036.2
    
    
    
    315.8
    
    
    
    (1,352.0
    )
    
    
    661.7Total liabilities and stockholders equity
    
    $
    1,360.5
    
    
    $
    949.6
    
    
    $
    826.1
    
    
    $
    (1,352.0
    )
    
    $
    1,784.2
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CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2006
 Subsidiary
    
    
    Subsidiary Non-
    
    
    ConsolidatingIssuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalASSETSCash and cash equivalents
    
    $
    37.0
    
    
    $
    
    
    
    $
    109.8
    
    
    $
    
    
    
    $
    146.8Accounts receivables net
    
    
    
    
    
    
    145.7
    
    
    
    159.4
    
    
    
    
    
    
    
    305.1Inventories, net
    
    
    
    
    
    
    133.3
    
    
    
    58.7
    
    
    
    (9.0
    )
    
    
    183.0Prepaid expenses and deferred income taxes
    
    
    8.6
    
    
    
    4.3
    
    
    
    21.2
    
    
    
    
    
    
    
    34.1Total current assets
    
    
    45.6
    
    
    
    283.3
    
    
    
    349.1
    
    
    
    (9.0
    )
    
    
    669.0Investment in affiliates
    
    
    1,232.9
    
    
    
    59.4
    
    
    
    
    
    
    
    (1,292.3
    )
    
    
    Property, plant, and equipment, net
    
    
    
    
    
    
    160.8
    
    
    
    62.3
    
    
    
    
    
    
    
    223.1Intangible assets, net
    
    
    
    
    
    
    466.6
    
    
    
    390.8
    
    
    
    
    
    
    
    857.4Other assets
    
    
    14.9
    
    
    
    4.3
    
    
    
    2.6
    
    
    
    
    
    
    
    21.8Total assets
    
    $
    1,293.4
    
    
    $
    974.4
    
    
    $
    804.8
    
    
    $
    (1,301.3
    )
    
    $
    1,771.3LIABILITIES AND STOCKHOLDERS EQUITYAccounts payable and accruals
    
    $
    22.4
    
    
    $
    222.4
    
    
    $
    226.6
    
    
    $
    
    
    
    $
    471.4Loans payable
    
    
    
    
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    0.1Total current liabilities
    
    
    22.4
    
    
    
    222.4
    
    
    
    226.7
    
    
    
    
    
    
    
    471.5Long-term debt
    
    
    432.2
    
    
    
    
    
    
    
    73.4
    
    
    
    
    
    
    
    505.6Intercompany accounts, net
    
    
    197.9
    
    
    
    (344.8
    )
    
    
    146.9
    
    
    
    
    
    
    
    Other noncurrent liabilities
    
    
    9.0
    
    
    
    99.0
    
    
    
    54.3
    
    
    
    
    
    
    
    162.3Total liabilities
    
    
    661.5
    
    
    
    (23.4
    )
    
    
    501.3
    
    
    
    
    
    
    
    1,139.4Common stock
    
    
    0.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.9Other stockholders equity
    
    
    631.0
    
    
    
    997.8
    
    
    
    303.5
    
    
    
    (1,301.3
    )
    
    
    631.0Total stockholders equity
    
    
    631.9
    
    
    
    997.8
    
    
    
    303.5
    
    
    
    (1,301.3
    )
    
    
    631.9Total liabilities and stockholders equity
    
    $
    1,293.4
    
    
    $
    974.4
    
    
    $
    804.8
    
    
    $
    (1,301.3
    )
    
    $
    1,771.3
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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2007
 SubsidiarySubsidiary
    
    
    Non-
    
    
    ConsolidatingIssuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalCash flows from operating activities:Net cash (used in) provided by operating activities
    
    $
    (9.7
    )
    
    $
    83.2
    
    
    $
    32.6
    
    
    $
    1.3
    
    
    $
    107.4Cash flows from investing activities:Capital expenditures
    
    
    (2.2
    )
    
    
    (1.6
    )
    
    
    (0.9
    )
    
    
    
    
    
    
    (4.7
    )Net cash used in investing activities
    
    
    (2.2
    )
    
    
    (1.6
    )
    
    
    (0.9
    )
    
    
    
    
    
    
    (4.7
    )Cash flows from financing activities:Net change in debt
    
    
    (50.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50.0
    )Change in intercompany accounts
    
    
    67.2
    
    
    
    (81.6
    )
    
    
    15.7
    
    
    
    (1.3
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    17.2
    
    
    
    (81.6
    )
    
    
    15.7
    
    
    
    (1.3
    )
    
    
    (50.0
    )Effect of exchange rate changes
    
    
    
    
    
    
    
    
    
    
    0.6
    
    
    
    
    
    
    
    0.6Net increase (decrease) in cash and equivalents
    
    
    5.3
    
    
    
    
    
    
    
    48.0
    
    
    
    
    
    
    
    53.3Cash and cash equivalents, beginning of period
    
    
    36.9
    
    
    
    
    
    
    
    109.9
    
    
    
    
    
    
    
    146.8Cash and cash equivalents, end of period
    
    $
    42.2
    
    
    $
    
    
    
    $
    157.9
    
    
    $
    
    
    
    $
    200.1
 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2006
 SubsidiarySubsidiary
    
    
    Non-
    
    
    ConsolidatingIssuer
    
    
    Guarantors
    
    
    Guarantors
    
    
    Adjustments
    
    
    TotalCash flows from operating activities:Net cash (used in) provided by operating activities
    
    $
    21.8
    
    
    $
    14.3
    
    
    $
    (25.1
    )
    
    $
    1.5
    
    
    $
    12.5Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (2.4
    )
    
    
    (0.8
    )
    
    
    
    
    
    
    (3.2
    )Net cash used in investing activities
    
    
    
    
    
    
    (2.4
    )
    
    
    (0.8
    )
    
    
    
    
    
    
    (3.2
    )Cash flows from financing activities:Net change in debt
    
    
    (50.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50.0
    )Change in intercompany accounts
    
    
    28.2
    
    
    
    (45.7
    )
    
    
    19.0
    
    
    
    (1.5
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (21.8
    )
    
    
    (45.7
    )
    
    
    19.0
    
    
    
    (1.5
    )
    
    
    (50.0
    )Effect of exchange rate changes
    
    
    
    
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    1.4Net increase (decrease) in cash and equivalents
    
    
    
    
    
    
    (33.8
    )
    
    
    (5.5
    )
    
    
    
    
    
    
    (39.3
    )Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    41.6
    
    
    
    56.4
    
    
    
    
    
    
    
    98.0Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    7.8
    
    
    $
    50.9
    
    
    $
    
    
    
    $
    58.7
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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Overview
   Results of Operations
 Three months ended March 31, 2007 compared to the three months ended March 31, 2006
 Three months ended March31,
    
    
    Three months ended March31,
    
    
    Period to Period Change2007
    
    
    2006
    
    
    2006 to 2007
    
    
    % ChangeStatement of Operations
Data:Total revenues
    
    $
    314.4
    
    
    
    100.0
    %
    
    $
    291.6
    
    
    
    100.0
    %
    
    $
    22.8
    
    
    
    7.8
    %Cost of goods sold
    
    
    222.8
    
    
    
    70.9
    
    
    
    224.6
    
    
    
    77.0
    
    
    
    (1.8
    )
    
    
    (0.8
    )%Gross profit
    
    
    91.6
    
    
    
    29.1
    
    
    
    67.0
    
    
    
    23.0
    
    
    
    24.6
    
    
    
    36.7
    %Selling and administrative
expenses
    
    
    55.5
    
    
    
    17.6
    
    
    
    46.5
    
    
    
    15.9
    
    
    
    9.0
    
    
    
    19.4
    %Research and development
expenses
    
    
    3.1
    
    
    
    1.0
    
    
    
    2.1
    
    
    
    0.7
    
    
    
    1.0
    
    
    
    47.6
    %Curtailment gain
    
    
    
    
    
    
    
    
    
    
    (11.8
    )
    
    
    (4.0
    )
    
    
    11.8
    
    
    NMOperating income
    
    
    33.0
    
    
    
    10.5
    
    
    
    30.2
    
    
    
    10.4
    
    
    
    2.8
    
    
    
    9.3
    %Interest (expense), net
    
    
    (10.9
    )
    
    
    (3.4
    )
    
    
    (13.6
    )
    
    
    (4.8
    )
    
    
    2.7
    
    
    
    (19.9
    )%Other income (expense), net
    
    
    2.3
    
    
    
    0.7
    
    
    
    1.9
    
    
    
    0.7
    
    
    
    0.4
    
    
    
    21.1
    %Income before income taxes
    
    
    24.4
    
    
    
    7.8
    
    
    
    18.5
    
    
    
    6.3
    
    
    
    5.9
    
    
    
    31.9
    %Provision for income taxes
    
    
    9.0
    
    
    
    2.9
    
    
    
    6.2
    
    
    
    2.1
    
    
    
    2.8
    
    
    
    45.2
    %Net income
    
    $
    15.4
    
    
    
    4.9
    %
    
    $
    12.3
    
    
    
    4.2
    %
    
    $
    3.1
    
    
    
    25.2
    %Bookings
    
    $
    425.6
    
    
    
    
    
    
    $
    365.3
    
    
    
    
    
    
    $
    60.3
    
    
    
    16.5
    %Backlog  ending
    
    $
    1,380.6
    
    
    
    
    
    
    $
    993.8
    
    
    
    
    
    
    $
    386.8
    
    
    
    38.9
    %
 Overview.
    Page 16 of 31




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Total revenues.
 Cost of sales.
 Gross profit.
 Selling and administrative expenses.
 Research and development expenses.
 Operating income.
 Interest expense, net.
 Other income (expense), net.
 Page 17 of 31




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Provision for income taxes.
 Bookings and backlog.
 Segment Information
     Page 18 of 31




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Segment
Analysis-three months ended March 31, 2007, compared to three months
ended March 31, 2006.
 Period to Period ChangeThree months ended
    
    
    Three months ended
    
    
    2006 toMarch 31, 2007
    
    
    March 31, 2006
    
    
    2007
    
    
    % ChangeStatement of Segment Data:RevenuesNew units
    
    $
    114.3
    
    
    
    36.4
    %
    
    $
    139.1
    
    
    
    47.7
    %
    
    $
    (24.8
    )
    
    
    (17.8
    )%Aftermarket parts and services
    
    
    200.1
    
    
    
    63.6
    %
    
    
    152.5
    
    
    
    52.3
    %
    
    
    47.6
    
    
    
    31.2
    %Total revenues
    
    $
    314.4
    
    
    
    100.0
    %
    
    $
    291.6
    
    
    
    100.0
    %
    
    $
    22.8
    
    
    
    7.8
    %Gross profitNew units
    
    $
    16.7
    
    
    
    
    
    
    $
    11.2
    
    
    
    
    
    
    $
    5.5
    
    
    
    49.1
    %Aftermarket parts and services
    
    
    74.9
    
    
    
    
    
    
    
    55.8
    
    
    
    
    
    
    
    19.1
    
    
    
    34.2
    %Total gross profit
    
    $
    91.6
    
    
    
    
    
    
    $
    67.0
    
    
    
    
    
    
    $
    24.6
    
    
    
    36.7
    %Operating incomeNew units
    
    $
    4.6
    
    
    
    
    
    
    $
    (1.3
    )
    
    
    
    
    
    $
    5.9
    
    
    NMAftermarket parts and services
    
    
    48.2
    
    
    
    
    
    
    
    34.4
    
    
    
    
    
    
    
    13.8
    
    
    
    40.1
    %Unallocated corporate expense
    
    
    (19.8
    )
    
    
    
    
    
    
    (2.9
    )
    
    
    
    
    
    
    (16.9
    )
    
    NMTotal operating income
    
    $
    33.0
    
    
    
    
    
    
    $
    30.2
    
    
    
    
    
    
    $
    2.8
    
    
    
    9.3
    %BookingsNew units
    
    $
    235.0
    
    
    
    
    
    
    $
    165.5
    
    
    
    
    
    
    $
    69.5
    
    
    
    42.0
    %Aftermarket parts and services
    
    
    190.6
    
    
    
    
    
    
    
    199.8
    
    
    
    
    
    
    
    (9.2
    )
    
    
    (4.6
    )%Total bookings
    
    $
    425.6
    
    
    
    
    
    
    $
    365.3
    
    
    
    
    
    
    $
    60.3
    
    
    
    16.5
    %Backlog  endingNew units
    
    $
    1,104.4
    
    
    
    
    
    
    $
    749.8
    
    
    
    
    
    
    $
    354.6
    
    
    
    47.3
    %Aftermarket parts and services
    
    
    276.2
    
    
    
    
    
    
    
    244.0
    
    
    
    
    
    
    
    32.2
    
    
    
    13.2
    %Total backlog
    
    $
    1,380.6
    
    
    
    
    
    
    $
    993.8
    
    
    
    
    
    
    $
    386.8
    
    
    
    38.9
    %
 New Units
 Revenues.
 Gross profit.
 Operating income.
 Bookings and Backlog.
 Aftermarket Parts and Services
 Revenues.
 Page 19 of 31




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Gross profit.
 Operating income.
 Bookings and Backlog.
 Liquidity and Capital Resources
     Recently adopted accounting standard
 Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109
 Page 20 of 31




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Page 21 of 31




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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 Risk Factors
  
    
    material weaknesses in our internal control over financial reporting;
    
    economic or industry downturns;
    
    our inability to implement our business strategy to increase our aftermarket parts and services revenue;
    
    competition in our markets;
    
    failure to complete or achieve the expected benefits from any future acquisitions;
    
    economic, political, currency and other risks associated with our international sales and operations;
    
    loss of our senior management;
    
    our brand name may be confused with others;
    
    environmental compliance costs and liabilities;
    
    failure to maintain safety performance acceptable to our clients;
    
    failure to negotiate new collective bargaining agreements;
    
    our ability to operate as a standalone company;
    
    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, 2006.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
    Material Weaknesses in Internal Control over Financial Reporting
  Page 23 of 31




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Internal Control  Integrated Framework
     Changes in Internal Control Over Financial Reporting
   Page 24 of 31




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PART II.  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   Page 25 of 31




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ITEM 6. EXHIBITS
  Exhibit 3.1
    
    Amended and restated Certificates
of Incorporation of Dresser-Rand Group Inc. (incorporated by
reference to Exhibit 31.1 to Dresser-Rand Group Inc.s Registration
Statement on Form S-1/A filed on July 18, 2005, file No. 333-129963).Exhibit 3.2
    
    Amended and Restated Bylaws
(incorporated by reference to Exhibit 3.2 to Dresser-Rand Group
Inc.s Registration Statement on Form S-1/A filed on July 18,
2005, file No. 333-129963).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.)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.)
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SIGNATURES
  DRESSER-RAND GROUP INC.Date: May 2, 2007
    /s/Lonnie A. ArnettLonnie A. ArnettVice President, Controller and Chief
Accounting Officer Page 27 of 31